What set Felix apart from the many thousands of other immigrants to these shores was how quickly he took the place by storm once he arrived in New York, at the end of June 1942. His stepfather had been able to transfer some money out of France to a bank in New York, and part of that money was used to buy a small apartment. Felix wasted no time making up for all the interruptions in his education. He enrolled in the McBurney School, then on West Sixty-third Street, because it was one of the few high schools in Manhattan to offer a summer program. He also convinced his mother that another way for him to learn English more quickly--Felix has always had an enviable facility with languages--would be to go to the movies, "because they had these sing-alongs--you know, follow the bouncing ball," he said. He excelled at McBurney, graduating in two years at the age of sixteen. He had a particular aptitude for math, science, and tennis and played on the varsity tennis team his last year at the school. A college counselor recommended to Felix, though, that he attend a small college because of his relative youth. His mother concurred. After a little investigation, he discovered that Middlebury College, in Vermont, offered a "cooperative program" with the Massachusetts Institute of Technology whereby he could study physics and engineering for three years at Middlebury and then for two years at MIT. He also liked to ski. He applied to Middlebury and was accepted.
He may have been one of the only Jewish students in the school at that time. During his sophomore year, he joined the Alpha Sigma Phi fraternity, whose national chapter had a policy against admitting Jews and blacks. Alpha Sigma Phi was founded in 1845 by three Yale freshmen. One day, the national organization sent a corporate executive--Felix thinks he was a vice president from AT&T--"to try to talk us out of this heinous thing of pledging a Jew and a Black." Felix sat through the meeting. The man had brought with him a couple of cases of beer to try to appease the fraternity members. Felix explained: "And this guy kept saying, 'You know, don't misunderstand me. Some of my best friends are Jewish.'" Soon after, "we gave him the beer back, and we took him to the railroad station and we sent him on his way." The local chapter got kicked out of the national fraternity for allowing a Jew and a black to join.
Felix diligently pursued his studies in physics, but soon it became clear to both him and his favorite professor, Benjamin Wissler--the chairman of the Middlebury physics department--that he was reaching his limit of aptitude in the subject. Wissler recommended not only that he pass on the MIT curriculum but also that he take a semester off.
Since he had not seen his father since 1941, Felix decided to go visit him in France in the summer of 1947. He took a ship across the Atlantic, and his father picked him up in the French port city of Le Havre. His father had remarried and was still managing the brewery, which had been relocated near Paris. They spent the summer in the south of France. His father then asked him to spend the year working at the brewery. So Felix went to work in the Karcher brewery cleaning out the beer vats, having slimmed down sufficiently to be able to climb inside them. He also helped out in the bottling operation. He worked twelve hours a day, beginning at six in the morning. "I just stank from this stuff," he said. "And it was still a pretty hairy period where--I mean, here I was an American in a part of the city that was totally Communist, and all the unions working in the factory were Communist unions, and there were a lot of Algerians, too. So a couple of times a barrel came rolling by pretty close"--and here he chuckled to himself with the memory of an American Jew surrounded by Algerian Communists--"and I was never quite sure what it was. But I also remember when I would go back to the apartment and I was in the subway just stinking of this beer, people would look. I decided quickly this was not for me."
He returned to Middlebury for the second semester of 1948. He completed his degree in physics and graduated in 1949, thinking he might want to work at the nuclear laboratory in Oak Ridge, Tennessee.
Fortunately, though, with the help of his mother and stepfather, he also had been exposed to Wall Street. During the summers of 1945 and 1946, Felix was a runner and a stock transfer clerk at Jack Coe & Co., a small brokerage. He remembered celebrating VJ Day at the firm. He was paid about $20 a week and would occasionally be rewarded with baseball tickets to the Polo Grounds, on 155th Street. But to Felix, it was nothing more than a way to earn a few extra bucks, not unlike his previous summer jobs working in a drugstore and teaching English to Edith Piaf, the glamorous Parisian chanteuse. When he graduated from Middlebury, his stepfather helped again, this time getting Felix a job at Lazard Freres & Co. in New York. Plessner and Felix's mother had returned to live in Paris after the war. Plessner knew Andre Meyer through a foreign exchange and bullion trading operation that the two men had created somewhere between Les Fils Dreyfus, in Basel, and Lazard Freres et Cie, in Paris.
Patrick Gerschel, Andre Meyer's grandson, believed another reason that Felix was given a coveted spot at Lazard was that Andre was having an affair with Felix's mother. "It was about money and sex," Gerschel observed. "When has it ever been any different?"
CHAPTER 2
"TOMORROW, THE LAZARD HOUSE WILL GO DOWN"
After two days of eerie silence following the earthquakes and fires that devastated San Francisco in the early morning of April 18, 1906, an unnamed bank officer of the London, Paris, and American Bank--the California outpost of Lazard Freres & Co.--was able to make his way through the rubble to a Western Union office and cable a staccato and desperate message back to his Lazard partners, three thousand miles away in New York City: "Entire business totally destroyed. Calamity cannot be exaggerated. Banks practically all destroyed. Our building completely destroyed. Vaults apparently intact. All records and securities safely in vaults. No lives lost among friends. Will wire fully upon..." The message ended tantalizingly. For the next few days, similar pleas for succor were sent to New York and the other two Lazard offices, in Paris and in London. These appeals met their own, inexplicable stony silence from the Lazard brethren, even though the capital needed to open these three offices had come from the ongoing success of the San Francisco operation.
