Fixers

by Michael M. Thomas

  So that’s STST, creed and culture. Further comment from me would be superfluous, other than perhaps this: every now and then, away from my business, I run into STSTers past and present. Only the ones who no longer work there seem remotely happy—at least as I define the word.

  FEBRUARY 26, 2007

  One final bit of background. I feel I should tell you a bit about San Calisto, nicknamed by me for the Roman palazzo where the Vatican stashes its superannuated cardinals. On days when I’m still in the office in the late afternoon, or when I have nothing on my plate for lunch, I’ll wander across the elevator lobby for a drink or a sandwich.

  San Calisto currently houses four engaging relics (down from a half dozen when I moved in next door) from the era when STST was an old-fashioned partnership. They still pine for those bygone days, although they understand why the firm went public in 2000. Trading activity had grown in volume, risk, and technical complexity to a point that the then-partners’ personal wealth might have been imperiled. Incorporation and a listed quotation protected against that dire contingency.

  Still, they all agree that something changed in their beloved firm’s vibe. New faces were coming up fast; room needed to be cleared at the top; relationships with certain corporate clients were changing as those clients’ own executive composition changed. The generation that had steered STST to postwar glory had outlived its day.

  San Calisto was Mankoff’s graceful way of shoving these elders gently aside. He was cool with the idea that STST’s history be recognized in a living way, but equally insistent that a respect for tradition not be allowed to interfere with present-day operations and attitudes. STST values its senior citizens’ experience and knowledge up to a point, but it doesn’t want them wandering around the firm spreading dangerous old ideas or talking up antiquated concepts like “conflict of interest.” Mankoff prefers history to be inside books and museums and glass cases, not shuffling around the byways of his realm, sticking its head into offices, inquiring about things it can’t really comprehend, spreading possible confusion with talk about “what we used to do …” or “what we used to think …”

  Frankly, I think the Street’s mistaken to ring-fence its elders. One thing that really bothers me about Wall Street nowadays is that everyone’s so young. Where’s the experience? They’ll tell you it’s built into the algorithms that they depend on, but I don’t buy that. For these young people, it’s all about now, never about then. Of course, if you have no past—didn’t grow up with pictures of ancestors on the dining-room wall, or worship in chapels with war memorial tablets—why should you give a damn about then?

  The San Calisto gang talk about the past but aren’t stuck in it; for a group whose age must average seventy-five, they’re pretty up to date. That doesn’t mean, though, that they’re crazy about today’s Wall Street. If there’s one philosophical point they’re agreed on, it’s that back in their day, the work was about building: raising money for new companies, new factories and stores, new processes. Today it’s mainly about extracting—whether what’s under the microscope is a company being hollowed out financially in a leveraged buyout, or practically everything in the magic slice-and-dice world of securitization.

  Visitors to San Calisto are buzzed in to a small reception area where a handsome, middle-aged receptionist plays Cerberus. The rest is a warren of small offices, conference rooms, a dining room catered by a chophouse down the block, and a closet-sized, dreary “business center” that looks like it was plucked from your local Marriott. San Calisto has its own separate Bloomberg account and LAN computer network. The overall décor is Ralph Lauren traditional—cut-glass decanters on imitation Chippendale sideboards, mediocre English watercolors of landscapes and racing scenes, a scattering of old nineteenth-century “Spy” caricatures, and etchings of Old New York

  The old boys’ offices are heavy on STST memorabilia: old photographs of the original Broad Street partners’ room; Lucite blocks with miniature prospectuses embedded in them; model airliners dating back to the heyday of the Lockheed Constellation and Douglas DC-6 and Boeing 707, bearing the insignia of airlines that are mostly no longer in business; models of ocean liners long since consigned to the scrapyard; miniature oil-drilling rigs; photographs of prime-of-life San Calistans shaking hands with company CEOs on shipyard launch ways and airport tarmacs, in factories, beside oil derricks, and with politicians and statesmen; framed fountain and ballpoint pens from notable closings: underwritings, private placements, mergers. And, of course, in every room, suitably framed, “Our clients come first.”

