20-year veteran's insider account of the collapse of the country's oldest ijnvestment bank
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While I was not present for what I describe below, the story is true and, at Lehman,
was legend, especially among us lifers who broke bread in the executive dining room.
On this one page, I have allowed myself reasonable poetic license. Still, as I have
known and observed both of the men I describe, I believe I have nailed the tenor of
Piled high with the usual paperwork, Allan Kaplan, an old-school
senior executive, whom many came to regard as the “conscience of
Lehman Brothers,” sat as his desk. Dick Fuld, one of the fixed
income1 traders, appeared in his office door.
Kaplan, as always, continued methodically working through the piles
stacked and arranged in perfect right angles before him. He glanced
expressionlessly in Fuld’s direction, returned his gaze to the work on his
desk. Kaplan acknowledged the figure in his office doorway, just loud
enough for Fuld to hear, and then ignored him as he continued his
progress through the great volume of paper that required his attention, his
Fuld was unable to shuffle his feet in the threshold of Kaplan’s office for
very long, and like a shark that must keep moving to live, strode to the
senior executive’s desk, announcing that he required a signature so that he
1. A security that pays a fixed return, such as a bond, commercial paper, or preferred
could complete a profitable, time-sensitive trade. Kaplan lifted his head,
placed his half-smoked Cohiba in an ashtray and blankly looked at the
impertinent, headstrong Fuld. Moving only his lips, he informed Fuld in
crisp words that seemed to disappear into the pile of the carpet, that he,
Kaplan, from his mile-high aerie, would consider approval of Fuld’s trade
once his desk was clear of the many piles.
Fuld, his veins filled with adrenaline rather than blood, could not sit on
this trade. Every second that passed increased the risk that he would lose
it. For Fuld, it was all about the moment. In this one, as in so many others,
he saw the purpose of his very existence and that of his firm as one: to
make money. It was written in stone that no one wanted to rub Kaplan the
wrong way. To do so could precipitate unpredictable wrath. But Kaplan
was increasingly an anachronism. Time would not stand still to accommodate
the outdated approval process that tied Fuld’s hands.
To consummate the trade, Fuld required Kaplan’s immediate sanction.
Making the situation doubly frustrating was a clear expectation, undoubtedly
shared by Kaplan, that the trade would be quickly approved once the
titan’s eyes fell on the paperwork. Slam-dunk. But Fuld was tangled in the
red tape of this powerbroker, known for his traditional, understated manner,
as well as limited tolerance for hotheads who came to him halfcocked,
ill-prepared, or disrespectful of the process.
Still there was a monetary bottom line and it flashed neon in Fuld’s
eyes: the trade will not wait. Kaplan, still ignoring him, had become an
intolerable brick wall. And so, acting on pure impulse and instinct, the
very innards of the best traders, Fuld cleared Kaplan’s desk with a single
sweep of his arm, scattering the exalted one’s neat piles around his desk.
Sucking in his breath, Fuld told the implicitly fearsome Allan Kaplan that
now he could approve the trade; his desk was clear.
If Kaplan flinched, it was not visible to the human eye. But he did fix
his stare on Fuld, eyes widening, this, the only discernible reaction. Fuld’s
cheeks filled with blood as he awaited his fate. Inwardly, Kaplan smiled
puckishly. Yes, he was amused and impressed. This Fuld had potential.
Kaplan silently reviewed the documents requiring his approval of the
insubordinate trader’s transaction, and with dispatch, delivered his signature.
Fuld rotated on heels of wing tips, utterly in the dark as to what the
poker-faced Kaplan had in store for him. Would he even have a job the
next day? But Fuld was in the moment, like the best of traders, the risk
takers, and held the authorization to trade in his hand.
Many years later, in May of 2003, Dick Fuld stood before a packed
chapel of mourners, including numerous employees of the firm that Fuld,
now CEO, transformed into a major force on Wall Street. He lauded and
joked affectionately about Kaplan, making great mention of his deceased
colleague’s integrity and ethics, and about the suit pants Kaplan belted so
high—Fuld affectionately chuckled—that they reached Kaplan’s chin.
Until a week before, Allan Kaplan had been fully engaged at Lehman,
despite a festering illness, serving the firm he had made his second home
for thirty-six years. In summing up Kaplan’s tenure, Richard Fuld, the
hard-assed titan, one of the most powerful men on Wall Street, always
bursting with testosterone, choked tearfully on his closing words: “Allan
was my friend.”
Fuld would later honor Kaplan by naming the auditorium on the lower
level of Lehman’s majestic Time Square tower after him. He wanted to do
something. And it was a fine gesture. But the man called the conscience of
Lehman had expired.