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The Brain in Thain

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Not long ago, I e-mailed Dick Grasso’s lawyer to arrange an interview. I sent the e-mail at 3:40 in the afternoon. By four, I had answered the phone to hear Grasso’s high-pitched gravel voice on the other end of the line. Prior to the scandal over his nearly $200 million compensation package in 2003, Grasso’s tenure at the exchange was marked by a conflict between large institutional clients—mutual funds and investment banks—who demanded a faster, more efficient exchange, and the brokers and specialists on the floor, who saw Grasso as their protector. Grasso, to his credit, had taken some tentative first steps down the road toward automation. But he is widely seen as having dragged his feet on the matter in deference to the floor. Now, however, Grasso was at pains to get himself on the right side of history. “I think [Thain] has done a terrific job,” he told me. “The Archipelago deal created a viable alternative to the floor. He took the strategic direction of giving the choice of execution to the customer.”

Thain has always worn his ambition lightly—the kind of guy who managed to get the big promotion without looking like he was gunning for it. But the ambition was there nonetheless. “He was a comer,” says Eckert, who says fellow partners viewed Thain as a future leader of Goldman only five years into his tenure there. To this day, friends and former colleagues hint at bigger plans—maybe even a tour as Treasury secretary. So it would be hardly surprising if there were scenes from Thain’s past that he would prefer to keep quiet.

In fact, there is one particular episode that doesn’t quite jibe with Thain’s record of earnest menschiness. In 1998, Goldman was at a crossroads. The firm had entered a nasty internal debate over whether to take itself public, and the Goldman executive committee was deadlocked. Then-CEO Jon Corzine strongly favored the move, as did the firm’s two vice-chairmen, Roy Zuckerberg and Bob Hurst. Arrayed against them were firm president Hank Paulson, the current U.S. Treasury secretary; John Thornton, the firm’s investment-banking boss; and Thain, who was then the firm’s chief financial officer.

In June, a vote of the Goldman partners broke the stalemate at the top of the firm. Corzine had triumphed thanks to a grassroots campaign that saw him undertake a global goodwill tour in search of support. But to the careful observer, there were signs of weakness. Above all, the skeptics complained that Corzine was constantly “getting ahead” of the executive committee, a perception his IPO crusade had reinforced. Corzine was also in the habit of having “unauthorized” conversations about merging Goldman with other Wall Street firms. Later that summer, when Corzine dragged Goldman into a bailout of Long-Term Capital Management, the massively cratering hedge fund, the dissidents had another powerful data point.

Thain created an uproar when he declined to renew the contract for the beloved floor barber. “How many people do you know who have no remorse?” asks one floor veteran. “No remorse and no empathy?”

Thain had been a Corzine protégé throughout much of his career. It was Corzine who’d overrode objections to make Thain CFO in 1994. And it was Corzine who’d landed Thain a spot in the firm’s leadership. “[Corzine] was one of his sponsors to move him up to the executive committee,” recalls Zuckerberg. The two men became close. Thain would accompany Corzine on ski trips to Colorado. He and his wife, Carmen, would periodically meet Corzine and his then-wife, Joanne, for dinner in Manhattan.

Then, just like that, the old rapport vanished. By mid-1998, Thain had taken to bad-mouthing his old mentor to colleagues. “His line was that Corzine wanted to go public to entrench himself,” recalls one. That fall, Thain, Thornton, and Paulson appeared to reach an understanding: Paulson would make the case against Corzine and the other two would support him for the CEO job. Soon Paulson was ranting about Corzine as though he’d been a lifelong enemy—and in ways that sounded remarkably similar to Thain’s complaints. Goldman’s 85 Broad Street headquarters had become the backdrop for a high-stakes game of Survivor.

The turning point came when Zuckerberg retired in late November 1998. This left Corzine in the minority on the executive committee, and somewhat inexplicably, he neglected to appoint a replacement. “I told Jon, ‘Put someone else on the executive committee immediately,’ ” says one former ally. “He said he could handle it. I said I didn’t think he was right.” After a few more weeks of squabbling, the troika of Thain, Thornton, and Paulson went to Corzine with a fait accompli: Paulson would replace him as CEO, and Thain and Thornton would become co-COOs. On January 11, 1999, Goldman partners received an e-mail from Paulson and Corzine: “Jon [Corzine] has decided to relinquish the CEO title, while continuing as a Senior Partner and co-Chairman of the firm,” it read. Corzine was reportedly so humiliated that during his final weeks at the firm, he would work from a limousine parked outside the Goldman offices rather than risk contact with the traitors inside.


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