Tearing Down the Walls

How Sandy Weill Fought His Way to the Top of the Financial World. . .and Then Nearly Lost It All

Monica Langley

• Publisher: Free Press
• Year: 2003
• Print ISBN: 9780743247269
• eBook ISBN: 9780743238618
• Topic: Business
• Subtopic: Business Biographies
• Index: Business

The very night that Sanford "Sandy" Weill, the chairman and chief executive officer of Citigroup, was being feted on the floor of the New York Stock Exchange as CEO of the Year, the television screens above the floor were flashing danger: A congressional panel was tearing into Jack Grubman, the $20-million-a-year telecommunications analyst who worked for Sandy. Had Grubman and Citigroup favored corporate clients at the expense of average investors? Was Citigroup recommending stocks of troubled companies to get their business? The worst scandal of Sandy Weill's long career was breaking around him.
Here, from its very beginning, is the riveting inside story of how a rough-edged kid from Brooklyn overcame incredible odds and deep-seated prejudice to put together Citigroup, the world's largest financial empire, and to transform financial services in America -- for better or worse.
Tearing Down the Walls provides an unprecedented look at how business and finance are conducted at the highest levels, with extraordinary insight into the character and motivations of powerful men and women. And it's the enthralling account of the interplay between power and personality. Sandy Weill, the son of an immigrant dressmaker, is a larger-than-life character, a legendary Wall Street CEO whose innovativeness, opportunism, and even fear drove him from the lowliest job on Wall Street to its most commanding heights. Over a span of five decades he has tangled with -- and usually bested -- some of the most prominent and powerful titans of finance, including the elitist financier John Loeb, the mutual-fund gunslinger and conglomerateur Gerald Tsai, the patrician American Express chairman Jim Robinson, and the cerebral banking visionary John Reed. A consummate deal maker, Sandy Weill amassed and then lost an astounding assemblage of securities firms, only to plunge ahead to rebuild his empire and ultimately create the modern American financial-services supermarket. At the center of Citigroup's recent crises, he's the mogul many are waiting to see topple, while many more are trying to figure out how he succeeded.
Using nearly five hundred firsthand interviews with key players in his life and career -- including Weill himself -- The Wall Street Journal's Monica Langley brilliantly chronicles not only his public persona, but his hidden side: blunt and often crude, yet unpretentious and sometimes disarmingly charming. Tearing Down the Walls reveals Weill's tyrannical rages as well as his tearful regrets, the crass stinginess and the unprecedented generosity, the fierce sense of loyalty and the ruthless elimination of potential rivals -- even those he loves. Langley illuminates a climb to the top filled with class conflict -- Jew against WASP, immigrant against Mayflower descendant, entrepreneur against establishment -- and explores the volatile personality that inspires slavish devotion or utter disdain. By highlighting in new and startling detail one man's life in a narrative as richly textured and compelling as a novel, Tearing Down the Walls provides the historical context of the dramatic changes not only in business but also in American society in the last half century. Compulsively readable, it is also essential for understanding the forces that are reshaping the American financial system today.

1

Crashing the Gates

At age twenty-two, when most young men are eagerly laying plans for their careers, Sandy Weill was facing failure. In one shattering night the future that he had thought would be his had utterly evaporated. His dreams of joining the family business were in ruins, his beloved mother was suddenly facing life alone, his classmates would soon be graduating without him, and the woman he desperately wanted to marry was being told to dump him. All because his father, Max Weill, went out for cigarettes one night and didn’t come back.

For Sandy, the pain of failure was all the worse for how hard and long he had struggled to achieve even a smattering of success. As a child growing up in the Bensonhurst section of Brooklyn, short and chubby Sandy was an easy target for the bullies who often sent him scurrying to his mother’s protective skirts. Shy and reclusive, he made no close friends at school and stood in fear and awe of his handsome, ebullient father, Max, who often scolded Sandy for not being more rough and tumble and not standing up for himself. His only real friend was his little sister, Helen, who worshiped her brother. During summers at their grandparents’ farm, Sandy would dig worms so that he and Helen could fish in the pond and then dutifully bait her hook and remove any wriggling fish she caught. But even with her, Sandy kept his feelings to himself. The two could sit together for hours listening to New York Yankees games on the radio without exchanging a word.

