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Burning Down His House

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Dick Fuld joined Lehman full time in 1969, shortly before Joe Gregory. Soon they were traders together, sitting a few desks from each other, under the powerful influence of Lew Glucksman. Glucksman was a gifted, ferocious trader, driven, in large part, by bristling class resentment. The principal targets of Glucksman’s ire were the firm’s investment bankers, the Waspy Ivy Leaguers who dropped names and chatted up CEOs. They’d ceased driving revenues but, infuriatingly, still claimed a disproportionate share of the bonus pool.

The conflict came to a head in 1983, when Glucksman walked into the office of Lehman CEO Pete Peterson, a distinguished old-school investment banker who’d served in the Nixon administration and, in his spare time, wrote for the New York Review of Books, and told him to leave. “I’m talking about running the business now,” Glucksman said. Peterson, who’d made Glucksman his co-CEO only eight weeks earlier, knew that his partners understood that the power had tilted—at Lehman, money had talked. Peterson didn’t put up a fight. And just like that, the traders were in charge.

Despite having been raised in Westchester’s upper-middle class, Fuld seemed to absorb Glucksman’s class resentments— “Fucking bankers,” he called them. Glucksman liked to frighten the bankers with his crude physicality and wells of anger—in a rage, he once ripped the shirt off his own back. And Fuld followed in the master’s footsteps. The bankers condescended to him, calling him “gorilla” because he seemed to grunt rather than speak in full sentences. Fuld, though, made the aggressive image his own, putting a life-size gorilla in his office off the trading floor. He backed it up with action. He was a gifted trader and legendarily fierce. He once cleared the desk of a manager who asked him to wait, sweeping the papers to the floor with his hand.

As a manager, Fuld was demanding and intense. “I take it as a personal failure to lose money,” he would say. “He thought he could intimidate you out of losing money,” observed one colleague. But to those he favored, he showed a warmer, paternal side. Early on, he took Gregory aside to tell him his wardrobe needed work. “I was one of those people who didn’t want to disappoint Dick,” Gregory once told a friend.

Glucksman’s brilliance as a trader was not matched by a talent for management. By 1984, he’d nearly driven Lehman into the ground. In desperation, Lehman sold itself to American Express. The merged company, though, didn’t take: In 1994, American Express spun off Lehman, a small bond shop that few thought would survive. Fuld was named CEO. “I was the only one left standing,” Fuld explained later.

The night he was selected, Fuld had an anxiety attack, and stopped breathing for 45 seconds. “I realized I was it,” he told the Wharton School online journal. “I didn’t want the job, and I wasn’t looking for the job.” But it was a moment of rebirth. “I came in the next day with terrific resolve.”

Fuld quickly cleaned house and promoted Gregory. “You’re the best business fixer I have,” Fuld told him. In 1996, Fuld formed an executive committee, appointing Gregory and a half-dozen others. “Everybody in his inner circle had equally undistinguished backgrounds, not top schools, not top-decile performers,” said one former associate, an investment banker. There was barely an Ivy League degree among them—Fuld had graduated from the University of Colorado, Gregory was a Hofstra alumnus. Still, they had common cause. None felt an iota of entitlement. “We’d all been poor [Fuld was the one exception] and didn’t want to be poor again,” said one member of the original committee.

Fuld quickly instituted an on-the-team-or-off mentality at Lehman. He paid bonuses largely in stock and wouldn’t let the executive committee reap the full benefit for five years. “It was not a good time to tie up your next five years in Lehman stock,” said that member of the original executive committee. “You had to decide whether you were going to stay and try to make this work. A lot of people left.”

With a single stroke, Fuld remade Lehman in his own image—and he loved what he’d created. One executive recalls a time when Fuld took a family vacation to Africa. At night, he’d hike to a spot where he could get a phone signal and call in to his top executives. “I’m out in the bush,” he’d tell them. He wanted to catch up on business. “Little business transpired,” recalls one participant. “It was more like he missed us.”

Gregory, Fuld’s old protégé, thrived in the new regime. Partly he was “a warm and fuzzy” presence—a “Feeler” with a capital F, as he’d tell people. He was an easy conversationalist, which relieved Fuld of that burden, and a not a bad golf buddy. He also took conspicuous pleasure in the millions he made, a quality that seemed to amuse Fuld—he famously commuted to work in his own helicopter from one of his sprawling Long Island homes. But Gregory’s warmth, and his joie de vivre, extended only so far. “Joe was a killer,” said one former Lehman banker. “No one was more deadly in the trenches.”


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