  By now, death and dementia have reduced the San Calisto population to four noble remnants. I call these old guys “the Wrecking Crew,” after characters in my beloved P. G. Wodehouse golf stories. I’m not a golfer, but when I was around seventeen, my father tried to seduce me into taking up the game and gave me a volume of the Wodehouse tales. I hated the game—it takes forever—but I love those stories, several of which feature a foursome of elderly Wodehouse players nicknamed according to their playing styles: “The First Grave Digger,” “The Man with the Hoe,” “Old Father Time,” and “Consul, the Almost Human” (after a half-man, half-ape sideshow attraction popular in Wodehouse’s youth). My own personal Wrecking Crew consists of the Nitmeister, who never met a factoid or data byte he couldn’t discourse on at length; the Ancient Mariner, a walking anthology of Wall Street and STST anecdotes, who’ll buttonhole you in a trice and relate something dreadful that Kidder Peabody did back in 1979; the Warrior, a much-decorated fighter pilot in Korea, who wears his ancient valor like a halo; and, finally, my favorite: Scaramouche.

  The latter is a bright-eyed old guy, ruddy-faced with an astonishing shock of white hair. His name is Clement d’Arcy Spear. He was born in 1934, the same year as my father, attended Boston Latin, Harvard, and Harvard Business School, did the then-mandatory two years in the peacetime military (“too young for Korea, too old for Vietnam”), volunteered on JFK’s successful 1960 campaign, and joined STST right after that election. He was head of Industrial Finance in the late seventies and eighties, retiring in 1992 as a limited partner.

  I nicknamed him after the title character in a 1920s potboiler by Rafael Sabatini. The opening line fits him: “He was born with the gift of laughter, and a sense that the world was mad.” Not that I’ve ever read the book—I did see the movie once on TV—but when the Yale library was built back in the 1930s, some wag had this sentence carved into the façade, alongside quotations from Dante, Shakespeare, and other immortals.

  Scaramouche has a highly developed feel for the ludicrousness and folly of so much of modern life. He has a champagne personality—he himself boasts that he’s “a revel-rouser,” but there’s a strain of hard-eyed realism running through it all. He’s got a wicked mouth on him and fancies himself a coiner of aphorisms, and I have to say, the more I see how the world really works, the more accurate his quips seem. It was of Rosenweis that Scaramouche first uttered his immortal aphorism that “90 percent of the world’s problems can be traced to three causes: sex, money, and short men.” I asked him once about how STST justifies being on every side of every deal, and he observed: “Chaunce, old boy, if God hadn’t wanted it this way, He wouldn’t have given us two sides to a mouth.” Another of my favorites is: “They say character is destiny, a sentiment with which I agree. The problem is, it’s usually some other man’s character and my destiny.”

  It’s from Scaramouche that I picked up a useful epistemological tool called “Hanlon’s Razor” (nobody seems to know exactly who Hanlon was), which posits, “Never attribute to malice that which can be adequately explained by stupidity.” He holds that this accounts for most conspiracy theories. Of today’s Wall Street, he says, “Nowadays computers have made it possible to profitably trade obscenely, almost embarrassingly small fractions of money. But to make those add up to a decent profit in absolute terms, you have to add cogs and capacity to the machine—A makes B turn, which makes C turn, which makes D turn and s
o on—and there’s a danger there. Let a tiny grain of sand get in one of the gears, and the whole damn thing will blow up.” That might be Mankoff talking, although Scaramouche is no admirer of STST’s CEO; he thinks Mankoff lacks style. Another good one is: “I’ve made more money from what I’ve read upside down on other men’s desks than what I’ve read right-side up on my own.”

  And it was Scaramouche who explained the financialization of the U.S. economy in terms that I’ll be able to pass on to my grandchildren, if I ever have any. “Once upon a time,” he told me not long after we met, “GM sold cars with loans attached; today they sell loans with a car attached. Apples and oranges, if you ask me.” And Scaramouche who summarizes a great deal of what goes on in Wall Street today with “complexity is the first refuge of a scoundrel.”

