House of Cards (44 page)

A
ND YET THERE
were legendary stories within the firm about the vicious-ness with which Cayne could publicly dress down subordinates. In fact, many new senior-level employees considered getting chewed out by Cayne to be both a rite of passage and an intoduction of sorts to the ways of the firm. One senior managing director recalled how within a month of taking over the running of an important business line, he got a call from Cayne. “He says, ‘Come down to my office right now.' Not hello. ‘Come down to my office right now.' I open up the door to his black-walled chamber, all done in black ebony wood. Between the door and the chair, if I hadn't had almost thirty years of experience on Wall Street, I probably would have shit in my pants. Because he barked at me the moment I set foot in that office.” After a fulsome, expletive-filled discussion of the managing director's supposed error in judgment—carved out in front of Alan Schwartz and Sam Molinaro, who were there, too—“he just sort of said, ‘Dismissed.’”

On May 4, 1988, Bear Stearns announced that Cayne would be the sole president and Rosenwald would become a vice chairman. The consensus seemed to be that Cayne, then fifty-four, was in position to take over running the firm from Greenberg, then sixty. “It's not a big change,” Cayne told the
Times
. “People will be doing the same thing they always have. It's business as usual.” Greenberg made no mention of Cayne's appointment in any of his numerous internal memoranda.

Fresh on the heels of that successful gambit, Cayne pushed Greenberg again for even more power at the firm. “I recognized at some point in the late 1980s that the ‘point allocator,' that's the boss,” Cayne explained, referring to the senior partner who decided what the other partners get paid. “That's the guy who runs the fucking show. I don't care what the masthead says. I don't care who's responsible. The guy who pays people is the boss. I convinced two guys on the executive committee to go to him and say, ‘You can't do the points by yourself. You got to do them with the number two partner, and that was Jimmy.’” But Greenberg wasn't wild about that idea, either, especially since “one of his flock,” as Cayne refered to the members of the executive committee who were loyal to Greenberg, thought Cayne would treat him unfairly when it came to compensation. At first Greenberg told Cayne no. “Greenberg said to me, ‘You terrify people, you put fear into people,’” Cayne explained. “I said, ‘You got it exactly upside down. I don't. You may have one guy. I got
six that are terrified of you.’” But once again, Greenberg relented and agreed to allow Cayne to have a role in the allocaion of the profit points to the senior managing directors.

A
PATTERN HAD
clearly emerged in the relationship between Greenberg and Cayne where Greenberg repeatedly reversed what had appeared to be an immutable position in the face of a threat from Cayne. Each time, Cayne gobbled up more and more power. Cayne had used the same approach with Cy Lewis when Lewis asked him to continue overseeing the brokerage account of Sandy Lewis's in-laws. To Cayne, the way to handle these powerful people was simple. “You stand up to a bully, the bully collapses,” he said. “That's always been my theory. The second you stand up, they fall. Bullies always cave.” But any number of Cayne's partners thought he was the bully. “He was an eccentric and a bully,” said one of them. “He would lecture and wouldn't listen. And he was more avaricious in his pursuit of power than anyone else at the firm.”

As often seemed to happen on Wall Street during the late 1980s, when bankers became more and more like rock stars and celebrities, Greenberg and Cayne took their power struggle at the firm into the business pages of the national newspapers and national magazines.

In June 1989, the
Times
caught up with Greenberg on a Saturday afternoon in the back room of Reuben's, a New York delicatessen, where he was performing magic tricks for a group of regulars. “I don't do tricks,” Greenberg told the paper. “I do miracles.” What followed was a breathless account of how Greenberg, in all of his avuncular quirkiness, had steered the firm from a 1,000-person private partnership with $46 million in capital to a 6,000-employee public company with $1.4 billion in capital. The profile pointed out that Bear Stearns's profits had been growing at an annualized rate of 13 percent and had a return on equity second only to the venerable Morgan Stanley. Bear had also stuck to its trading roots, largely eschewing the M&A business and the leveraged-buyout rage (led in large part by the Bear alumni at Kohlberg Kravis Roberts). Greenberg, the paper observed, relied on “old-fashioned values more prevalent in country stores than on go-go Wall Street.” But the article pointed out that he was no longer a hayseed, either. He was worth millions and, after his divorce from his first wife, he started showing up regularly in gossip columns, which mentioned he was dating Lyn Revson, the former wife of cosmetics king Charles Revson, in addition to Barbara Walters, as previously noted. “He's become far more polished in recent years,” Walters was quoted in the article as saying. “I think some of his friends pulled him aside and said, ‘Alan, take off the pinky ring.’”

