A few days after Lehman Brothers Kuhn Loeb was sold to Shearson/American Express in April 1984, Peter G. Peterson was holding court at the Candy Kitchen in Bridgehampton, Long Island, a coffee shop–ice cream parlor that is a magnet for the writers, producers, publicists and businessmen who spend their weekends in or near that fashionable resort. The former chairman of Wall Street’s oldest continuing partnership shared his booth with journalist William Broyles, who had taken his son and daughter there for waffles. Broyles tried to juggle Peterson’s obvious appetite for an audience with the incessant demands of his children—for maple syrup, milk, a fork, a napkin. I happened by in search of the morning papers, and Bill invited me to join them. Oblivious to the children, Peterson went on with riveting tales of what really happened to the partnership launched by the Lehman family one hundred and thirty-four years before.
Peterson’s account seemed worthy of a Theodore Dreiser novel, and Broyles, a talented writer, expressed interest in pursuing the story. Peterson said that Ed Klein, editor of the New York Times Magazine, had called him that Friday to say that he had not yet settled on a writer, but wanted to know whether Peterson would cooperate on a story about the death of Lehman Brothers. Peterson said he would.
He seemed almost buoyed by news of the sale of the company he had once guided, as if the humiliation of the firm were a personal vindication, which, in a sense, it seemed to be. For just nine months before, in July 1983, Peterson had been ousted as chairman by his longtime colleague, Lewis L. Glucksman. His tale told, Peterson wandered from our table to another, where he repeated his tale. Broyles and I were left buzzing about what a hell of a story this might make. For Lew Glucksman, who had won the power struggle with Peterson, sounded like a fascinating cross between a paranoid Captain Queeg and a pathetic soul like Dreiser’s Charles Drouet, the traveling salesman with pretensions of grandeur in Sister Carrie.
Because I intruded on his conversation with Peterson, Bill Broyles had first crack at the story. But after thinking about it overnight, Broyles decided that a book on Vietnam had first claim on his time. Without a green light from Broyles, I would not have chased this story. I thank him.
The first thing I did was make a couple of calls to people I knew at Lehman. They confirmed the bare outlines of much of what Peterson said, cautioning that this was not a simple morality play with cardboard heroes and villains. It sounded like a terrific story, one that might expand my limited knowledge of Wall Street and its blizzard of new jargon—greenmail, leveraged buyouts, “Pac-Man” defenses, the two-tier, front-end loaded, boot-strap, bust-up, junk-bond takeover. Perhaps, I thought, what happened at Lehman might provide a vehicle to explore a larger story about how Wall Street and capitalism were changing.
But first I had to decide where to tell this story. I already knew the Times Magazine was committed to publishing an account.
As luck would have it, the Times telephoned early that week. The conference call came from Executive Editor Abe Rosenthal and Deputy Managing Editor Arthur Gelb. They asked if I would undertake a magazine assignment for them, but the subject they proposed, while important, just didn’t arouse me. I said no. There was a pause. Then I said, “You know what I’d love to do is a long piece on the fall of Lehman Brothers.” They liked the idea.
Ed Klein and I met for breakfast and agreed that I would spend the better part of a year reporting and writing a two-part, 25,000-word article for the Times Magazine. Throughout the reporting, writing and editing process the Times editors were extraordinarily supportive. In addition to Rosenthal, Gelb, Klein and Deputy Magazine Editor Martin Arnold, I wish especially to thank Michaela Williams, who edited the pieces with great care and was a pleasure to work with. Andrew Yarrow and Phyllis Shapiro performed fact-checking feats. Mary Marsh, a friend, slaved to help organize cartons of research material.
The idea for this book arose after I was well into the reporting for the pieces. I went to Jason Epstein at Random House, who has published and edited three of my four previous books, and said I thought the full story of what happened at Lehman and what was happening on Wall Street could not be contained in a 25,000-word article. He worried that two articles in the Times might dull interest in a book. I tried to reassure him that there was no way to cram this melodrama into a few magazine pieces. He took a chance on this book, which turns out to be almost five times the length of the pieces the Times published.