  Some say that Scaramouche could have ended up running STST if he’d gone for it, but he didn’t. I asked him about that once. “The problem was,” he told me, “that to do that, I would have had to become one of these people, and I would rather have bamboo slivers under my fingernails than end up inhabiting the persona of someone like Rich Rosenweis.” He likes to tell himself what he swears is a true story about how one day quite recently, he was walking along Rector Street and ran into a man, a few years younger than himself, whom he’d known fleetingly in the old days. This fellow looked Scaramouche up and down and then asked, dead seriously, “Are you who I think you used to be?”

  The way my friend tells it, for once in his life, he was at a loss. Finally, he mumbled, “God, I hope not,” and they went their separate ways.

  The old boy basically doesn’t give a damn. He says what he thinks and doesn’t care whom it rubs the wrong way. He frankly admits that he grew to hate Wall Street even as it made him rich. In the 1980s, when everyone was flirting with Michael Milken and his magical money machine, he announced that if STST did junk bond business with Drexel Burnham he’d quit and take his corporate clients and best people to Morgan Stanley. STST rejected Milken’s overtures and thereby dodged a regulatory and financial disaster.

  Scaramouche was Merlin Gerrett’s lead investment banker back in the day, helping Gerrett build Arrow Northumberland into the country’s most-admired investor (and second-richest man after Bill Gates). Scaramouche himself didn’t do badly out of the relationship; rumor has it that he still owns $80-odd million of Arrow Northumberland stock, bought for peanuts when he first began to handle Gerrett’s investment-banking business. It’s said that Gerrett still privately seeks the old boy’s advice, notwithstanding that Mankoff is now the firm’s designated Gerrett connection.

  There are times everyone needs a good, bracing jolt of companionship, and so, today, after accepting my assignment from Mankoff, still harboring lingering doubts about whether I’m doing the right thing, when cocktail hour rolled around, and my long day’s work was done and evening drew nigh, I walked across the elevator lobby to San Calisto.

  This evening the crowd was down to just two: Scaramouche and the Ancient Mariner. I poured myself a whiskey from the sideboard and joined them just in time to hear Scaramouche say, “Now tell me that isn’t the damnedest funniest thing ever to happen on Wall Street! If it isn’t, I don’t know what the hell is!”

  I asked to be included in the joke.

  “Have you heard about the transactions the firm’s doing with this fellow Polton?” Scaramouche asked me. “The hedge-funder?”

  “A bit.”

  “Well, what I hear is that when Polton and his minions started to canvass the Street for willing coconspirators, this firm and Morgan Stanley and Banque de Seine and others were quick to sign up. But Bear Stearns, of all people, turned him down. Did you hear me? Bear Stearns! Can you believe it! Turned him down on what they said were ethical grounds, quote unquote. That is probably the only time in the Street’s history that the words ‘ethical’ and ‘Bear Stearns’ have appeared in the same sentence!”

  He let us savor that remark, then turned to another matter. “Chauncey, you talk all the time to Lucia van der Poole. Has she ever mentioned something called Samarra/Hatton?”

  “Samarra? You mean like in the John O’Hara novel?” I responded. Appointment in was one of my father’s favorites.

  Scaramouche shook his head. “The one I’m talking about is a redneck mortgage servicer way down south in Dixie. One of those fly-by-night outfits that uses door-to-door representatives and strip-mall offices to peddle mortgages to poor people who they know won’t be able to keep up the payments. I gather Rosenweis has made a deal to acquire their business. Mankoff must be nuts to let him. That a firm like ours would involve itself in such a contemptible business beggars belief! It’s worse than penny stocks!”

  I Googled Samarra/Hatton afterwards. I could tell quickly that this would be a lily that Lucia—who had never mentioned the name to me—would despise having to gild. I could understand Scaramouche’s disbelief. This is a low-rent, Shylockian business on a level with payroll lending. Samarra/Hatton gives mortgages to people with “less than pristine credit histories.” In other words, people whose prospects of paying back a mortgage are between zero and none. It then sells these on to Wall Street, which repackages them into structured deals, like the ones STST is doing with Polton. Scaramouche is right: it’s a contemptible business.