All that began to change when fourteen-year-old Sandy was enrolled at the Peekskill Military Academy, a boarding school near his grandparents’ farm. The school emphasized both sports and scholarship and kept students’ days full of activities. At five feet nine inches Sandy was too small for the football team, but much to his own surprise, he honed his tennis skills, acquired during earlier summer camps, to win many school tournaments. He became captain of Peekskill’s tennis team and even played in the Junior Davis Cup. The physical regimen of calisthenics every morning and sports every afternoon melted away some of the baby fat. At the same time Sandy realized he liked learning and was good at it. He would bang out his homework assignments in an hour or two and then nag his roommate, Stuart Fendler, to finish his assignments so the two could head for the school canteen for ice cream. Yet while excelling at both sports and academics, Sandy never became a leader on campus or even a very popular student. At graduation, when seniors predicted what would become of their classmates, no one predicted Sandy would do anything exceptional. He told classmates he planned to join his father’s steel-importing business. In a school skit, Sandy even cast himself as the owner of Super Deluxe Steel Plating Co., with five plants across the country.

Max Weill’s inaptly named American Steel Co.—it dealt almost exclusively in imported steel—was his second business venture. Like many young Jewish men whose parents had emigrated from Eastern Europe, Max first went into the rag trade, where his good looks, flirtatious ways, and free spending won him a strong clientele as a dressmaker. Etta Kalika, whom Max married in 1932, couldn’t have been more different. Plain, conservative, and thrifty, Etta refused to wear the fancy clothes Max brought her and preferred to spend her time visiting her parents, who lived downstairs from Max and Etta in a three-family home the parents owned, and caring for her two children, Sandy and Helen. While the dressmaking business was successful, Max Weill, who treated himself to a weekly haircut and manicure, was always on the lookout for the next big opportunity. One opportunity he found—to violate wartime price-gouging regulations—earned him a $10,000 fine and a suspended prison sentence and prompted him to leave dressmaking for good. After an abortive move to Miami during the war, Max and Etta were back in Brooklyn by 1945, this time in the Flatbush neighborhood, and Max had set up American Steel.

Sandy’s outstanding academic record at Peekskill opened the doors of prestigious Cornell University where, true to his intentions to join his father’s business, he declared a major in metallurgical engineering. But as so many college freshmen discover, college is about a lot more than classes. With thirteen Jewish fraternities eager to sign up new pledges, Sandy found himself a hot property. AEPi was particularly interested in recruiting him, and Sandy wanted to make a good impression. The composure and confidence—or at least the appearance of it—developed in military school, as well as the free-flowing alcohol, helped him overcome his innate shyness. Though never comfortable in social settings, he found he could be sociable and even charming. His tennis skills, applied to the game of table tennis, impressed the fraternity brothers.

Once AEPi accepted him, Sandy fell into a common pattern: alcohol and parties at night, missed classes in the morning, and weekends full of dates. By Thanksgiving of his freshman year Sandy was on probation and realized that the rigors of metallurgical engineering were not conducive to his new lifestyle. A switch to Cornell’s liberal-arts program enabled him to resuscitate his grade-point average without making a serious dent in his heavy schedule of dating, eating, and drinking. Indeed, it was during his freshman year that Sandy began to indulge what would become a lifelong passion: food. Sandy and his frequent Ping-Pong partner Lenny Zucker, who shared Sandy’s obsession with eating, would plan weekends around where they were going to eat. It helped that Sandy had a car, a new yellow Pontiac convertible, and a credit card, both supplied by his father. Yet he wasn’t extravagant. On the way to pick up their dates for a dinner at a famous Finger Lakes restaurant, Sandy warned Zucker to let the girls order first. “They’ll order the liver, the cheapest thing on the menu, and then we can have steaks,” a prediction that turned out to be dead on.

Despite his shortish stature and less-than-suave manners, Sandy had more than his fair share of dates at Cornell. He was especially adept at spotting and romancing the Cornell coeds who came from moneyed families. But when he was twenty-one and visiting home during his junior year, his aunt Mabel, a self-professed matchmaker, told her nephew about Joan Mosher, a student at Brooklyn College who lived with her parents in Aunt Mabel’s neighborhood of Woodmere, Long Island. Overcoming an initial bout of shyness, Sandy telephoned Joan and came away from the call convinced he really wanted to meet this woman. Their first date, April Fool’s Day, 1954, ended in the wee hours of the next morning as the two found one thing after another to talk about. Smitten, Sandy vowed to friends that he was going to marry Joan Mosher and, true to that pledge, he never dated anyone else. Joan’s gracious poise, empathetic manner, and tall, slender figure were an irresistible package to the Brooklyn boy who was just about the opposite—awkward, short, and stocky with a cockiness that tended to hide his shyness. To be closer to her, Sandy would spend weekends with his aunt Mabel, sleeping on her sofa during the few hours he wasn’t with Joan. Joan’s family lived in a new upscale development in Woodmere, in an upper-middle-class home with a large yard. Her father, Paul, was in public relations, and the family lived in a country-club milieu that Sandy had never experienced. While the Moshers didn’t directly object to Sandy, it wasn’t hard for Sandy to recognize that they weren’t thoroughly pleased that Joan was getting serious with someone who didn’t seem to be as ambitious or as polished as they might have liked.

