million is a good number. ” What Pettit may have meant, his friends believe, was that there was no point dwelling on it. Certainly everyone must have agreed with Cecil that the next quarter’s results needed to be over double that—especially once the firm was put on review for a ratings downgrade.
Cecil asked Bob Matza, the new CFO , if Fuld and Pettit understood what would happen if Moody ‘s downgraded the firm—Lehman would not be able to issue commercial paper, which meant, as Matza put it, “We’ re toast.” Matza told Cecil that neither Fuld nor Pettit understood this, so Cecil called a meeting with both men to enlighten them. He says, “They did not take this very well, particularly Chris.”
Cecil says both Fuld and Pettit had grown up in a subsidiary of a subsidiary; they had no experience running a public company and didn’t know they had to look out for rating agencies. They had to learn on the job.
Still, by the fourth quarter, Cecil had almost met his objective. The firm announced a $46 million after-tax profit and Moody ‘s affirmed them.
A relieved Cecil said to Matza, “I think we should ban the phrase ‘We’ re toast.’ I don’ t want to have to hear it ever again.”
----
Cecil believed that Fuld, not Pettit, was his best ally in the cost-cutting battle. He remembers patiently explaining to Fuld that by cutting costs and not plowing the savings back into remuneration, the share price would go up. Cecil says this was Fuld ‘s “lightbulb moment.”
“Dick is very pragmatic,” he says, “and he is, more than almost anybody I know, a lifelong learner. Most people get to a point in their career, and they kind of are who they are. Dick, however, at a fairly late stage in his life, went through this transition of being on a trading desk to running Lehman as a public company. That’s a huge change in just five years. Also, he went from being a trader, heavily influenced by all the bad habits of the old-fashioned trading floors, to head of the firm, trying to do the right thing, trying to keep the firm together, recognizing the value of all the different parts of the firm, recognizing the importance of a good culture.
“He also changed personally, becoming a good public speaker and all those things. Becoming good with clients. He went through a remarkable transition in a short period of time.”
Fuld began spending more and more time not just with capital market clients, but with investment banking clients; he already knew men like Henry Kravis (head of KKR ) and Leon Black (now at Apollo), but now he had to treat them not just as acquaintances, but clients; he had to pitch them. They needed to see him differently, not just as an introverted trader, but as the visionary head of a major securities firm.
One meeting that did not go so well was with the late Bruce Wasserstein, then the co-chief executive of the boutique mergers and acquisitions (M&A) outfit Wasserstein Perella. Fred Segal, a former Lehman partner who was working for Wasserstein at the time, brought his boss down to Lehman’s offices and introduced him to Fuld. Wasserstein told Fuld a harsh truth. “You’ ll never get a premium valuation, because you don’t have a decent advisory banking business,” he said. “So you should buy us.” The meeting ended swiftly.
Later Fuld called up Segal. “Fred,” he said, “never bring that fat fuck here again.”
----
Pettit, however, stayed Pettit, rallying the troops and diving into staff problems. The only trouble with this approach was that Lehman was growing too big for one man to micromanage.
But it was also around this time that Pettit first realized just how far he had come. Mary Anne Pettit recalls Chris saying to her one Sunday evening as he was paying his bills in his study in Huntington. “You know, I think we are rich.”
Yet this never really changed his lifestyle, despite certain luxuries. There was an annual holiday in the Caribbean with the Tuckers. The
Cecil asked Bob Matza, the new CFO , if Fuld and Pettit understood what would happen if Moody ‘s downgraded the firm—Lehman would not be able to issue commercial paper, which meant, as Matza put it, “We’ re toast.” Matza told Cecil that neither Fuld nor Pettit understood this, so Cecil called a meeting with both men to enlighten them. He says, “They did not take this very well, particularly Chris.”
Cecil says both Fuld and Pettit had grown up in a subsidiary of a subsidiary; they had no experience running a public company and didn’t know they had to look out for rating agencies. They had to learn on the job.
Still, by the fourth quarter, Cecil had almost met his objective. The firm announced a $46 million after-tax profit and Moody ‘s affirmed them.
A relieved Cecil said to Matza, “I think we should ban the phrase ‘We’ re toast.’ I don’ t want to have to hear it ever again.”
----
Cecil believed that Fuld, not Pettit, was his best ally in the cost-cutting battle. He remembers patiently explaining to Fuld that by cutting costs and not plowing the savings back into remuneration, the share price would go up. Cecil says this was Fuld ‘s “lightbulb moment.”
“Dick is very pragmatic,” he says, “and he is, more than almost anybody I know, a lifelong learner. Most people get to a point in their career, and they kind of are who they are. Dick, however, at a fairly late stage in his life, went through this transition of being on a trading desk to running Lehman as a public company. That’s a huge change in just five years. Also, he went from being a trader, heavily influenced by all the bad habits of the old-fashioned trading floors, to head of the firm, trying to do the right thing, trying to keep the firm together, recognizing the value of all the different parts of the firm, recognizing the importance of a good culture.
“He also changed personally, becoming a good public speaker and all those things. Becoming good with clients. He went through a remarkable transition in a short period of time.”
Fuld began spending more and more time not just with capital market clients, but with investment banking clients; he already knew men like Henry Kravis (head of KKR ) and Leon Black (now at Apollo), but now he had to treat them not just as acquaintances, but clients; he had to pitch them. They needed to see him differently, not just as an introverted trader, but as the visionary head of a major securities firm.
One meeting that did not go so well was with the late Bruce Wasserstein, then the co-chief executive of the boutique mergers and acquisitions (M&A) outfit Wasserstein Perella. Fred Segal, a former Lehman partner who was working for Wasserstein at the time, brought his boss down to Lehman’s offices and introduced him to Fuld. Wasserstein told Fuld a harsh truth. “You’ ll never get a premium valuation, because you don’t have a decent advisory banking business,” he said. “So you should buy us.” The meeting ended swiftly.
Later Fuld called up Segal. “Fred,” he said, “never bring that fat fuck here again.”
----
Pettit, however, stayed Pettit, rallying the troops and diving into staff problems. The only trouble with this approach was that Lehman was growing too big for one man to micromanage.
But it was also around this time that Pettit first realized just how far he had come. Mary Anne Pettit recalls Chris saying to her one Sunday evening as he was paying his bills in his study in Huntington. “You know, I think we are rich.”
Yet this never really changed his lifestyle, despite certain luxuries. There was an annual holiday in the Caribbean with the Tuckers. The
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