Rumors began to Engulf Lehman Brothers. Banking partners buzzed about new trading losses, provoking fears that Dick Fuld would take even greater trading risks in hopes of making a financial killing to strengthen Glucksman & Company. Word of a mass exodus of partners was in the air—Dick Fuld heard that five partners planned to leave; François de Saint Phalle pegged the number as closer to ten. There were whispers about a move to bring Peterson back as chairman; about how Solomon and Schwarzman were aggressively shopping and trying to sell the firm; about how Peterson was slyly maneuvering to locate a buyer because if the firm were sold in the next two years, he would still receive a premium.

Business went on, deals were closed, trades made, clients advised. Partners continued to devote most of their day to clients, not internal politics. But, increasingly, the inflamed internal politics of the firm intruded. There was upheaval in the banking department when it was announced that M. & A. chief Richard Bingham, for family reasons, was moving to San Francisco. Various M. & A. partners clamored for the post he was vacating. They lobbied Shel Gordon, a man of caution, a consensus builder, who moved slowly. Gordon looked first to a former Peterson protégé Stephen Schwarzman, then thirty-six, as a possible successor, but the talented Schwarzman was about as popular as Peter Solomon, and for some of the same reasons. Glucksman and Rubin were not displeased with the opposition to Schwarzman, who made no secret of his disdain for them. The post went unfilled. To end the management impasse, a makeshift solution was devised that in many ways typified both Gordon’s craftiness and Lehman’s internal bickering—a five-member committee was named to run M. & A., chaired by Schwarzman. The committee, however, proved unworkable.

About this time word leaked of a scheme, crafted by Bob Rubin and his friend Bill Morris, and endorsed by Glucksman, to lengthen the payout period from two and a half or five years, as then was the case, to ten years. In other words, if a partner wished to leave, he would be permitted to collect each year only 10 percent of the money due him. The plan was designed to shore up Lehman’s capital base by stanching the outflow of partners’ dollars. Instead, it fueled protests from many quarters, including those who said they worried most about the adequacy of capital. Partners bantered about becoming “indentured servants” and “Glucksman slaves.” Rubin says he tried to explain that for anyone who wished to leave, the plan would still pay them over two and a half or five years, not ten. But those who agreed to stay would have to accept a ten-year payout plan. The timing of the plan could not have been worse. “You can only do that in good times. If not, you panic guys. It’s like yelling fire in a theater,” says Peter Solomon, who loudly opposed it. Glucksman was forced to scuttle the plan before it was even presented to the board.

These events took their toll on Lew Glucksman. Partners noticed that he seemed depressed and wore a perpetual scowl on his face. Pete Dawkins saw the change in the man who recruited him: “As tensions grew, Lew withdrew from involvement with the banking side of the firm. Physically, he was on the trading floor more—an environment he was more comfortable with.” By December, says one banker who thoroughly disliked Glucksman, “It became clear that we were dealing with an unstable personality. It was clear the firm was in jeopardy. The markets were starting to change. We weren’t making as much money. Everybody was saying, ‘I’m going to leave before this thing sinks.’ Individual partners were talking to people on the outside to see if they could sell the firm. The place was like Russia. You couldn’t trust anyone; they might be a spy for Lew.”

The impending departure of Peterson made partners feel less secure. Although Peterson was no longer immersed in Lehman business, he retained the title of chairman until December 31; he still helped partners with clients; he was much more available to chat now than he had ever been. “He called me every day,” says one former partner. “I talked to him more in one month than I did in six years.” The worse Glucksman looked, the better Peterson appeared. The anger many partners harbored toward Peterson receded, replaced by sentimentality for the good old days, and perhaps a bit of self-pity.

Bankers found a release for their emotions at a joyous December 17 farewell party Peterson threw for himself at River House. Peterson paid because Glucksman & Company did not offer to, a decision that annoyed many banking partners. “It was humiliating to the firm not to pay for a dinner for a man who saved the firm,” says banking partner Stephen Bershad. In all, forty-three present or former partners and such Lehman advisory directors as George Ball, former Defense Secretary James R. Schlesinger, and former Assistant Secretary of State Richard C. Holbrooke (with his regular date, Diane Sawyer of CBS) attended, accompanied by their spouses. Joan and three of Peterson’s children from his second marriage—Holly, Michael and David—came, as did a cousin, Anatasia Vournas; his new partner, Eli Jacobs; and executive assistant Melba Duncan, who smoothly organized this event, as she did most others.

