House of Cards (30 page)

A
BOUT THE ONLY
unscripted moment in the maudlin—but mercifully brief—final Bear Stearns shareholders meeting on May 29 came when
Cayne spoke from what appeared to be the heart about the final hand fate had dealt him. Pulling the microphone closer on the sparse dais in front of about four hundred shareholders, the nattily dressed former CEO (and still chairman of the board for another day) made his first public comments since March. The $10-a-share stock deal that shareholders were in the process of rubber-stamping at that very moment had cost Cayne nearly everything he had built in the previous forty years at the company, including both his billion-dollar fortune and his powerful throne. “It's a sad day,” he said, “but we'll all get through it and hopefully be better off for it.”

To that point, Cayne's words had more or less echoed those of his partner Alan Schwartz, the media banker turned beleaguered CEO, whose own impromptu remarks had focused on his ongoing gratitude to the Bear Stearns employees. As Cayne continued speaking, however, his voice became increasingly shaky and his thoughts more personal. “This is my fortieth year with the company,” he continued. “And when I retired”— on January 4, after Schwartz told him it was time to go—“that was a sad moment. This is equally sad. That which doesn't kill you makes you stronger. And at this point, we all look like Hercules. Life goes on. This company achieved lofty heights for sure. But we ran into a hurricane.” With some anger, he then launched into his view that nothing less than a “conspiracy” was responsible for the firm's downfall after eighty-five years and that he hoped that the authorities would “nail the guys who did it.” In the end, though, he concluded, “I have no anger, only regret. Fourteen thousand families were affected. I personally apologize. I feel an enormous amount of pain and management feels an enormous amount of pain. I am sorry it happened the way it happened. Words can't describe how bad I feel.”

Seconds later, the meeting concluded without questions or protest from the audience. The
fait,
as they say, was
accompli
. Ten minutes, start to finish. While other shareholders and employees, all of whom had lost fortunes, milled about the second-floor auditorium bemoaning their fates, Cayne returned quickly to his ebony lair on the sixth floor—nobody stopped him to talk—and ensconced himself back behind his curved desk. When Bear first moved into its gleaming forty-five-story headquarters in 2001, Cayne also had a palatial office on the forty-second floor, with a sumptuous and panoramic southwestern view of lower Manhattan. But after September 11, he quickly moved down to the lower floor. (The office on the high floor became a conference room with a fully stocked bar.) The undistinguished view from his sixth-floor corner office
is toward the northeast and, ironically, faces the adjacent JPMorgan Chase building.

In his office, Cayne made a few phone calls and received an intermittent stream of loyalists. In contrast to his somber public performance downstairs, he now had a twinkle in his eye and his spirits seemed high. By his side he kept his trusty mini blowtorch, used to light and relight his mammoth private-label cigars. (He alone authorized himself to smoke inside the building.) David Glaser, a longtime Bear investment banker who most recently had the title of co-head of investment banking, came by to pay his final respects. Glaser was heading off to a senior position at Bank of America. Then Teddy Serure, a Bear broker, came by. Once upon a time, Cayne had spent “eleven months and twenty-three days” wooing Serure away from Merrill Lynch. “Jimmy promised me just one thing when I came,” Serure said, “that this would be a fun place to work.” So it was, he was happy to confirm. Even to the end.

Another big Cayne fan, Vinny Dicks, a senior executive in the brokerage business, came in and said an emotional goodbye. Cayne thanked him for the “extraordinary” letter he had written Cayne's seven grandchildren about their grandfather. And Cayne told Dicks, “You know who to come to if you need help” in the future. After a quick lunch of cold chicken salad, sent down from the dining room, one of the several executive assistants in the bullpen outside of Cayne's office came in crying and thanked him for all the wonderful memories and all the good times. They hugged.

But when the phone rang a few moments later and Cayne learned it was Jamie Dimon—the new owner of his firm—calling from his vacation refuge in Positano, on the eastern coast of Italy, Cayne quickly switched emotional gears. In the minute-long conversation, Cayne congratulated Dimon on the just-concluded 84 percent positive vote for the deal—a deal Cayne had been vehemently against but eventually voted for as a board member—and explained to Dimon that the shareholders' meeting had come off without any of the hitches the lawyers had been worried about (for instance, what if someone had
actually
spoken up). There was no discussion of the fact that JPMorgan owned just shy of half the Bear shares going into the vote, making the outcome a foregone conclusion.

