Liberators in Pinstripes
Economic calamity and elite paralysis nourished another oddly related fable: the Wall Streeter as heroic revolutionary. In this tale, the corporate old guard had become ossified and sclerotic, complacent, bureaucratic, and risk averse. On their watch the economy was withering away, losing its combative muscle, its indigenous American taste for the audacious. What native entrepreneurial urges still lived on were disabled by a bewildering labyrinth of government regulations, restrictions, and inhibitions. Together business and public bureaucracies were responsible for the arteriosclerosis afflicting the national economy. They needed dismantling. Fortunately, there were men ready to face the Goliath.
A capitalist version of liberationist theology, at one time the eccentric faith of outlying circles of revanchist businessmen and marginalized conservative intellectuals, gathered momentum all through the dolorous 1970s. An aged ideological alloy combined reverence for the free market with a seething resentment of state interference and the servile demoralization it allegedly encouraged.
Such ancient ideas were now defended by the latest applications of differential calculus and probability theory. But what gave this old-time religion added force, first of all among a rising generation on Wall Street and soon among a milieu of nerdy techno-entrepreneurs, were the unprepossessing social origins of these young men.
Precisely because many of them, like Ivan Boesky and Carl Icahn (or for that matter Bill Gates or Steve Jobs), were not to the manor born, but were instead strivers from the middling classes, they genuinely believed and were able to convince legions of followers and admirers that they had come to storm the fortresses of the ancien régime. Richard Fuld, who eventually ran Lehman Brothers and ran it into the ground, attended the University of Colorado and hawked bonds for a living. AIG was founded by the son of a woman who ran a boardinghouse; he later turned it over to Maurice “Hank” Greenberg, whose father owned a candy store on the Lower East Side. Greenberg in turn appointed Joseph Cassano, the son of a Brooklyn cop, to manage the London-based credit default swap operation. Stan O’Neal, who mismanaged Merrill Lynch into near bankruptcy, was the son of a farmer turned GM worker. Carl Icahn, the son of a cantor, was a lower-middle-class kid from Queens whose smarts got him to Princeton and then to Wall Street. Once there, he exercised a raging temper and a petulant contempt for the old-boy network from whom he regularly extracted tribute in the form of “greenmail” that temporarily at least allowed top management to hold on to its executive suites.
Self-proclaimed champions of the disenfranchised shareholder and saviors of a business underclass denied access to life-sustaining bank credit, men like Icahn turned Wall Street into a combat zone where the forces of market freedom faced off against the overlords of yesteryear. The inventors of this ideological drama were capable of the most cynical and self-interested deceptions while remaining true believers in its underlying moral allegory and economic axioms: the shareholder as the oppressed victim, management as the great usurper.
It was this sense of mission that transformed these corporate raiders, merciless practitioners of the lean-and-mean approach to corporate reorganization, into cultural heroes during the Reagan era and beyond. They promised to open up the marketplace for capital to that discriminated-against mass of American businessmen who lacked the size and connections to command the attention of the big banks. They fearlessly attacked the entrenched managements of the very largest corporations whose timidity, addiction to routine, and limited vision kept stock prices artificially depressed, depriving their shareholders of their rightful gains. In this brave new world, the formal legalities of property rights trumped all other social claims. This was the “right” ne plus ultra that the New Deal had momentarily abridged.
Ironically, as time passed, each new hosanna to the shareholder invoked a more and more migratory, shadowy presence, a kind of massless mass, whose purpose in life seemed less and less to do with ownership and management and more and more to do with speculation. The idea of being tied down to a particular piece of property in the age of financialization seemed like a fool’s game — until everything went smash.
