24 / CHRONICLESnAuletta: “We were making money. Allnthe people cared about was theirnmoney. Greed.” Another remarkednthat “Lehman was held together strictlynby money, blood money.”nBut despite the money pouring intonthe firm, the Lehman partners “didnnot think of themselves as wealthy,ndespite annual earnings ranging fromn$500,000 to more than $2 million, innaddition to owning millions of dollarsnin Lehman stock.” And when PeternCohen, head of the Shearson side ofnShearson/AMEX, pushed his bid fornLehman — boasting that he maden”$1.2 million last year, and seventeennpeople at Shearson made more thannme!”—the Lehman partners “rolledntheir eyes,” because as one said, “afterntaxes we all made more than him.”nOnce you get more money than Godnyou need more money than God. Thenfall of the house of Lehman camenabout when its partners discoverednthey didn’t have enough.nBy 1967, Lehman — founded inn1850 by German-Jewish immigrantnbrothers who started trading cotton innMontgomery, Alabama—was responsiblenfor $3.5 billion in underwritingnand was among the top four WallnStreet investment banks. Auletta’s narrativenbegins in 1969 with the death ofnBobbie Lehman, the last of the namento run the partnership and the rulernwhose twofold legacy began the firm’sndemise. Bobbie groomed no successornand established no system of consensualngovernance. Individual partnersnknew how to manage individual clientsnbut not how to manage themselvesncollectively.nIn 1973 they chose Pete Peterson,nwho had come to the firm only twonmonths earlier when President Nixonndeposed him as his Gommerce Secretary,nas CEO—on the basis of hisnadministrative experience. The secondnhalf of Bobbie’s legacy consisted ofnLew Glucksman, hired away fromnA.G. Becker in 1962 with his ownncommercial-paper team to establishntrading at Lehman. Bankers initiatenloans; traders sell and buy thencollateral — Bobbie wanted to makenmoney on both sides of the financingnprocess. The two-fold approachnseemed the only way to deal withndramatic changes on Wall Street. Lehman’snstory is one of the tragic conflictnof Glucksman and Peterson, each try­ning in his own way to deal with thenother, and with the larger forces atnwork in the leveraging of America.nDeregulation increased competitionnon Wall Street. Investment bankingnquickly became less a matter of socialnand political connections and more anmatter of price. Giant corporationsncould now afford to hire their ownnmoney managers, who sought to maximizenprofit on a day-to-day basis rathernthan worry about the firm’s long-termnprofitability. Trading was in the ascentnand by 1983 accounted for more thanntwo-thirds of Lehman profit. Risk arbitragenand new financial instrumentsnfurther emphasized trading. Investmentnbanks needed more capital—nLehman could trade $15 bilhon ofngovernment financing in a single day.nThe increased need for capital andnmarkets forced the creation of financialnsuper stores — Prudential plusnBache, Dean Witter plus Sears. Thentakeover of Lehman has been calledn”McDonald’s taking over then’21′”—but the real name of the hamburgernjoint was Hayden, Stone,nShearson, Hamill, Lamson, Faulkner,nDawkins, Sullivan, Loeb, Rhodes,nHornblower, AMEX. Merger maniandrove up the prices of financial firmsnalong with the rising price of financialnassets, and because the firms werenworth more, more partners were willingnto sell them, particularly Lehmannpartners, who were required at age 60nto sell their shares back to Lehman fornbook value only (ca. $1,250).nThe polarization of bankers andntraders at Lehman was no differentnfrom that of cowmen and farmers innthe Old West. Bankers held 67 percentnof the shares and 51 of the 79 partnerntitles, but the traders were bringing innmore than twice the profits. Glucksmannproposed a radical redistributionnof the shares, and Peterson turned himndown, setting the stage for a powernstruggle. The outcome of that strugglenwas first determined by money andnthen by greed for even more. Moneynin the form of gushing profits helpednmake Glucksman co-CEO in 1983.nShortiy thereafter he engineered thencoup which forced Peterson out.nBut in the months before his goldennhandshake took effect, Peterson forcednGlucksman not out of his job but outnof his company. The ebb and flow ofnthis struggle is portrayed with genius innnnAuletta’s account, and the samenstrength powers his conclusion:n”Greed was the word that hovered overnthe troubled partnership. To their facesnGlucksman accused the senior bankersnoi greed for money. Behind his back,nsenior bankers accused Glucksman ofngreed for power. Traders said the bankersnwere greedy because they werenprivately angling to sell the firm.nBankers said the traders were greedy tonsteal their shares and to take such fatnbonuses.”nTensions at Lehman centered onnGlucksman’s suspicion that Petersonnwanted to sell the firm before henturned 60 in order to sell his thousandsnof shares at a profit well over booknvalue and at the expense of partnersnwith far fewer shares. “There is nonquestion he was interested in sellingnthe business,” says Glucksman, “henwas obsessed with money.” Neithernman, however, was to determine Lehman’snfate. Not even the Lady Macbethnof the conflict—Peterson’s wife,nJoan Ganz Cooney, founder of Children’snTelevision Workshop—couldndecide the issue, though she seems tonknow more about the games big peoplenplay than her recent libertarian SmithnCollege commencement address onneconomic equality would suggest:n”She knew that Glucksman was violentlynopposed to the idea of selling thenfirm, while it was Pete’s private hope tonsell Lehman before he reached sixty.”n”Pete certainly hoped it would sell innthat period,” she told Auletta, “andnwe’d have no money worries. . . .nOur sole interest was in getting asnmuch money as we could.” At thentime of these remarks, her husbandnwas earning the equivalent of $5 millionna year after taxes.nBut Peterson’s greed and Glucksman’snpassion were equally ineffectivenin the end. The market itself had itsnrevenge on the house of Lehman. Latenin 1983, profits dried up as tradingnlosses escalated, and Lehman wasndown $30 million by the end of Marchn1984 and more than that amount innthe following month alone. “Glucksmannwas shorn of his armour. Nonlonger was he a guaranteed moneynmaker. A fickle market had denuded antroubled partnership.” Peterson walkednaway with a package worth $23 million.n”Maybe it’s a littie too rich,” henremarked to the AMEX people.n