A week after the initial calamity, on April 25, another, most emphatic missive was sent: "It is hardly necessary for us to say to you that this is the time for the London, Paris and American Bank, Ltd. to show all the strength that it may be able to command." Finally, the Lazard partners in New York responded and wired $500,000 to San Francisco and arranged for an additional $1.5 million line of credit to help resurrect their sister firm. The rescue financing allowed the San Francisco bank, operating from the basement of one of the partner's homes, to survive the disaster. This was not the first time--or the last--that the great bank came close to collapse.
BY THE TIME of the great earthquake of 1906, Lazard had been around, in one form or another, for fifty-eight years. The story of the firm's humble origins as a dry goods store in New Orleans in 1848 has been buffed to such a high gloss it is no longer possible to determine if the tale is true. As a literal translation of the firm's name suggests, though, at least two Lazard brothers--Alexander, twenty-five years old, and Simon, then all of eighteen--likely in search of both a refuge from certain military conscription and better opportunities for Jews in America, moved to New Orleans in the early 1840s to be with an uncle, who had already been "making money in commerce" in the Big Easy. Once this beachhead had been established, the two brothers sent for their eldest sibling--Lazare Lazard--and he soon joined them. Together, on July 12, 1848, the three brothers founded Lazard Freres & Co. as a retail outpost for the sale of fine French clothing.
These three Jewish brothers had emigrated from Frauenberg, three miles from Sarreguemines, in the Alsace-Lorraine region of France. Their grandfather Abraham had probably walked to France through Germany, from Prague, in 1792, with the hope of seeking greater political freedom. At that time, France appeared momentarily more progressive in its treatment of Jews than did the surrounding countries: there were some forty thousand Jews in all of France then, with twenty-five thousand of them in Alsace-Lorra
ine (but only five hundred in Paris). Abraham became a farmer. His son Elie was born in Frauenberg. In 1820, Elie married Esther Aron, a banker's daughter who brought to the marriage a considerable dowry. Together they had seven children, among them five sons, including Lazare, Alexander, and Simon, the founders of the New Orleans store. When Elie Lazard died, Esther married Moise Cahn. Together they had another four children, including Julie Cahn, who later married Alexander Weill, the Lazards' cousin and Michel David-Weill's great-grandfather.
WHILE REVOLUTION WAS sweeping across their homeland and reaching into other parts of Europe, the Lazards' New Orleans store was an immediate hit. Some of the profits were sent home to France--beginning a long Lazard tradition of sending the firm's profits around the globe.
Sadly, great calamities were not atypical in New Orleans, either. Fires destroyed huge swaths of the city in both 1788 and 1794. When a fire struck the city again in 1849, the Lazards' storefront was destroyed, only a year after the partnership started. The family was able to salvage much of the inventory, though, and in an act of prescience, the brothers moved the whole operation to San Francisco and set up a new store in the Wild West, selling their imported goods. The journey to California was arduous and took many months; Lazare and Simon nearly died from malnutrition. They survived to find San Francisco a bustling if somewhat disappointing frontier city where the prices of land, housing, and food were rising precipitously, along with the population. They realized quickly, though, that there was money to be made catering to the new arrivals, among them a wave of gold miners and speculators that had descended upon the city soon after a sustained vein of gold was found, also in 1848, on the edge of the Sierra Nevada. The Lazards' California operation (they were now joined by a fourth brother, Elie, named after his father) became the leading wholesale dry goods concern on the Pacific coast, and an increasingly important exporter of the gold coming out of the mines.
By 1855, "business was so brisk" that the Lazard brothers sent for their twenty-two-year-old cousin, Alexander Weill, to come from France to join the firm as the fifth employee. Weill served as the bookkeeper for his cousins' operation. "Gradually, the business became involved in financial transactions, first with its retail clients and then increasingly with others," according to a limited edition--only 750 copies were printed--of Lazard's 1998 self-published 150-year history. "Most often these dealings involved the sale of gold and the arbitrage of the different dollar currencies then in use, one backed by gold and the other by silver. Weill was the driving force taking the enterprise further and further into finance."
As the French were the chief trading partners for the Lazards, on or around July 20, 1858, the prospering firm opened an office in Paris under the name of Lazard Freres et Cie. With the Paris office up and running at 10 Rue Sainte-Cecile, the Lazard brothers returned to France. Alexander Weill remained in San Francisco in charge of the American outpost. Twelve years later, in the midst of the Franco-Prussian War of 1870-71, the family opened a third office, in London--christened Lazard Brothers & Co.--as a way to continue the importing and exporting of gold bullion after the French government curtailed all payments of foreign debts by domestic firms. The London office was considered a branch of the Paris office, but by enabling Lazard to continue to pay its bills as they came due, the London office added immeasurably to the firm's overall reputation at a time when other financial firms were defaulting on their debts.