Every act of this Wall Street insurgency had its disinterested or even nonmaterial justification. If their outsized mergers and acquisitions made them stunningly rich, they produced handsome returns for holders of mutual funds, college endowments, savings and loan institutions, and pension funds that bought the high-risk/high-return junk bonds which financed these transactions. If men like Saul Steinberg, Carl Icahn, and Ron Perelman and the immaculately coiffed circle of anonymous suits serving them seemed almost indecently awash in money, at least they worked liked demons to get it, putting in inhuman hours, beginning their days at four in the morning, ending them at midnight. For them, hard work, an American sacrament, was an aphrodisiac; they were a living reproach to the stereotypical Wall Street banker whose day began at ten and ended at three, with an intermission for a three-martini lunch.
Taking on the stuffed shirts like Felix Rohatyn of Lazard Freres or the urbane, French-accented Michel Bergerac, head of Revlon (as Ron Perelman, an uncouth upstart out of Philadelphia, did in his hostile take-over of the company in 1985), was depicted as class warfare, American-style. The have-not-enoughs were confronting the have-too-muches (even though Perelman himself craved nothing more than to climb to the summit of social notoriety). Somehow, the fate of the American dream seemed to be at stake. And if in the immediate aftermath of root- and-branch corporate reconfigurations, landmark industrial plants shut their doors; if whole communities became ghost towns; if middle management lived in terror of its own extinction — in the long term, this was a kind of tough-love patriotism; it would strengthen America against its rivals in a global economic jungle where only the fittest survived.
When they lobbied ferociously for a defanging of the government’s regulatory apparatus or for the repeal of keystone pieces of New Deal legislation like the Glass-Steagall Act, these young lions did so to extend the realm of freedom, to remove the dead hand of the government bureaucrat, and to unleash the creative energies of the enterprising individual. The willingness to be savage, and to wear that savagery like a medal of honor, was the whole point; this was a revenge fantasy against America’s white-shoe crowd, who had forfeited their right to rule.
A choir of youthful publicists provided intellectual cover for the new knighthood. In his best-selling "Wealth and Poverty" (its title an ironic and perverse echo of the Henry George classic), George Gilder explained that “to help the poor and middle classes one must cut the taxes of the rich.” Fatuities like this soon became commonplaces of our political life and remain so to this day.
No mere public policy scrap, this was a crusade with a metaphysical bottom line. Richard Darman, Reagan’s deputy secretary of the treasury, lambasted the business establishment as “bloated, risk averse, inefficient, and unimaginative.” Freedom morphed into a synonym for free enterprise. An anti-elitist revolution from above, it exuded a messianic aura. Corporate America was to be saved from itself, from its fat cat complacency. Stripped of poorly earning assets, malingering workers and their featherbedding unions, and doddering and absentee managers, American business would rise again. Only men who had risen from social obscurity could appreciate and meet the challenge. They came armed with the necessary irreverence, fearlessness, and appetite for the new. They could reinvent the world in their garages or sweep away those cobwebbed gray flannel suits. Only they had the foresight to spot, and the derring‑do confidence to resurrect, companies languishing in commercial oblivion, financially distressed but latent with untapped potential. They could be freed, but it would take the valor of a new financial knighthood.
Michael Milken’s Aladdin-like junk bond leveraged buyouts, mega-mergers and acquisitions made him the chief knight of the realm. Raised in California, nerdy, married to his high school sweetheart, residing in the same suburb he grew up in, supremely arrogant, yet notably modest in what he drove, dressed in, and lived in, he was perhaps an unlikely candidate for the role. He nonetheless exerted a mesmerizing influence, a charisma that had limos lining up on Rodeo Drive in Beverly Hills at four in the morning to do deals, convinced, as one of his more perfervid admirers gushed, that “Michael is the most important individual who has lived in this century.” Why not? Contemporary observers thought they spied a social revolution in the making. Milken was its Lenin.