While his brief foray into metallurgical engineering ended in near disaster, Sandy still intended to join his father’s business. With that certain opportunity ahead, he thought little about career planning, unlike friends who were aiming for law school or joining professionally oriented groups on campus. He continued to coast through school, posting reasonable grades in easy courses while spending as much time with Joan as he could. By spring of 1955 the young couple began planning an elaborate wedding to be held shortly after Sandy graduated.

Then Max Weill sprang his stunning surprise. Leaving the house on the pretext of going for a pack of cigarettes, Max phoned his unsuspecting wife to tell her he had long been having an affair with a younger woman and now he intended to divorce Etta and marry his lover. Reeling, all Etta could think to do was call her son. The news floored Sandy. He had known his parents were very different from each other, but he had never even considered the possibility that they might divorce. As soon as he recovered his wits, Sandy jumped into his convertible, sped off to pick up his sister at Smith College in western Massachusetts, and then drove through the night to confront Max, who was living with his mistress. It was only then, as he and Helen tried desperately to convince Max to come home, that his father struck a second shocking blow: He had secretly sold American Steel months earlier. There was no steel business and no job for Sandy.

Defeated and despondent, Sandy returned to Cornell. His family was disintegrating before his eyes, and his long-held dream of setting up as a prosperous steel importer had evaporated, literally overnight. Yet more was in store. While he and Helen were comforting their mother in Brooklyn, Sandy missed a crucial exam in his accounting class. The professor wouldn’t listen to explanations or excuses, and suddenly the shaken senior didn’t have enough credits to graduate with his class. Joan’s parents seized on the crisis as ammunition to foil the pending wedding. Their daughter’s suitor wouldn’t have a college degree. Worse, his parents were divorcing in a scandalous affair. “The apple doesn’t fall far from the tree,” Paul Mosher warned his daughter before offering her a trip to Europe if she wouldn’t marry Sandy.

But Joan and Sandy had forged a bond that neither scandal nor parents could break. In a last-ditch effort to remove at least one of the Moshers’ objections to him, Sandy convinced the Cornell administration to let him take a make-up exam for his accounting course. He took the exam on the Monday before the planned wedding and was notified he had passed on Thursday. Cornell wouldn’t be issuing diplomas again until the next fall, but at least Sandy had graduated. The wedding went ahead as planned, despite the obvious tension between Sandy and Joan’s parents and without the presence of Max Weill, whom Sandy had forbidden to attend lest his presence upset Etta. The elegant ceremony took place at the Essex House in Manhattan, across from Central Park. Sandy was ecstatic to be marrying the beautiful and graceful woman who had become his closest friend. And while Sandy was neither a debonair nor an elegant groom, Joan Weill recognized a diamond in the rough. She loved him for his loyalty, drive, and sense of humor—and for putting her on a pedestal. The honeymoon took the couple to Florida for the entire summer, courtesy of Max Weill, who now lived there with his new wife. Sandy and Joan toured the state, putting their hotels and meals on his father’s credit card. The expenses-paid honeymoon was more than Max Weill’s wedding gift—it was his effort at reconciliation with his still-angry son.