By 1874, the firm was doing sufficiently well to be included in an article about the new breed of San Francisco millionaires.
In 1876, the partners made the "momentous" decision to sell their dry goods inventory at auction and refocus their business entirely on banking. On July 27, 1876, a new fourteen-year partnership agreement was drawn up between the four Lazard brothers, Alexander Weill, and the Lazards' half brother David Cahn, creating the Banking House of Lazard Freres, to be known as Lazard Freres et Compagnie in Paris and as Lazard Freres in San Francisco. (London remained a branch of the Paris office.)
IN 1880, ALEXANDER Weill left San Francisco for New York with the intention of opening an office that would be a leader in the exporting of gold to Europe and spent four years in New York building the business there. In 1881, Lazard was named the treasurer of the Sutro Tunnel Company, a California gold mining concern that controlled the Comstock Lode, the Brunswick Lode, and a tunnel into Mount Davidson. Soon thereafter, Lazard vastly increased its export of gold to Europe. In March 1884, Lazard exported $500,000 of gold, some in bars, some in double eagle coins. Only Kidder Peabody, a once venerable old-line investment bank, at $1 million, exported more.
On August 30, 1888, Lazard Freres & Co. joined the New York Stock Exchange, with seven partners. While non-family members started to join Lazard at this time as "partners," ownership of the firm remained within the founding families.
The three Lazard houses, in New York, Paris, and London, continued to grow and thrive, mostly from successful foreign exchange and trading. The fact that by the turn of the twentieth century there were indigenous houses in the world's three most important financial centers made Lazard absolutely unique. No other fledgling banking partnership had a presence much beyond its country of origin, with the possible exception of the powerful J. P. Morgan & Co., which was developing pockets of influence across continental Europe and in England. Still, Lazard had something that even the omnipotent J. P. Morgan did not have: Lazard was an American firm in the United States, a French firm in France, and a British firm in the U.K. "The intellectual horizon at Lazard was, what do we make of the world," Michel explained at the time of the firm's 150th anniversary. "How do we understand it with the great privilege of being able to try to understand it from several points of view?"
One of the key ways Lazard maintained this aura of indigenousness was to engage in a form of loose primogeniture, with fathers passing to sons their coveted partnership seats. This occurred at each house. There was also, at least among the French families, a proclivity for arranged marriages and intermarriages. "The great strength of this family," observed the late writer Arnaud Chaffanjon, "is to have married between cousins, in the same clan. The Weill, Lazard, Cahn and Aron have married their first cousins. It's the best way to keep money within the family." This decision kept the growing fortune from getting dispersed. By the time Simon Lazard died, his son Andre and his nephew Michel were "already learning the business of banking in the Paris house." Alexander Weill brought his San Francisco-born, Paris-educated son, David Weill, into the firm, and he became a partner in 1900. In the late 1920s, David Weill would officially change the family name to David-Weill--he became David David-Weill--in an utterly successful effort to establish the family in French aristocracy, not the easiest thing to do at that time for immigrant Jews in socially stratified France. Pierre David-Weill would follow his father and assume the position of senior partner. And in due course, Michel David-Weill took over from Pierre as senior partner.
In London, the office was muddling along rather ineffectually as a bank or "bill office," regulated by the Bank of England. All of the partners in Paris were partners of the London branch, which accepted deposits, but mostly from other immigrant banking houses, such as the Rothschilds' and the Barings'. By 1905, Lazard Brothers wanted to develop more of a commercial and corporate business rather than simply being a bank to other banks. To that end, a year before his death, Alexander Weill searched for a well-regarded Englishman to bring into the firm, eventually enlisting Robert Kindersley, a highly successful and well-known City stockbroker--the City being London's equivalent of Wall Street--as a full partner in Lazard Brothers with the French. Kindersley joined Lazard Brothers in 1905 and quickly brought it to prominence. He was the first Lazard partner to focus on the business of advising corporations, not only in foreign exchange and commercial loans but also in the little-known world of mergers and acquisitions.
Kindersley helped to recruit badly needed new blood to the London house. Lazard Brothers' reputation had advanced suffic
iently that by 1914, at the outbreak of World War I, the firm was named one of England's accepting houses and served on the Accepting Houses Committee, one of about seventeen such financial institutions so honored, an indication of how far Lazard Brothers had come from its origins as a lowly outpost of the French firm. In London's financial circles, this was a big deal.
Kindersley also had more than a passing business relationship with Weetman Pearson, a major British international financier and industrialist. At some point between 1910 and the dawning of World War I, Kindersley introduced Pearson to David Weill, and Pearson made a small investment in Lazard Brothers. After World War I, the Bank of England developed strict new regulations about the degree of foreign ownership it would permit in the English banking system. As a result, Pearson, now known as Lord Cowdray, and S. Pearson & Son Ltd. increased its stake in Lazard Brothers to 50 percent, with the other half being owned by Lazard Freres et Cie. The consequences of the Pearsons' stake in Lazard Brothers would reverberate through the three houses for years, finally coming to a head some ninety years later.
The last tycoons: the secret history of Lazard Frères & Co Page 3