Household names in American business — TWA, U.S. Steel, Gulf Oil, Walt Disney — were all of a sudden in play and threatened with absorption into some alien acronym of financial abstraction. One-third of the companies on the Fortune 500 list in 1980 no longer existed as independent entities a decade later. Employment rosters at the Fortune 500 fell from 16 million in 1979 to just over 11 million in 1993. Three thousand mergers worth $200 billion took place in 1985 alone. By the end of the century, Fortune, anointing America “a Trader Nation,” announced that there was “a revolution underway, and it’s changing the way we invest and work and live.”
Milken’s social revolution overturned Wall Street’s historic hierarchy. The firm he worked for, Drexel Burnham Lambert, had been distinctly minor league; now it and a handful of other new arrivals, like Kohlberg, Kravis, Roberts & Company, were cock of the walk. “Relationship banking” — that genteel world lined with mahogany walls hung with Old Masters, resting on time-tested traditional dealings between particular banks and their corporate mates, a relationship premised as much on family and social ties as it was on mere moneymaking — gave way to (indeed, was run over by) “transactional banking.” Here every new deal was open to negotiation, each a new test for some Wall Street financial house to prove its commercial bona fides all over again, and all deals were subject to the singular criterion of the highest return produced in the shortest time.
Nasty microbattles for control took place inside venerable firms like Lehman Brothers, where languorous Ivy League patricians turned out in rimless spectacles and the omnipresent breast-pocket hankie were challenged by shirtsleeved, uncouth, cigar-chomping geeks from the trading floor staring out at the world through stylishly obtuse, thick-framed black glasses. As one magazine profile noted, Mesa Petroleum’s T. Boone Pickens, a corporate raider of the first rank, although a WASP, “never loses a chance to dramatize his persona as a plain-talking country boy engaged in a populist battle against an effete elite.” Frank Lorenzo, who wrestled to the ground the old-line management of Eastern Airlines, was the son of a Spanish immigrant who went out of his way to emphasize his ethnic origins by listing his given name in Who’s Who as “Francesco.” It was all symbolic of fresh blood getting pumped through the aerated arteries of an aging financial organism.
An All-American Infatuation
No arena of cultural endeavor remained immune to the charisma of these young Turks. Preachers and newspaper editors, magazine entrepreneurs and board game creators, novelists, playwrights, moviemakers, and television soap opera producers, historians, book publishers, gossip columnists, and even choreographers were all infected with a kind of bug-eyed fascination. Treating the financier as a messiah was already afoot when the economy first turned down in the seventies. In The Financier, Michael Jensen invoked the “I” banker as a kind of holy magician: “His art is arcane. But just as the rainmaker promised to draw from the sky that drop that nourished the farmer’s crops, so these latter day rainmakers draw from the people and institutions around them the dollars that one needed to build the nation’s factories.” In an atmosphere like this, those who covered the news or searched it for sources of entertainment couldn’t take their eyes off what Michael Thomas, a columnist for Manhattan Inc. (perhaps the magazine most single-mindedly zeroed in on doings on the Street), waspishly dubbed the “new tycoonery.”
Catholic theologians like Michael Novak joined televangelists in scouring the Bible for injunctive commandments to multiply and accumulate. Televangelist Jerry Falwell found “the free enterprise system . . . clearly outlined in the Book of Proverbs.” Great wealth, Falwell professed, was “God’s way of blessing people who put him first.” He and his fellow evangelicals certainly practiced what they preached, transforming their ministries into multipurposed businesses that included theme parks, cable TV stations, colleges, and hotels. Nor were they shy about flaunting their personal opulence. Jim and Tammy Faye Bakker had six houses, one of which came equipped with an air-conditioned doghouse.