Learning the Back Office

Usually Sandy got no further than the receptionists’ desks. By the fall of 1955, Wall Street had gotten a reputation as a good place to make some money, and Sandy spent weeks trudging through Lower Manhattan making cold calls on the firms lining the narrow streets. Often he passed directly in front of the City National Bank, its facade decorated with a frieze called “The Titans of Finance.” But with his heavy Brooklyn accent, cheap suits, and perennially sweat-soaked shirts, about all Sandy could persuade the receptionists to do was take his resumé. He knew it wasn’t much of a resumé. A liberal-arts degree, even from a prestigious school like Cornell, didn’t do much to prepare a guy for a job in what was then called “high finance.” And his work experience consisted of two weeks selling the Greater New York Industrial Directory to local businesses, a job from which he was fired after making only one sale in those two weeks. What it took Sandy longer to realize was that the banks and securities firms crowded into the financial enclave considered themselves a culture operating in a world apart from other industries. Only the well-bred, the well-dressed, the well-off, and the well-connected need apply. For decades the Street had been dominated by firms like J.P. Morgan and Morgan Stanley, whose managing directors and brokers enjoyed memberships in the prestigious clubs along Hanover Square that openly or informally prohibited blacks, Jews, and women. Moreover, many of those men had attended the same prep schools and colleges and could trace their Protestant roots to the Mayflower. Certain brokerage houses and investment banks, such as Goldman Sachs, welcomed and promoted Jews, but only those descendants of German Jewish emigrés; they carried a distinct bias against the sons and grandsons of Eastern European Jews, like Sandy.

Pervasive as they seemed, Wall Street’s prejudices were focused mostly among the brokers and managing directors, the “front office” that solicited and cared for clients, mostly wealthy individuals. The “back office,” where the accounting, record keeping, and other mundane tasks of high finance were carried out, was a different story. And that’s where Sandy finally got a break. More of a crack, really. Bear Stearns, very much a second-tier firm among Wall Street’s powerful brokerage houses, needed another runner to deliver securities certificates to other firms. “Runner” wasn’t really an apt description of the job. The brokerage firms preferred reliability over speed, and most of the runner jobs went to old men looking to augment their Social Security checks or to escape the boredom of retirement. But business was good for Wall Street, and the twenty-two-year-old Weill seemed reliable enough. The job paid only $35 a week, but it literally opened doors for Sandy. Delivering stock certificates around Wall Street, anchored by the New York Stock Exchange with its colossal Corinthian columns and marble-walled, gilt-ceilinged trading room, gave Sandy a chance to watch brokers in action. Each lunch hour was devoted to close observation as brokers slammed down phones, raced to fill out trading slips, and shouted to one another about the latest blip disclosed by the chattering Dow Jones News Service machines. The adrenaline rush he got from simply watching the action was addictive. Sandy had to be part of that club.

One day it dawned on Sandy that a detour might take him where he wanted to go. At Cornell he had been a member of the Reserve Officers’ Training Corps—ROTC—an organization designed to prepare college students for a stint in the military as officers. Sandy’s ROTC unit was affiliated with the U.S. Air Force. It wasn’t a big leap, then, to calculate that serving four years as an Air Force pilot would give a guy—even a guy of Eastern European Jewish descent—a credential that could gain him admission to the broker training programs that had once rejected him. The plan might have worked. Pilots had to have fast reactions and good decision-making skills—excellent prerequisites for a broker’s job—and military service carried some clout on Wall Street. But he never got the chance to find out. With the Korean War long since ended, the military was winding down and setting tough new standards for new recruits. An Air Force dentist examining potential recruits found a spot of decay on one of Sandy’s teeth. Application denied.

Now desperate—he and Joan were expecting their first child—Sandy pleaded with his bosses at Bear Stearns to at least let him have a crack at taking the mandatory brokerage licensing examination. He would study on his own while continuing to do his daily chores in the back office. They consented: If he could pass the examination, he would get a shot at being a broker. In the meantime, whether to encourage or discourage him, they began giving Sandy more responsibilities in the back office. First they made him a quote boy, a post in which he worked directly for a boisterous trader named Cy Lewis, who would later become a legend among Wall Street traders. Lewis would yell for a price quote on some stock, and Sandy would punch the necessary symbol into the quote machine to get it for him. Next he became a margin clerk, keeping track of the loans Bear Stearns made to customers to allow them to buy more stock, which was in turn used as collateral against the loan. If a stock’s price fell—that is, the collateral securing the loan declined in value—it was Sandy’s job to let a broker know that his client needed to either put up more cash as collateral or sell the stock to repay the loan. Few brokers had any concept of how important these and dozens of other menial back-office jobs were to the smooth functioning of their firm. Fewer still had any idea about how to do those jobs. But Sandy was fascinated by the intricacies of the back office, even while studying for the exams that might let him move to the front office. Less than a year after his desperate plea, Sandy Weill passed his exams and became an officially licensed broker at Bear Stearns.