  Scaramouche wasn’t finished. “A firm of our size and dignity has no business peddling this penny-ante stuff! It’s like the Morgan bank going into payday loans! Disgraceful!”

  The Ancient Mariner and I raised our glasses and drank to that.

  Scaramouche went on: “The real risk in buying a low-grade business is the low-grade people who come with it. Not that the Wall Street people I see nowadays at the Stuyvie (short for Stuyvesant Club, the old-line midtown club where I’m also a member) fit anyone’s definition of high-grade. They make you yearn for the good old days when the Street emptied out by six, and everyone would be home in the bosom of their family or mistress, or having a martini at their club. I must say, the more I hear about what takes place inside those cloistered walls downtown, the harder it is to imagine that there was a time at the firm, at least while Herman Strauss was still alive, when we were told in no uncertain terms ‘only to go after first-class business, and only in a first-class way.’ Anyway, I shan’t be surprised if the whole bloody mess comes to a hideous and inglorious ending. To say nothing of expensive.”

  Walking home later, I started thinking about the nuts and bolts of the job I’ve agreed to do for Mankoff. This fellow Homer Orteig, OG’s right-hand man and campaign strategist, seems a good place to start. The question is: how and where do I get to him?

  MARCH 6, 2007

  Inevitably, I find myself wondering about OG. Not that it makes any difference to what I’m up to for Mankoff, but I suppose it’s normal for me to want to have a better sense of the kind of person he is. His followers seem to think he’s Abraham Lincoln, Jack Kennedy, and Martin Luther King rolled into one. When he delivers a speech, you get a feeling of what the atmosphere on the Mount must have been like when Jesus got going on the Beatitudes.

  But how good a president will he make? I can’t seem to help asking myself that, even though it has nothing to do with my assignment. He’s a great campaigner, tremendous with crowds, but how is he at the one-to-one make-the-other-guy-blink stuff where policy gets thrashed out and workable legislation negotiated? Mario Cuomo famously observed that we campaign in poetry and govern in prose, and look at how little poetry counts for in modern life.

  His career path has been impressive and variegated, and his credentials look amazing. The guy’s been a lot of places, done a lot of things. He’s been his own John the Baptist, preparing the way with two books, an autobiography a while back and a book last year about the power of hope, about how if we dream hard enough, America can be a better place. Self-help books that pitch a wishing-will-make-it-so philosophy sell in the millions, so in that sense OG is preaching to the converted. I don’t read self-help books, and I doubt I’ll read
either of OG’s.

  Everywhere he’s been, everything he’s done has garnered success and acclaim—although there are a few critics who point to unkept promises, discarded relationships, grand plans not implemented. The usual broken eggs that go into making a tasty-looking career omelet. But great résumés—or great minds—don’t necessarily make for great or significant president. Look at the first George Bush.

  I’m no expert, but if OG is elected, I’m guessing he may run aground on Capitol Hill. There are people in Congress today who make it look like the doors to the loony bin have been thrown open. The country is polarized to a degree I’ve never seen, and it’s reflected in the Congress. The middle ground, where socially and fiscally essential policies and programs were once worked out, is a barren wasteland. Nothing grows there. I look for Congress to be a problem, what with the static generated by the 24/7 news cycle and the deceptions of the spin doctors and “news” dispensers like Fox.

  These days, the more intellectual a politician is, the more suspicion he’s likely to arouse. What is it the prophet says? “Come—let us reason together.” But that’s not how the system works, maybe never has. Politics is about cutting deals: you give me this, and I’ll give you that. I’ll slip you $75 million, you deliver Winters, Holloway, and Brewer. Certified intellectuals like OG have difficulty buying into that process. They can’t grasp why their acute, analytical, three-diploma, mother-knows-best perception of the right policy solution isn’t always immediately conceded by all concerned. Why their skillful rhetoric and polished reasoning don’t inevitably carry the day. They never seem to understand, or simply disregard the notion of the instinctive mistrust ordinary people feel for those who flaunt their high IQs. That in politics, principal with an “al,” as in wealth, counts more than principle with an “le,” as in truth, beauty, and the American way. In other words: show me the money.