New magazines like Success, Manhattan Inc., Venture, and Millionaire, and the relaunched Vanity Fair (as well as established ones like Esquire and The New Yorker) sprang to life as awestruck documentarians of the era’s power-suit costuming, its manly horseplay, its philanthropic social climbing, its O.K. Corral financial stare-’em‑downs and shoot-’em‑ups. Power portraits of the biggest deal makers marveled at their all-around fitness, their regimen of physical workouts that prepared them for all-nighters. A high-end athletic club offered the “Fitness Program Fast Enough for Wall Street.” These were financial athletes at the peak of their game, in it not for the money alone but for the je ne sais quoi that always seems present at the mystic heart of all true sportsmen, men like the financier Asher Edelman, known as “the Liquidator,” who confided his “Nietzs-chean desire for control.” Bond traders made out like professional hit men and boasted of “ripping the faces off” opponents (who sometimes turned out to be their clients). More cerebral samurai of the financial wars carried around copies of "The Art of War" by Sun-tzu, the Chinese Clausewitz. Forbes rhapsodized about Michael Milken’s “one-man revolution”; Business Week’s cover story compared the junk-bond master with Morgan; Institutional Investor anointed him “Michael the Magnificent.”
A whole subgenre relived familiar tales of transfiguration. For instance, there was the story of Bruce Wasserstein (playwright Wendy’s brother), who grew up in the middle-class neighborhood of Midwood in Brooklyn, spent time as a poverty worker and Nader raider, only then, like some character out of The Big Chill, to go on to negotiate the four largest corporate mergers in American history. He was compared with a bloodied general perpetually embattled. Wasserstein enjoyed homelier comparisons: “I’m a craftsman, no different than a carpenter or a painter.”
Moreover, Wasserstein’s incongruous beginnings turned out to be not so odd after all, as a small cohort of young men living on the fringes of the counterculture and the “new left” brought its feistiness and irreverence, if not its politics, to this bizarre version of the class struggle on Wall Street and to the information superhighway. A face-off at an unsexy institution like Lehman Brothers between two otherwise colorless figures — one, Lewis Glucksman, a jowly merchant; the other, a onetime political functionary, Pete Peterson — got dramatized in the media as a facsimile of mortal combat, a tale of “greed and glory.” Arbitrageur Ivan Boesky’s book "Merger Mania" modestly attributed his triumphs to hard work and common sense. But this was mere rhetorical gesture since everyone knew his real allure was that of the riverboat gambler. Nick-named “Piggy,” he was a charmer with a long history of skirting the law.
Slang from the Street insinuated itself into the language of everyday life. And whole thesauruses migrated in the opposite direction — from civilian life back to the front lines — to capture the atmosphere of blood-thirsty romance. Metaphors for corporate mergers leaned heavily on the language of sex and violence, ranging all the way from chivalrous marriage to rape. There was talk of “white knights,” of “shotgun” corporate marriages, of “financial angels” and “sweethearts,” not to mention “sleeping beauties” targeted by a rogue’s gallery of “black knights,” “killer bees,” and “hired guns.” This was a refreshed vocabulary stripped of the politesse of the Establishment, earthier and closer to the Volk. Here was the metaphoric vocabulary of a Wall Street state of mind spoken from coast to coast.
Wall Street R Us
However improbable it might have seemed to our ancestors, this fable of Wall Street heroism on behalf of democracy managed to enchant. By the turn of the millennium, a cultural democratization of the Street was widely visible. It had grass roots. First of all, by then roughly half the population participated in the stock market, if only passively through their pension funds and other forms of institutional investment. Moreover, the Street’s reputation had undergone a miraculous makeover. Those hoary suspicions of old had faded away. More than that, the Street had become for many a zone of liberation, visionary exultation, national pride, and entertainment. A great many people had come to think of the stock market as a place that welcomed outsiders; not merely welcomed them, but empowered them; and not only empowered them but put them in touch with the zeitgeist of the new millennium. Ordinary folk could become homesteaders on Wall Street’s virtual landscape, where they might stake out their claim to freedom: freedom from workday tedium, from the press of material want, from the demeaning deference to employers and haughty elitists in business and government. A chemical engineer in New York credited his involvement in the stock market with a miraculous change in his thinking: “It gave me the feeling of control over my life I never had before.” Susie Vasillov, owner of a housewares store and a stock market player, spoke for many: “And whether you’re a mommy or the owner of a tony housewares shop, we’re all businesspeople. I think it’s a great thing that’s happened to the country.” Shareholder Nation had arrived.
