The Last Tycoons: The Secret History of Lazard Freres and Co. by William D. Cohan

The Last Tycoons: The Secret History of Lazard Freres and Co. by William D. Cohan

CHAPTER 1
"GREAT MEN"
Even among the great Wall Street firms--Goldman Sachs, Morgan Stanley,
and Merrill Lynch--Lazard Freres & Co. stood apart, explicitly priding itself
on being different from, and superior to, its competitors. For 157 years,
Lazard had punched above its weight. Unlike other Wall Street banks, it
competed with intellectual rather than financial capital and through a hard-

won tradition of privacy and independence. Its strategy, put simply, was to
offer clients the wisdom of its Great Men, the finest and most experienced
collection of investment bankers the world had ever known. They risked no
capital, offering only the raw Darwinian power of their ideas. The better the
idea, and the insights and tactics required to achieve the result contemplated
by it, the greater was Lazard's currency as a valued and trusted adviser--and
the larger were the piles of money the Great Men hauled out of the firm and
into their swelling bank accounts. The lucky few men--yes, always men--at
Wall Street's summit have always been portrayed as ambitious and brilliant
on the one hand and unscrupulous and ruthless on the other. But the secret
history of Lazard Freres & Co., the world's most elite and enigmatic
investment bank, twists parts of this conventional wisdom into knots of
unfathomable complexity. The Great Men chronicled herein amassed huge
fortunes--to be sure--but they refused to admit to anyone, least of all to
themselves, that their pursuit of these riches led to relentless infighting.
Instead they spoke, without irony, of being part of a Florentine guild and of
advice whispered to heads of state and to CEOs of the world's most
powerful corporations, while all the time attempting to preserve the
mythical special idea that was Lazard. They also, to a person, craved an
equally elusive chimera: the assurance that somehow, despite everything,
they alone had remained virtuous.
But starting in the mid-1980s, the wisdom of Lazard's Great Men strategy
began to show its considerable age, especially when Lazard was compared
with its better capitalized and more powerful and nimble foes. The firm's
numerous strategic missteps were exacerbated by the increasingly titanic
generational struggle inside Lazard between the likes of Felix Rohatyn and
Steve Rattner--superstar investment bankers and pillars of New York
society--as well as by the bizarre behavior of the increasingly isolated and
bitter Michel David-Weill, the French billionaire who controlled Lazard and
fomented the struggle from his imperial lair. And at the climactic moment,
Bruce Wasserstein, the supreme opportunist, came along to pick Michel's
considerable pockets. The decades of internal turmoil and paternalistic
management led ultimately to the once-unthinkable: a Lazard Freres free
from its founders, as a publicly traded company just like any other, its
operational flaws and obscene profitability open to the world--its special
cachet lost forever.
The story of Lazard has always been one of internecine warfare,
calamity, and resurrection, proving definitively that the forces of "creative
destruction"--in the Austrian economist Joseph Schumpeter's famous
observation--are alive and well to this day in American capitalism.
OF ALL LAZARD'S Great Men, none was greater than Felix George
Rohatyn. Felix was considered by many to be the world's preeminent
investment banker. He was the man who saved, first, Wall Street and then
New York City from financial ruin in the early 1970s. For some thirty years
at the end of the twentieth century, he had unofficially presided over Lazard
Freres, helping to transform it into Wall Street's most prestigious,
enigmatic, and mysterious investment banking partnership. But on one of
those impossibly close days in our nation's capital, in the summer of 1997,
Rohatyn found himself at the end of his tenure at Lazard, testifying before a
Senate subcommittee in hopes of obtaining ratification of his appointment
to a position he had long maintained was beneath him.
"It is a great honor for me to appear before you today to seek your
consent to President Clinton's nomination of me to serve as the next
American Ambassador to France," the sixty-nine-year-old Felix told the
Subcommittee on European Affairs of the Senate Foreign Relations
Committee. "It is also a very emotional experience, for many reasons.... I

The Last Tycoons: The Secret History of Lazard Freres and Co. by William D. Cohan