It probably says something about the polarization at the firm that only one partner with a trading background, Shel Gordon, was invited.* Partners noticed that Gordon came for cocktails but left before dinner, thus paying homage to one faction without alienating the other. Gordon says he had “a longstanding commitment” to attend the annual Kindergarten Society Dinner at the Heights Casino, in Brooklyn.

The Peterson dinner was held in a private dining room at the River Club. At the end of dinner, several partners rose to speak. Peter Solomon, an accomplished mimic with a Don Rickles sense of humor, was first to jump up. Roger Altman presented Peterson, on behalf of the firm, with an untitled Willem de Kooning drawing, and a word of thanks. The back of the gold-framed drawing was inscribed: WITH THE ADMIRATION AND AFFECTION OF HIS MANY FRIENDS AT LEHMAN BROTHERS.†

Peterson, who could be very witty when he put his mind to it, spoke from handwritten notes. “Only at Lehman would a chairman have to give himself a going-away party!” he said. He jokingly referred to Lehman as “a mental health ward,” populated by “subnormal professionals.” “I once made the mistake of asking each partner how much of the fees were attributed to them. The total added up to a thousand percent of revenues!” He affectionately singled out each business associate in attendance, including several wives, for insult and good-natured ribbing, and concluded with a quote from Nietzsche and a tribute to his partners.

Then everyone went to an adjoining room to witness a hilarious roast of the outgoing chairman. Billed as “A Day in the Life of Pete Peterson,” it starred Lehman partners. Those in the room were not surprised to see Steve Schwarzman play Pete Peterson, because he was close to the outgoing chairman, suitably irreverent and an accomplished mimic. They were pleasantly surprised to see Roger Altman play Lew Glucksman, for Roger was not thought to be daring—and Glucksman’s nerves at this point were raw. “No one wanted to portray Lew Glucksman for fear that he would take it personally,” recalls Altman. Altman organized two rehearsals for the several partners who would participate, and on the night of the dinner he arrived carrying cone heads, a steering wheel, a telephone and a bathrobe.

In the opening scene Schwarzman (Peterson) is in his bathrobe ordering a partner to appear at the River House at six o’clock in the morning to review a memo. The partner arrives in scene two and finds the lobby crawling with Lehman partners. Peterson comes down the stairs with a cup of coffee, which he spills; he bumps into a wall while walking and reading. In scene three, four partners are sandwiched in Peterson’s car. Each is speaking, while Peterson is paying no attention, signing papers and throwing them over his shoulder. He barks to his driver (played by Altman), “Frank, get me the ‘Big Man’ in Chicago.” Then, to no one in particular, he announces, “God, it’s so wonderful to be important!”

Scene four is in the office. “You remember Mr. Goldfedder, the chairman of Federated Department Stores,” says one partner to Peterson.

A distracted Peterson then introduces the visitor as “the chairman of Goldfedder’s.” At that point, Glucksman (Altman) enters, scowling. Like the actor in the Federal Express TV ads, Glucksman speaks in machine-gun fashion: “Interest-rates-are-going-up. Interest-rates-are-going-down. Better-finance-now.” Glucksman exits. They go to the Lehman dining room for lunch, where Peterson, who was always trying to resist sugar and who was constantly ordering raspberries, lunges for the sugar bowl and absent-mindedly pours it over his salad.

Scene five is set in the boardroom. Peterson and Glucksman are there when the servile board members file in, wearing their white (Saturday Night Live) cone hats. The phone rings, and someone announces: “It’s Golda Meir!”

“Tell her I’ll call back,” says Peterson.

Brusquely turning to Glucksman, Peterson says, “We’ve got a problem with our overhead. We’ve got to get rid of cigars.”

Glucksman’s leg twitched violently. “You can’t get rid of my cigars,” he says, almost choking on the fat cigar in his mouth. As an alternative, Glucksman shoots back: “We’ll get rid of raspberries!” The coneheads say nothing, just sitting there, their names draped over their chests.

People left the River Club as if floating on air, feeling they had taken part in a magical evening. Walking toward First Avenue, Linda and Peter Solomon were joined by Holbrooke and Diane Sawyer. They walked silently, savoring the jokes, the comradeship, the memories.

“If Pete had done this a year ago,” blurted Solomon, wistfully, “none of this would have happened.” Holbrooke sadly agreed.

*One other trader, Jim Boshart, was offered an opportunity to attend. Boshart says Peterson telephoned and said, “I just want you to know we’re having a party and it will be in good humor, and given your relationship with Lew, you might be uncomfortable.” Boshart agreed, and was not invited.

†Partners had planned to chip in to cover the approximately $15,000 cost of the De Kooning, but Glucksman, after consulting with Altman, decided the firm should pay.