Despite the shotgun marriage, the third time proved to be the charm for the Dimon and Cayne mating dance. In late 1998, soon after Sandy Weill, then chairman and CEO of Citigroup and Dimon's mentor, fired him as the heir apparent of Citigroup, Cayne and Dimon had talked for three hours about many things, including the possibility of Dimon taking
over the Bear Stearns Securities Corporation—the firm's clearing business—in the midst of the SEC's investigation into Bear's violations of the antifraud provisions of the federal securities laws in connection with its clearing relationship with A. R. Baron, Inc., a small (and now defunct) “bucket shop.” (Bear Stearns later settled the charges with the SEC about its dealings with Baron for about $38.5 million, and Richard Harriton, who ran the clearing business, was later barred for life from the securities industry and fined $1 million.) Dimon enjoyed his discussion with Cayne but declined his offer because what he really wanted to do, Dimon told Cayne, was “have your seat” in the metaphorical sense of wanting to one day run a Wall Street firm.

The two men met again a few years later, after Dimon had become CEO of Bank One, in Chicago. Dimon came calling this time because Bank One wanted to buy Bear Stearns. But Cayne told Dimon that the acquisition wouldn't work because the market would react negatively to such a dilutive deal. “Any premium for Bear Stearns shareholders would disappear after you announced the deal,” Cayne told him.

Now, with a serious helping hand from the men running the U.S. Treasury and Federal Reserve along with $29 billion of the public's money, Dimon had finally gotten his prize; whether it would become a pyrrhic victory remained to be seen. At a UBS Global Financial Services Conference on May 12, eight weeks after the signing of the initial deal, Dimon had said, “You will judge us on this deal one year from now. You cannot judge us on this deal today. We would not have done it if we didn't think it made sense, but we are bearing an awful lot of risk…. There's a lot of risk and we are not going to sleep easy until we're done, until we get through the closing and a couple of months after that. We're completely focused to manage through this downturn.”

But on May 29, as Cayne's and Dimon's brief telephone conversation was nearing an end, Cayne allowed that it had been a “sad, quite sad” day and then wished Dimon “all the best luck in the world.” He then returned to the business of saying his internal goodbyes.

Most of the artifacts of Cayne's illustrious career had already been boxed up—including copies of a prized book,
Gin Rummy: A Predator's Guide
by Michael Sall—and sent off to his weekend home at the shore in Elberon, New Jersey. There was one prominent exception: the Ek-Chor motorcycle that had been a fixture in his office since he became Bear's CEO. Instead of taking it with him, Cayne had decided to make a gift of the motorcycle—from the Chinese motorcycle company that Bear took public in 1993—to Fares Noujaim, a Bear vice chairman and longtime vocal Cayne supporter. Noujaim moved the motorcycle to his new office
downtown at Merrill Lynch, where he was briefly president of Merrill Lynch Middle East and North Africa. “The motorcycle is part of Wall Street history,” Noujaim said.

W
HILE
C
AYNE WAS
holding court in his office for the last time, Paul Friedman, resigned to the inevitable, wondered aloud how his beloved Bear Stearns, where he had spent the past twenty-seven years of his life, could have evaporated so quickly and effortlessly, just shy of its eighty-fifth birthday. He had become nothing more than a “transition employee” and wasn't sure what to do next, given that the deal was supposed to close the next day and he had not been offered a job at JPMorgan. “There's no process for leaving,” he said. “There's gonna be five thousand, six thousand, seven thousand people whose last day is tomorrow, and no one knows how to leave. Nobody knows. Do you just stop coming in? Do you resign to somebody? Do I turn in my ID? What happens to my corporate credit card, my BlackBerry? Nobody knows, and we're all just going to wander off into the sunset. I have a fair amount of severance and stuff that's coming, and it's subject to having signed an agreement and release that I haven't received yet, and they say somewhere in the next few weeks you'll get that. But there's no one to discuss it with, because everybody in our HR department is leaving. The whole thing is bizarre. JPMorgan, for a firm that's supposed to be legendary in their ability to do mergers, this one has been a shit show from the beginning. The classic is they keep talking about how they've hired 40 percent of Bear Stearns's employees or plan to. That's clever, because that includes a couple of thousand people we have that are clerical workers in a call center in Dallas. It includes a whole bunch of people who were hired transitionally for the next few months. Real, live people is a couple thousand, so there's probably ten thousand that won't get hired or won't get hired past three to six months, and the process is just so fucked up.”

Friedman paused for a moment and stared out the window onto 47th Street. When he resumed speaking, it was with a new resolve. “But having said that, we deserve it, so it's okay,” he explained. “It's funny. You heard Jimmy. His only comment that he made in the meeting was, ‘We're still looking at conspiracy theories, and who did what, and we'll see if they can decide who the bad guys were, and whether they can prove it.' And we're the bad guys. We did this to ourselves. We put ourselves in a position where this could happen. It is our fault for allowing it to get this far, and for not taking any steps to do anything about it. It's a classic case of mismanagement at the top. There's just no question about it.”

W
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APPENED
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