Illustration by Riccardo Vecchio
Bernie quickly developed a reputation for efficient, meticulous execution, and did well for a niche player. Carl Shapiro, who made a fortune in the textile business, recalls that 50 years ago, it could take weeks to unload a block of stock. “This kid [Bernie] stood in front of me and said, ‘I can do it in three days,’ ” Shapiro told the Palm Beach Daily News. “And he did.”
Bernie, though, had in mind a larger target, the monopoly of the New York Stock Exchange. “Back then, it was an incredible dynamic,” says one competitor. “Bernie was sort of against the rest of the world.”
Everyone knew the specialist system ripped off investors, artificially inflating the spread between the buy and sell prices. Madoff made it his mission to bring down the corrupt system, a mission happily aligned with his financial interests. “Bernie was the king of democratization,” says Eric Weiner, a reporter who covered him in the early days. “He was messianic about this.” He pushed to automate the system, listing buyers and sellers on a computer that anyone could access. He won that battle—technology was inevitable even then—and quickly moved on to the next. “We came up with the concept of developing a screen-based trading mechanism,” Bernie explained to a conference. “That was the start of NASDAQ.”
By the eighties, the Madoffs had taken huge market share and Bernie began to accumulate the trappings of the financial success he’d long dreamed of: impeccable suits, antique watches, and, later, far-flung homes and a plane on which he had his initials painted. Still, Bernie’s origins were always there. He was an outer-borough kid, and he held fast to his identity and, with it, his class resentments. As his success grew, he liked to make fun of the types who’d once raced past him, overeducated college kids he now hired. Bernie recounted, “They just spend too much time thinking … You could actually watch them … My brother and I and my sons would look at them, saying, ‘Well?’ And they would say, ‘I’m getting there.’ By that time, the price would usually have moved against us.”
The joke about Hermann Merkin was that he didn’t need a telephone at work since he didn’t heed anyone’s advice. A German immigrant, he’d made dozens of millions investing in stocks, shipping, private equity. But his ambitions were broader. In 1958, when Ezra was 5, Hermann co-founded the Fifth Avenue Synagogue, a congregation that would become perhaps the richest in the country. The synagogue, a monument to Hermann’s accomplishments, would be under his control for years. And he guided it forcefully—he had little patience for communal decisions—turning it into a haven for modern Orthodoxy as well as a center for his own religious education. Hermann put a premium on education. Yanked out of school as a teenager, he was a frustrated intellectual. At home, a learned Jewish text was often open on his desk, next to the Wall Street Journal. He regularly attended Talmud classes at the synagogue, until a few days before he died at 91 in 1999.
Ezra followed his father in almost all things—most of his life, Ezra, too, has attended Talmud classes. But Ezra’s imitation was a form of flattery lost on Hermann. “He didn’t love it,” says one person close to the family. Hermann didn’t express pride in the children. The exception was intellect, which Hermann not only encouraged but wanted on display. Hermann invited Israeli prime ministers, wealthy Wall Street businessmen, and rising politicians to dinner. The kids sat at one end of the table and listened to the adult discussion, often dominated by Hermann. But once a week, on Shabbos, Hermann ceded the floor to his eldest son, his Torah prodigy. Wearing a tie, Ezra commenced an exegesis of the next day’s Torah portion. He was professorial, playing it up. It was one of the few things Ezra did that elicited unrestrained paternal approval.
After high school at Ramaz, the Upper East Side Orthodox day school, Ezra attended two yeshivas in Israel, then Columbia and Harvard Law, and swiftly climbed through the world his father built. “There was never a time when he wasn’t a success,” says an acquaintance. He made a pit stop at top-tier law firm Milbank, Tweed, but in the early eighties, he jumped to finance, his father’s field and the glamour sport of Wall Street at the time. He went to work at a hedge fund run by Alan Slifka, a friend of Hermann’s. There he met Joel Greenblatt, who founded Gotham Capital in 1985, where Ezra later worked as an analyst, and, says Greenblatt, a good one.
From early on, though, it was clear that Ezra’s unique talent did not involve managing money. “It’s very, very difficult for Ezra to make decisions,” says one money manager who worked with him over the years. He worried about the big picture, fretted over allocations. His gift was that he “was a world-class salesman,” says the money manager. Ezra saw himself in the investor. “He recognized that many people didn’t have confidence [to make investment decisions],” says the money manager. “He recognized that if people had confidence in him, then he could give them confidence.”