Toy manufacturers simulated the excitement about piratical cut-throatery with aptly titled board and video games like Greed, The Bottom Line, and Arbitrage. Book publishers discovered an insatiable demand for titles purporting to illuminate the mysteries of business gamesmanship: The Money Game, The Takeover Game, and dozens of others featured the stories of financial “geniuses” and takeover Michelangelos.
Newspapers and magazines were full of glad tidings about Wall Street as the latest form of the vox populi. CNBC, CNN‑FN, Bloomberg, and others responded and encouraged the insatiable appetite for investment news and advice. Financial news plus sports accounted for half the editorial content of many newspapers. By the 1990s, the sheer overwhelming presence of stock market news on TV and radio, the proliferation of talk shows and whole new cable channels where market analysts became video celebrities, the inundation of the airwaves by commercials for brokerages, online trading websites, and other avenues of mass enthrallment were all evidence that someone was listening.
They were doing more than listening. Average folk were predicating their spending plans on the leverage their assets in the stock market presumably provided. Home building and buying, car purchases, vacation getaways, big-ticket consumer electronics, air travel, and consumer durables in general stayed afloat, in part, atop the bubble. People wore wristwatches that beeped when IBM stock hit its owner’s price threshold. A Florida dentist confessed to tracking his investments in between patients, sometimes between X-rays and fillings.
Day-trading, which became wildly popular by the mid-1990s, particularly invited hoi polloi, all sorts of people who might not otherwise have ventured anywhere near the Street, to indulge and overindulge. They seemed consumed by normal consumer anxieties about being left out and left behind, but also by the sort of thrills, titillation, and light-ninglike action that popular culture in general thrived on. Newsweek called it a “blood sport.” A Connecticut billboard touting offtrack betting captured the sneaky thrill: “Like the Stock Market. Only Faster.”
Investment clubs for schoolkids and octogenarian ladies and everyone in between sprouted up everywhere. They were as much pastimes as they were financial undertakings. By 1990 there were about seven thou-sand officially registered clubs, with probably three times that number organized on a more informal basis. More than a third were all female. The most famous was organized by a group of women in Beardstown, Illinois. They published The Beardstown Ladies’ Common Sense Investment Guide, which flew off bookshelves since the ladies had done quite nicely, thank you, on the stock market. (Later it turned out the club’s books had been cooked, although innocently.)
High schools introduced investment into the curriculum; by the late 1980s, 350,000 students were playing the Stock Market Game in class and competing in tournaments that went on for weeks. In Arlington, Massachusetts, seventh graders formed teams called the Wizards of Wall Street, the Money Machine, and Stocks R Us. Summer camps added playing the market to their menu of daily activities. Mothers who thought teaching their children about Wall Street would be empowering could buy Wow the Dow, a kiddie’s guide published by Simon and Schuster. When the Four Seasons Hotel in Boston set up a “dollar and sense investment camp,” a local magazine editorialized: “If kids get hooked on saving and investing, America’s future could be free of dependence on foreign capital . . . and the nation closer to a balanced budget.”
Fever dreams like this were in one sense nothing new when it came to depicting the Street as the pathway to riches. Yet what was different was the way visions of El Dorado were interwoven with the merry informality of consumer culture and the expectations of social emancipation. Wall Street, once a popular symbol of aristocracy, inequity, and oppression, now promised to overthrow itself and have a lot of fun doing it. The Bull is dead. Long live the Bull.
Excerpted from "The Age of Acquiescence: The Life and Death of American Resistance to Organized Wealth and Power" by Steve Fraser. Published by Little, Brown and Co. Copyright © 2015 by Steve Fraser. Reprinted with permission of the publisher. All rights reserved.