As Greenberg had, a few months before the article appeared, celebrated his fortieth year at the firm—the typically idiosyncratic celebration lasted fourteen minutes and included videos of Greenberg performing magic tricks, the presentation to him of a huge box of cigars, and the comment from him that he “has never wanted to get up and go to work more than I do now”—the article naturally turned to the subject of who would succeed him as the leader of the firm. “At 61, Greenberg shows no sign of stepping down, and there is no mandatory retirement age,” the piece said. “But he is so completely in charge, and so essential to the functioning of the firm, that it is hard to imagine Bear Stearns without him.” The
Times
made no mention of the brewing power struggle between Cayne and Greenberg and suggested that with Greenberg, Rosenwald, and Cayne so close in age, the next leader of the firm would likely be someone from below their ranks. Cayne made only a cameo appearance in the article.

Four months later, Cayne had his star turn in the
Washington Post
. It was the first substantive article that appeared about him outside of Truscott's bridge columns in the
Times
. But, of course, bridge was the article's hinge. The article revealed that Cayne had made nearly $4 million in 1988 and was worth more than $30 million in Bear stock but still managed to be “out the door before 5
P.M.”
on most days to play bridge, as he had most of his adult life. The paper left it to Chuck Burger, Cayne's longtime bridge partner, to explain the secret to Cayne's success. “He is tenacious,” Burger said. “He gets a bad result and just swallows it and gets on to the next hand. He never gives up. It is war.”

Not everyone “loves or admires Jimmy Cayne,” the
Post
allowed, “and his calculating, political style and tough bottom-line orientation” rubbed many people the wrong way and caused departures from the firm. But there was no question, the paper continued, about the “excellent relationship” that Cayne had with Greenberg. The
Post
even stated flat-out that “Cayne today is viewed as a complementary, non-threatening second-in-command.”

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LESS POLITICALLY
useful piece of PR came out in a December 1989 profile of Cayne that appeared in the short-lived
M
magazine. He made a number of comments that were critical of women at the bridge table and on Wall Street. “[B]ridge is a man's game at the competitive level,” he said. “Sixty to 70 percent of the people who play bridge are women, but all of the top players are men. I'm not being chauvinistic; it's just keeping score…. Take a look at Wall Street. Wall Street is stress, highly emotional, and loaded with rejection. You have to be able to survive that.
That's perhaps why women haven't achieved the record that they have in other areas. You don't see many women selling securities. When a guy says on the phone to a guy, ‘I don't want you to bother me again; I find you to be really stupid,' a woman taking that probably isn't going to handle it as well. She'll probably have to go to the ladies' room and dab her eyes. It's the same way in bridge. At a certain emotional level, women perform not as well as men.” Cayne's comments caused much consternation around Bear Stearns, especially since, as with many other Wall Street firms, there had never been—nor ever would be—a woman among the senior most executives running the firm. When the
M
article came out, Cayne went into damage control mode and wrote the firm's employees: “I sincerely apologize to everyone for the totally false impression given by the article and assure you I disagree with its contents.” He also said the quotations in the article were “fabricated, distorted or taken out of context.” But Duncan Christy, the reporter, told
Fortune
that Cayne's comments were transcribed from a tape and were “meticulously accurate.”

Allegations about how Cayne treated women and the press would dog him throughout his career from then on. “To escort visitors to meetings,” the
Wall Street Journal
reported in 1993, “the firm this year staffed its Park Avenue headquarters with models seductively clad in short skirts. After some women executives complained, Bear clothed the models— dubbed ‘geisha girls' because senior executives hatched the idea after a trip to Asia—more conservatively.” At a meeting at the end of 2007 in his office with Lesley Goldwasser, one of the very few high-ranking women at Bear, and two leading private-equity executives, he looked at Goldwasser and then said to the two clients: “And she's not too bad to look at either.”

Vicky Ward, a writer for
Vanity Fair
and other publications, wrote the following about Cayne in the
London Evening Standard
two weeks after the firm collapsed: “Cayne is a man of vast appetites, an online poker addict who I found to be a self-aggrandising tyrant when I met him six years ago. At that time he lied to me baldly about a story I was working on, bragged about his poker and flirted with me, showing off Bear's sumptuous offices. When later confronted with documents that proved he'd lied, he went berserk and resorted to name-calling.” But she found him to be “charming, likeable but clearly a rogue” and could not believe that he was the CEO of a major Wall Street securities firm. “He had all the time in the world for me,” she said. “And he also just spent hours playing poker on his computer screen.” Cayne said Ward's account of their meeting was “delusionally false.”