House of Cards (46 page)

Cayne made sure to know what was going on politically around the firm before he made his moves. “Warren was the up-and-coming wonder kid, superstar trader, head of the mortgage department, and there was a point where the two of them became effectively co-heads of fixed income and rivals, and John was more in Ace's camp and Warren was Jimmy's protégé, and the two of them didn't get along,” said Friedman. “It was tense. There was a lot of tension about how all of this is going to play out. I started getting calls Friday from Jimmy's office. ‘Come on down, let's chat,' Cayne said to me. Ten years ago, there's no reason I should be chatting
with Jimmy Cayne. We'd talk—'How are things? What's going on on the trading floor?'—and what I realized after a time was he was looking for the inside scoop on the Warren and John thing, and it got really uncomfortable, because I like Warren, and we got along well and we were friendly. But at the time I didn't work for him. I worked for John Sites, who had been wonderful to me, and it was really, really awkward. I did a probably bad job of disentangling myself from it, but I basically stopped answering Jimmy's questions. He then one day was kind of curt, and I never got called again, so he stopped. He stopped inviting me down for cigars.” (Friedman didn't smoke.)

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igars have been as much a part of the stage set of Wall Street as private jets and bespoke Savile Row suits. At Bear Stearns, Savile Row suits were not so much part of the PSD culture, but private jets and cigars were nothing short of ubiquitous on the executive committee. To be sure, Greenberg smoked cigars around the office—
Cigar Aficionado
ranked him seventy-first among the one hundred top cigar smokers of the twentieth century, between George Gershwin and
Seinfeld
actor Michael Richards; the “best deal” he “ever made was one that kept him supplied with cigars (courtesy of Ron Perelman) for quite a while”—but for Jimmy Cayne, a cigar was like a sixth digit. “No Wall Street CEO has smoked more cigars,” Charlie Gasparino, the CNBC reporter, wrote about Cayne in
Trader Monthly.
In March 1992, Greenberg reminded everyone at the firm about the smoking policy. “No smoking anywhere at Bear Stearns except in your own office with the door closed,” he wrote. “There will be no exceptions—unless you have worked at Bear Stearns more than 43 years.” Despite the policy, there were numerous reports of both Cayne and Greenberg smoking cigars in the corridors and in the elevators, even going so far as to flick their ashes on the floor of the elevators on their way out. When, in 2003, New York City mayor Michael Bloomberg banned
smoking in all office buildings and restaurants, Cayne alone continued to smoke cigars in his office and the surrounding environs. “He smoked, and you inhaled them in his office,” Paul Friedman remembered what it was like for him to go into Cayne's office. “You'd come out, and you'd smell of them.” Friedman said that “for people who smoked them, I think he was fairly generous with sharing them.”

As with everything he put his mind to, Cayne had a passion for cigars. One day, as a favor to Fares Noujaim, a vice chairman of Bear Stearns, Cayne agreed to have a meeting with a high school friend of Noujaim's from Lebanon. “He knows a lot about Bear Stearns,” Noujaim told Cayne. “He knows a lot about Jimmy. He'd like to meet you.” After spending a “delightful” thirty minutes together, Noujaim's friend gave Cayne the most incredible gift he had ever received. It was a cigar, but one with no identifying features, such as a label. “I take one puff and I never tasted anything like this,” Cayne recalled. The draw was as smooth as silk. Cayne had to know more. He became obsessed with finding where the cigar came from and—more important—getting himself a steady supply. He called Noujaim. “You and I got great history,” Cayne told Noujaim. “In our lifetime, you've asked me five thousand things. I have delivered five thousand times. I'm asking you for one thing. I want the name of the cigar.” With the name, Cayne figured he could get himself the cigar in Switzerland, where many aficionados buy Cuban cigars.

After two weeks, Noujaim told Cayne that the cigars had come from the private stock of the prime minister of Lebanon. “I can't find out the name of the cigar,” Noujaim told him, “but I'm going to Lebanon and I might be able to make a deal to get some cigars.” Now obsessed, Cayne persisted in his quest. He remembered there was an employee in the firm's commodity department who was Cuban and whose family owned a tobacco farm, so he invited the fellow up to his lair. “He takes one puff,” Cayne said. “He said, ‘I never smoked anything like this.' I said, And so is it Cuban?' He said, ‘Oh, yeah, it's Cuban, but the draw, Jimmy, the draw. Where did you get this?' I said, ‘It's a long story.'” Cayne asked the guy to research all the different Cuban cigar manufacturers, but the source could not be found. He remained hooked on the cigars, though, and buys a regular stash through sources in Lebanon. The cigars cost him $150 each, about four times the price of a regular high-quality Cuban cigar. “Sort of stupid,” he said, “but they got a fish on the line. I don't know how many other people in the world they got like me, but I'm sure they got a few. They just get cigars from this one source. And it's like oil. Whatever the price is, the price is.”