Jason took one other chance on this book. Joan Ganz Cooney is one of his closest friends; of the twenty people invited to her wedding to Pete Peterson, Jason was one. He likes and admires Pete Peterson, whom I had met a few times at Jason’s Sag Harbor home. When the book was nearly complete, I cautioned Jason that Peterson, and perhaps Joan, would be displeased by parts of the manuscript and suggested he might want someone else at Random House to edit it. Jason declined, saying that publishing books was what he did for a living. He was confident that his friends Joan and Pete understood that this was my book, not his. Jason is special.
I might have written a very different book had I failed to win the cooperation of the two main participants—Pete Peterson and Lew Glucksman—each the son of immigrants, each an American success story, each destined to clash. Peterson sacrificed all but a few Sunday mornings in the summer of 1984 to meet me at seven in the morning at a diner in Southampton. In all, I spent about fifty hours interviewing him. Lew Glucksman at first was harder to pin down; feeling burned by the media, he wasn’t eager to talk. But in time he relented and in the end spent about thirty-five hours with me. Neither man emerges quite as he expected to, but I wish to thank each for his time and patience.
Time was a great ally. At first many of the participants refused to cooperate. Eventually, I did interview each member of Lehman’s board of directors, each member of the executive and operating committees, more than half of the seventy-seven partners, numerous associates, secretaries, former partners and people on and about Wall Street. I had access to Lehman’s financial records and many internal documents. While reporting, I went back to the participants many times to confirm dialogue, to check facts, to prod their memories. Whether they are pleased or not by the outcome, I thank the partners and employees at Lehman for their assistance, particularly those whose special help it is probably wiser not to acknowledge. I also thank Peter Cohen and the executives at Shearson/American Express for cooperating and encouraging others to make themselves available.
A word about my method: I have tried to put the pieces of the Lehman puzzle together without resorting to journalistic shortcuts and the air of omniscience that infects much of the new journalism. At the risk of “slowing the narrative”—a phrase too freely uttered by editors eager to blur the line between fiction and nonfiction—I have used only the words actually given to me directly in interviews and have tried to attribute these words and thoughts to people. I have invented no dialogue. I do not enter the mind of someone unless he or she invites me. I have tried, wherever possible, not to accept a single version of a dialogue or incident, but instead have checked details and dialogue with the main participants, including adversaries. Where there was disagreement about what happened in a meeting, about who said what to whom, rather than rely on a solitary source or version, I have tried to let the reader know who is speaking; where recollections differ as to what was said, I have indicated as much. When I have asserted, without attribution, that something was said or done, I have based these assertions on the testimony of adversaries who agree.
A few caveats: No reporter can with 100 percent accuracy re-create events that occurred some time before. Memories play tricks on participants, the more so when the outcome has become clear. A reporter tries to guard against inaccuracies by checking with a variety of sources, but it is useful for a reader—and an author—to be humbled by this journalistic limitation.
Although I talked to more than forty Lehman partners and to numerous Lehman employees, my narrative relies heavily on the recollections of the fifteen or so members of the Lehman board and operating committee. In the critical last year of Lehman’s life as a private partnership, these were the decision makers. It is also worth noting that this is not intended to be a book about how typical investment bankers go about their business, though I trust the book will shed some light on investment banking. The story I tell here focuses on a tumultuous period at Lehman Brothers, one in which scheming and jockeying for power was as commonplace as it is in politics. Unavoidably, some readers may draw the unwarranted conclusion that Lehman partners did little else but hatch political plots. The extraordinary profitability of the firm through 1983 suggests another conclusion.
This book has been a labor of love. Intellectually, it took me places I had not been before. It opened doors to a financial world whose dominion over our lives continues to spread. It both taught and depressed me.
It also left me grateful to the many others who had a hand in this book, including: the people at Random House, especially: Peter Osnos, who offered some valuable journalistic advice, Becky Saletan, Jason Epstein’s senior editorial assistant, Sallye Leventhal, his editorial assistant, and copy editor Sandy Schoenfein; Nora Ephron and Richard Reeves, friends who read parts of the manuscript and helped save me from myself; my editors at the New York Daily News, who kindly granted me a leave of absence from my weekly column; my agent, Esther Newberg, who, like the best agents, is one part business representative, one part critic and one part mother; and Amanda Urban, who is equal parts critic, friend and loving wife.