The Coincidental Partner

It wasn’t much as apartments go, a one-bedroom next to the railroad tracks in East Rockaway. But the monthly rent of $120 was affordable and the commute to the city was easy. More important, it let the young couple get away from Joan’s parents and Sandy’s mother, with whom they had been alternately living since returning from their Florida honeymoon. But the best thing about the new apartment was that they lived across the hall from Arthur and Linda Carter, another young Jewish couple. The two couples formed an instant bond. Linda, who had just given birth to the Carters’ first child, offered comfort and advice as Joan neared the end of her pregnancy. Arthur had majored in French at Brown University and had considered a career as a concert pianist before joining the U.S. Coast Guard during the Korean War. As the war wound down, Arthur began looking for a job on Wall Street. Dressed in his Coast Guard uniform, he managed to secure an interview with Bobbie Lehman, the head of Lehman Brothers and grandson of one of the founders. A former army man, Lehman, who ran the firm as his own personal fiefdom, liked the urbane and handsome young man and hired him as a rookie investment banker in the department that advised industrial concerns. But Carter had no upper-class pedigree, no Wall Street connections, no family money, and he soon discovered he wasn’t being paid as much as his colleagues. When the Weills moved in across the hall, Arthur Carter suddenly found himself with a neighbor who shared the brunt of Wall Street’s prejudices. The two families often cooked dinner together, Arthur and Sandy rode the train together each day, and they frequently met for lunch, since neither was invited to join the private clubs to which other brokers belonged. The conversation always concerned business and the Street, and how they would run the place if they were in charge.

Sandy’s brokerage career began in a decidedly different way from most others. Rather than making phone calls or personal visits to solicit clients, Sandy found he was far more comfortable sitting at his desk, poring through companies’ financial statements to see how fast they were growing or examining the disclosures they made to the Securities and Exchange Commission about their business. He often found little nuggets of information that persuaded him a company’s stock was a good buy or to be avoided at all costs. For weeks his only client was his mother, Etta. Joan, who knew very well Sandy’s tendency to avoid public contact, managed to double his clientele one weekend when they ran across one of her old boyfriends, Michael Weinberg, at the beach and Joan persuaded him to let Sandy sign him up for a brokerage account. She began calling Sandy at the office each day, sometimes several times a day, to warn him to “get off your duff and make some calls.” Her nudges helped Sandy overcome his shyness, and he began building a client base centered around his Brooklyn roots. The area merchants and professionals Sandy convinced to open accounts also became a source of new business as word spread about the successful stock picks he had put in their portfolios.

But there were limits to working at Bear Stearns. Bigger brokerage firms had a wider array of financial products, from mutual funds to hog bellies, to offer their clients. If a broker could sell two or three commission-generating products to each client rather than just one, each sales call would be far more profitable. With his track record on stocks and a solid, if small, client base, Sandy moved in 1956 to Burnham & Co., a Jewish firm run by I. W. “Tubby” Burnham. Each night as Burnham headed out the door, he could see young Sandy hunched over his desk, searching for tidbits of information in company reports or making cold calls to pitch new clients. With new products to sell to his old clients and the wide array of product offerings to attract new clients, Sandy grossed $25,000 in sales in his first year at Burnham and took home a third of it, or about $8,000.

While Sandy was building his brokerage business, Arthur Carter decided that he could further his career at Lehman Brothers if he had a business degree. Although Sandy argued against it—Carter already had a job at one of the most powerful Wall Street firms—Carter applied to and was accepted by Dartmouth’s Amos Tuck School of Business Administration, his tuition to be paid by the government under legislation for veterans of the Korean War. When Carter left for s...

Table of contents

• Cover
• Colophon
• Title Page
• Copyright
• Dedication
• Contents
• Cast of Characters
• Prologue
• 1: Crashing the Gates
• 2: Corned Beef With Lettuce
• 3: Into the WASP Nest
• 4: Exile on Park Avenue
• 5: Rip Van Winkle Inc.
• 6: Backwater Mogul
• 7: Branching Out
• 8: Fast Jets, Golden Parachutes
• 9: A Splendid Balance
• 10: Homecoming
• 11: The Red Umbrella
• 12: Choices
• 13: The Mother of All Deals
• 14: The Hydra-Headed Monster
• 15: Stalemate
• 16: Showdown
• 17: Seeds of Destruction
• 18: Blindsided
• 19: Taking Command
• A Note on Sources
• Acknowledgments
• Index