C
AYNE ALWAYS PRIDED
himself on divining and lassoing talent. He did it by relying on his gut. If he was interviewing someone and got a good feeling, he would offer the person the job on the spot. If he noticed an unusual capability or talent in someone who already worked at the firm, he would elevate him within the organization to a position of power and authority. This had the benefit of making such people loyal to Cayne, sometimes to a fault. He was a man who made loyalty his litmus test: Loyal partners would never sell a share of stock, loyal partners would never consider a higher-paying job at another firm, loyal partners would respect his decisions. He was not a boss who communicated through memos or by walking around. Rather, he prided himself on spending the time— usually in his office—to make a personal connection with his partners to help them solve the problems brought to his attention. This approach led to the inevitable collateral damage, of course, with longtime employees— among them Coleman, Michaelcheck, and Sites—leaving the firm in the wake of his ascension. “His biggest problem was that as he became more powerful,” explained a former Bear senior managing director, “you get to be more and more in a bubble and you need to be more analytical. The information coming to you comes to you differently and you need to have a keener understanding of it and of what someone's saying. And he didn't, he just wanted to go on his gut.”

Warren Spector, a cerebral and highly self-assured former national high school bridge champion, was one of the people Cayne spotted and then nurtured. Spector was a trader in the fixed-income department when Cayne marked him for future greatness. “What appealed to me is this guy's making a lot of money,” Cayne said. “I got to find out what he's doing. I found out that whatever desk he was on, in the mortgage department, that desk did better than any other desk. So this guy obviously was capable. He was lucky to have somebody like me who could notice him and move him up the food chain, which I did.”

Spector grew up in suburban Chevy Chase, Maryland. In high school, he was on both the math team and the bridge team, and was the president of both during his junior and senior years; he also played on the chess team and the table tennis team. After his sophomore year, Spector took a year's sabbatical to play bridge. In 1976, the American Contract Bridge League named him the Scholastic King of Bridge. That fall, after graduating from high school, he matriculated at Princeton but after one semester moved on to St. John's College in Maryland. At St. John's, Spector was enrolled in the school's famous Great Books curriculum, which he loved. He also studied Latin and Greek. He gave up playing bridge
because he did not want to become a bridge teacher or a bridge professional. He wanted to have a normal life.

After getting an MBA at the University of Chicago in 1983, he took a job at Bear Stearns because of the quality of the people he met there— in particular Coleman and Michaelcheck—and because the firm would allow him to start on a trading desk immediately rather than work as an analyst. He liked Coleman and Michaelcheck immediately because they were both smart and hands-on. He would pointedly tell people: “Bridge had nothing to do with it at all.”

Spector made a wise choice and in short order, as he said often, “catapulted” up the ranks of the firm far more quickly than he would have anywhere else. Four months into his career at Bear Stearns, a serendipitous “moment arrived that would make his career,” according to Bloomberg. Chuck Ramsey had just finished a big trade, and Michaelcheck and Ramsey were discussing it. As Ramsey later told Bloomberg, Michaelcheck then made “a snap decision. He looked around the room and saw Warren Spector standing nearby, and he said, ‘Warren, come over here.' Warren walked over, and [Michaelcheck] says, ‘You now work for Chuck.' That's how Warren Spector got on the mortgage desk.” He was an instant success. He became a senior managing director at twenty-seven, four years after he joined the firm, making him somewhat of a legend on Wall Street. He was invited to join the management committee (what used to be called the compensation committee) in 1990 and then the executive committee in 1992, at age thirty-four. Spector was one of the youngest senior executives on Wall Street and one of its most glamorous, having married actress Margaret Whitton, star of
Major League
and
9½ Weeks.

He knew Greenberg a little from the weekly risk committee meetings, but he didn't meet Cayne until 1990, when he joined the management committee. “He called me because I [had] played bridge [in high school] and he had seen my name as being a star at Bear Stearns,” Spector once said. “But he didn't know [if] I was [still] a bridge player. He called me up and said, ‘Are you a bridge player?’ I said, ‘I used to be.' So bridge was something that he, Ace, and I all shared and talked about.” Said Cayne, with some pride, about first discovering Spector: “Suddenly out of nowhere there's a bridge player at Bear Stearns on the bond desk.”