House of Cards: A Tale of Hubris and Wretched Excess on Wall Street
By William D. Cohan
Doubleday, 468pp, $27.95
Four years ago, on a grayish morning in late May, I left my Brooklyn home and made my way to Central Synagogue on Manhattan’s East Side. I came thither to pay my last respects to an old friend, Mickey Tarnopol, whose life had finally been claimed by a long and valiantly resisted cancer. He and I went back some 40-plus years by then, to when we were young associates, then young partners, at Lehman Brothers. We had both left Lehman: Mickey for Bear Stearns, where he became a key figure in that ill-starred firm’s corporate-finance effort, and myself for a series of false starts that culminated in the short and precarious vocation of writer. In the way of a world in which those whose circumstances increase tend to move rapidly away from those whose circumstances are reduced, it had been a number of years since Mickey and I had seen much of each other, but there was a spot in my heart filled with pleasant memories of him and his family: to miss his funeral would have been unthinkable.
It was a splendid occasion. The temple was packed, the congregation murmurous and self-congratulatory, the speakers vying with one another to praise Mickey’s philanthropic generosity and his merits as father, spouse, colleague, friend. The great securitization boom, of which Bear Stearns was a vibrant nexus, was then building toward its crest, and every now and then a figure would rise from a pew, scuttle to the back of the synagogue, and conduct an intense and hopefully lucrative cell phone conversation. It was all, you might say, very Bear Stearns.
I left Central Synagogue mournful and vaguely troubled. One eulogist after another had spoken, with the confident optimism verging on arrogance that is peculiar to Wall Street in boom times, of the “culture” of the “Bear” as if it were the elder Morgan being praised. And yet nothing I heard could disabuse me of an opinion formed way back when, in my Lehman days—back when “the Bear’s” then-patriarch, Cy Lewis, played willing butt-boy to Goldman’s Gus Levy, another titan of finance who never saw an ethical corner that wasn’t worth cutting, and the relationship between those two firms was, to coin a word, catamitic.
That opinion, quite simply, was that “the Bear” was still, had always been and ever would be a second-rate firm, no matter how much money it appeared to be making; that its core DNA remained Class B; and that if character is indeed destiny, it must someday come to grief.
YOU WON’T FIND Mickey Tarnopol in William D. Cohan’s generally splendid, dauntingly thorough House of Cards: A Tale of Hubris and Wretched Excess on Wall Street, which in a way says it all, but you’ll find everything you need to know, possibly more than the general reader will easily absorb, about how and why “the Bear” stumbled, fell and died. It is, to put it directly, one of the best Wall Street accounts I have ever read, right up there with Barbarians at the Gate (and, for those who know the game, infinitely more useful). I do not see it leaving my shelves until the time comes for my heirs to dispute my meager belongings.
It is a dense book, one that needs to be closely read, because the pieces that fit together to fill out the puzzle are numerous and, in many instances, subtly carved. Mr. Cohan divides his account into four sections. The first takes the reader through the tumultuous weekend in May 2008, when “the Bear” teetered on the brink and was finally, in a manner of speaking, bailed out by the Federal Reserve and the Treasury through the agency of JPMorgan Chase. The second recites the history of the firm, principally as embodied in its three dominant figures: Cy Lewis; “Ace” Greenberg; and the man in the saddle on the gallop to self-destruction, Jimmy Cayne. The third covers the firm’s entry into mortgage securitization around 2002 and the subsequent run-up to the Cioffi-Tannin hedge fund scandal and the slow-drip self-immolation that culminated in the JPMorgan Chase buyout. Finally, there is a shortish coda about the collapse 16 months later of Lehman Brothers, in which Mr. Cohan makes a point that I have long held and proclaimed: that Bear was saved, so to speak, and Lehman allowed to fail because the two firms were completely different kettles of rotted fish and presented crucially different problems of public financing.
This book is so rich, so flavorful, so instructive, and so fully and compellingly cast that a reviewer hardly knows where to begin—and so I won’t. Mr. Cohan is a good, deft writer, and never more so than in his treatment of Jimmy Cayne, who was obviously (as the author admits) a principal, if not the principal, source for accounts of who said/did-what-to-whom that have the resonance of accuracy and authenticity. Mr. Cohan is generous to Mr. Cayne in the acknowledgements, but his mastery of the show-don’t-tell approach to narrative is such that Mr. Cayne comes off, largely through his own words and actions (and inactions), as a perfectly dreadful fellow with one presumptively redemptive aspect: an impeccable card sense, at least at the bridge table, where he plays—obsessively, to the neglect of much else—at Life Master level.
To repeat myself, character is destiny. Students of institutional genetics cannot fail to conclude that what begins on a dubious genomic note must end on a dubious genomic note, that a firm whose path to greatness was laid out by the likes of Cy Lewis was odds-on to be set on the road to extinction by a Jimmy Cayne, with “[h]is lifelong flair for hucksterism.” Sooner or later, the Eumenides’ll getcha! Never fails.
There is only one point—not a small one—where I would take issue with Mr. Cohan. The “Ace” Greenberg he depicts isn’t the “Ace” Greenberg I remember, and those who know me will testify that, even with the onset of dotage, my mnemonic tendency remains less than benevolent. “Ace” was always tough, always an edge-taker, but he played pretty much within the rules. When he was running Bear Stearns, the firm came closest to what it was likely to be at its best: a rough street fighter, skilled at working the dark corners and fringes, now and then getting lucky with the occasional piece of choice business (Larry Tisch). “The Bear” really was what the Goldman Sachs depicted in Charles D. Ellis’ The Partnership claimed to be but wasn’t: a rank outsider, no matter how big its footings got, with that adjective “rank” being applicable in various connotations at various times.
In the end, “the Bear” got to be mainly about its bad guys, with its good guys (final CEO Alan Schwartz, for one) relegated to clean-up detail. Connoisseurs of schadenfreude will have a field day; I personally got a big kick out of Mr. Cohan’s account of the great and boastful law firm Wachtell Lipton’s screw-up on the JPMorgan Chase contract. Good anecdotes pepper these pages, but the larger thread, the headlong hurtle toward oblivion, is never lost. And oblivion it turns out to be: This past weekend, the newspapers reported that various rooms and public spaces at JPMorgan’s Manhattan headquarters are named for the banks it took over on its implacable march to oligopoly, but that you will not find Bear Stearns.
I guess the biggest Wall Street home truth that those of us who are footing the bill for a mess in which “the Bear” was a key player might take to heart is one that Mr. Cohan lays out near the end of his engrossing account, and that is confirmed by nearly every sentence in this fine book. It’s simply this: On “the Street,” honorable equals stupid. Too bad for our lot.
Longtime Midas Watch columnist Michael M. Thomas’ eighth novel, Love & Money, will be published in June by Melville House. He can be reached at books@observer.com
