March 30, 2008
Market Maker
What ‘the Bear’ Meant for the Street
By NELSON D. SCHWARTZ
BACK in the days of ticker tape, when Wall Street firms like Morgan Stanley hired young men with pedigrees from colleges like Princeton and clubs like Piping Rock, Bear Stearns was the kind of place where hardscrabble Brooklynites could get a job.
Bear’s former chairman, Alan Greenberg, known as Ace, even had a name for these hires: P.S.D.’s, as in Poor, Smart, with a deep Desire to become rich. Not only did Bear fulfill the dreams of the P.S.D.’s, it was also a proving ground for many of the titans who created today’s Wall Street.
Bear was where Kohlberg met Kravis and Roberts, and it was their firm, K.K.R., that pioneered private equity. The Brooklyn-born Sanford I. Weill, who later led the acquisition of Travelers and Smith Barney and oversaw the creation of Citigroup, started out at Bear Stearns shortly after graduating from college in 1955.
Now, as what’s left of Bear after its near collapse is absorbed by JPMorgan Chase — itself a descendant of once-legendary banks like Chemical and Manufacturer’s Hanover — it is worth taking a moment to remember just what Bear represented among the tribes of Wall Street.
“It was a place where a young guy could get ahead on merit,” says Jerome Kohlberg Jr., who worked at Bear for 21 years before leaving to found K.K.R. in 1976 with Henry R. Kravis and George R. Roberts. “They didn’t care where you came from if you showed you were willing to work. There were Jews, gentiles, Italians, Irish. It was a mixed bag.”
Elsewhere in the industry it was very different, recalls Muriel Siebert, who started on Wall Street in 1954 as a research trainee at Bache & Company. She eventually became the first woman to own a seat on the New York Stock Exchange and founded the firm that bears her name.
There were few, if any, women or Jews in leadership positions at the time. At one point, Ms. Siebert applied at Morgan Stanley, and “they told me I’d have to wear a hat and white gloves in the elevator.”
Although she never worked at the firm she still calls “the Bear,” as many old-timers do, she says, “It was unique.”
“It didn’t matter what your last name was,” she added. “They had a mixture of all kinds of people and they were there to make money.”
As chairman, Mr. Greenberg always sat on the trading floor, not in a secluded corner office, and was known as much for his magic tricks as his trading smarts. He stepped down as chairman in 2001 after 52 years at the firm but is still a familiar presence at Bear’s Madison Avenue headquarters.
Mr. Greenberg’s predecessor, Cy Lewis, was even more colorful. He was 6-foot-4 “and had played professional football,” Mr. Kohlberg recalls of Mr. Lewis, who ran Bear from the mid-1930s to the mid-1960s. A famous bit of Bear lore is that Mr. Lewis died at his own retirement party in 1978 at the Harmonie Club.
As Wall Street changed, Bear changed with it.
Morgan Stanley and other white-shoe firms dropped old hiring restrictions and opened their doors to women and minorities. And more executives at Bear came from elite schools; Alan Schwartz, a Duke graduate, is the current chief executive.
But Bear never strayed that far from its roots as a trading house, especially in bonds. Indeed, it’s not coincidental that scrappier firms like Bear or Lehman Brothers relied more on trading, since underwriting and merger advice was the original province of elite places like Morgan Stanley. “Trading was seen as plebeian,” says Charles Geisst, a professor of finance at Manhattan College and a Wall Street historian.
While Lehman has diversified, the combination of Bear’s fixed-income focus and its relatively small size proved fatal in today’s fast-moving market.
"It was a damn shame,” Mr. Kohlberg says. “It didn’t have to happen. They took too much risk."
MAYBE some of Bear’s senior managers should have more closely read “Memos from the Chairman,” a collection of Mr. Greenberg’s idiosyncratic notes to employees that was published in 1996.
“We want people at Bear Stearns to cry wolf,” he advised. “Forget the chain of command! That is not the way Bear Stearns was built. If you think somebody is doing something off the wall or his/her decision-making stinks, go around the person, and that includes me.”
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