16 Feb The Rise and Fall of Ace Greenberg
Alan Greenberg’s book, The Rise and Fall of Bear Stearns, may be the most totally avoidable book on the financial crisis that has yet come out, and is certainly the biggest exception to my rule regarding “only reviewing the credible books”. This book is not claiming to add anything to the ideological discussions that surround the 2008 financial crisis, and it really does not add anything to the historical record either. What the book is, rather, is a very sad and pathetic temper tantrum from a man who was once a major figure on Wall Street.
I have never met Ace Greenberg, but I know an awful lot of people who do know him, and I have rarely heard a negative word said about him. I do not know his politics, though I have heard him say some things that were positively inane, and other things that I found to be quite astute. Sadly, this book is long on the former and short on the latter.
No one who reads it will conclude that he wrote it for any other reason than to try and vindicate himself in the fall of Bear Stearns. This was a gigantic financial firm that six months prior to the apex of the financial crisis foreshadowed much of what was to come with its emergency acquisition by JP Morgan (behind $29 billion of support from the Federal Reserve). The authoritative book on Bear Stearns was written some time ago, and it is fantastic. This Greenberg book, written by a 60-year veteran of the firm and former CEO, ought to have offered us more. Instead, it offered petty and revisionist claims of how much smarter Greenberg was than the former CEO in the 1960’s and 1970’s who gave him his start. It provides Greenberg’s history of how well he ran the firm, a period he says should be remembered for its incredible risk management. And finally, it gives Ace his chance for “payback” to Jimmy Cayne, Greenberg’s successor at Bear Stearns who essentially was the CEO throughout the time period that Bear levered up their mortgage book 35-to-1, and set the table for their collapse as a financial powerhouse. I have no interest in defending Jimmy Cayne. What I do wish to express in this review, though, is how petty and unbecoming I think it is for a distinguished business leader to write a 150-page diatribe against a former rival. I think it is beneath Mr. Greenberg, and I am disappointed.
Greenberg is obviously and perhaps understandably a victim of his own self-serving thinking about the events that brought Bear Stearns down. He essentially argues in this book that (a) No one ever told him what to do – he was in charge and knew how to manage risk better than anyone; (b) He had nothing to do with what happened to Bear from 2000-2007, and even though he was Chairman of the company during that time, it was Jimmy Cayne and co-President, Warren Spector, who ruined the firm. That Greenberg can not see this obvious contradiction is forgivable; I can not say I would position things in my own mind much differently if it were me in his shoes. But that does not mean readers should fall for it. One of the saddest parts of the book is when Greenberg brags about how he forced employees to re-use paper clips when he was the CEO of the firm. A multi-billion dollar company trading at $172 per share is sold for $10 per share with $30 billion of taxpayer money involved, and he wants to reminisce about the days in which he encouraged employees to save 1/100th of a cent here and there. It would be sad if it wasn’t so, well, much more than sad.
I have said before and will say again that the fall of Bear Stearns is one of the saddest parts of the financial crisis. This was a truly gritty company with a remarkable entrepreneurial culture. A good portion of the advantage to JP Morgan in acquiring the company involved cost synergies, and that means a lot of people lost their jobs. Greenberg almost defies decency when he uses a portion of the book to brag about how he tried to keep the board from loading up Bear stock in one of the retirement account options the employees had. He just forgets to mention in that process the unbelievable pressure on Bear employees to load up on Bear stock in all sorts of other capacities. No major Wall Street firm had as high a percentage of stock owned by employees as Bear Stearns did. The victims in this mess were their employees and shareholders. Their bondholders were made completely and totally whole. The major guys like Ace, Jimmy, and Spector are all gazillionaires. But a lot of very talented and capable people saw their lives and careers in ashes when leverage went out of control, and when risk management became a cliche rather than a real guiding philosophy. Greenberg does not deserve all the blame for what happens, but readers of this book do deserve better than a self-serving revisionist vindication. The book should be very brief: “I am so sorry for those who were committed to the Bear Stearns organization”, would have been sufficient.