“Firestorm on Wall Street” was the title of the second program in the “More than Money: An Interview Series with Myron Kandel.” Since the founding financial editor and economic commentator for over 25 years at CNN had stellar guests previously—Steve Forbes, Editor in Chief of Forbes Magazine; and Joseph Stiglitz, an economist, professor at Columbia University, and winner of the Nobel Memorial Prize in Economics (2001)—I knew that I didn’t want to miss this event.
After a brief overview of his program, Kandel introduced William D. Cohan, author of House of Cards: A Tale of Hubris and Wretched Excess on Wall Street and a contributing writer for Fortune magazine; and Gregory Zukerman, The Wall Street Journal reporter who writes the paper’s column “Heard on the Street” and author of The Greatest Trade Ever: The Behind-the-Scenes Story of How John Paulson Defied Wall Street and Made Financial History.
Offering the background to the headlines, Kandel’s guests shared stories of the executives who individually and collectively ignored the indicators of a financial crisis. According to his publisher Random House, Cohan’s book on Bear Stearns is “A blistering narrative account of the negligence and greed that pushed all of Wall Street into chaos and the country into a financial crisis.” Zuckerman described in some detail how the risk-taking Paulson sought out and then earned billions by betting on the housing collapse others—including mortgage, real estate, and investing experts—had missed. Since Paulson had created a market for his product by using Goldman Sachs as a salesman, the two brilliant business writers weighed in on the government investigation of Goldman.
Wikipedia’s definition of a firestorm “is a conflagration which attains such intensity that it creates and sustains its own wind system. It is most commonly a natural phenomenon, created during some of the largest bushfires, forest fires, and wildfires….Firestorms can also be deliberate effects of targeted explosives.” A conflagration is defined as “an uncontrolled burning that threatens human life, health, property or ecology. A conflagration can be accidentally or intentionally created (arson).” Kandel’s choice of the word firestorm for his event seems very appropriate.
The reason I attended the program was to further my education on the culture of Wall Street, and especially, to hear Cohan speak. His previous book, The Last Tycoons: the Secret History of Lazard Frères & Co., spins “A tale of restrained ambition, billion-dollar fortunes, Byzantine power struggles, and hidden scandal.” Cohan’s employment as a vice president at one of the world’s preeminent financial advisory and asset management firms coincided with mine. However, he was involved in the business transactions while I was on the sidelines watching the action from my position as a temporary secretary. In my over five years at the firm, I worked with a majority of partners, numerous vice presidents, and many other bankers.
When Zuckerman mentioned that Paulson’s analyst in creating his deals was Paolo Pellegrini, my ears perked up since he, too, was a former Lazard banker. However, unlike Cohan who moved from Lazard to be a managing director of telecom mergers and acquisitions at JPMorgan Chase, Pellegrini according to Zuckerman in an article (“Profiting from the Crash,” WSJ, 10/31/09) had “a career of disappointments” and that “Paulson & Co. likely was his last stop on Wall Street.” The disappointed analyst earned an estimated $45 million in his first year at his “last stop.”
What I took away from hearing the stories and learning more about Wall Street’s demeanor and greed was nothing new. It was the same old story: the behavior on Wall Street won’t change.
Specifically, words that I recorded in my notebook in the darkened auditorium include these thoughts from Cohan on proposed government regulation of Wall Street: “Wall Street buys the sort of regulation they want” … “Their actions are just smart enough not to go over the edge” … “We haven’t changed how Wall Street behaves not even in a small way” … “Goldman people don’t feel comfortable voicing dissent.” … “Nobody is blowing the whistle.”
Cohan made a very interesting statement: “There is no memory on Wall St.” The younger people on Wall Street make decisions not knowing the history of the previous crisis—like the Internet IPOs in the late 90’s or the housing downturn in the early 90’s—and don’t take time to reflect on the consequences of their behaviors. Instead, it seems clear, Wall Street moves from one crisis to another, like an addict who seems incapable of staying away from drink, drugs, or other substances to get a high, all the while knowing but not accepting that a big downer follows. Rather, the user, when he needs it, seeks out another source to get high.
Zuckerman stated that, “We need the best and the brightest to be in financial services.” To me, that seemed to affirm that what was going on within Wall Street firms was okay. And that the results, although possibly catastrophic for the majority of America and a good part of the globe, are what matters. It matters to those who profit from the results. Do bankers stop to think about those who are negatively impacted by the results?
Last year, I wrote a special report entitled, “Temping with Tycoons: Lessons from My Leadership Reinvention” —an account of what I learned at Lazard about the firm’s culture, group behavior, and individual actions. Documenting what I observed and reading about the firm, I used Lazard as the business school I could afford. And it was during those years experiencing the hubris of bankers, the carelessness of analysts, and their overall ignorance of the real world that inspired me to teach future leaders about the human side of business. “Temping with Tycoons” is required reading at the beginning of “A Management Approach to Organizational Behavior,” a course I teach to undergraduates at the Zicklin School of Business within Baruch College, the nation’s most ethnically diverse campus. Primarily working class and first generation, the students are able to learn about some behaviors on Wall Street. They are also often aghast and angry at what they read.
One of my students put it very simply, “Why is there such a divide?”
I don’t know exactly. Future posts will include notes from “M.B.A. Under Siege: Reimagining Management Education,” an all-day conference held at Fordham University where business school educators from as far away as Kazakhstan in Eurasia listened to presentations from highly regarded business school professors and participated in discussions. Especially of interest was the role that management—or lack of it—played in the collapse of the global economy. Watch this space for more information on the culture and management of Wall Street.