By Michael Siconolfi and Michael Rapoport
Alan "Ace" Greenberg, the executive who helped turn Bear Stearns
Cos. into one of the world's biggest--and riskiest--securities
firms, died of complications from cancer in New York on Friday at
the age of 86.
Mr. Greenberg began his career at Bear Stearns in 1949 and rose
through the ranks over many decades, taking over as chief executive
in 1978 and running the New York firm until 1993, when he handed
the reins to trusted associate James Cayne. An avid bridge player,
Mr. Greenberg liked risk takers and found, in Mr. Cayne, a
like-minded protégé.
Mr. Greenberg was raised in Oklahoma City and briefly attended
the University of Oklahoma on a football scholarship. He brought an
outsider's sensibility to Wall Street. While rival investment banks
such as Goldman Sachs Group Inc. and J.P. Morgan fashioned
themselves as white-shoe firms catering to the global elite, Bear
Stearns was a scrappy upstart that often managed to out-hustle
rivals on deals.
Bear Stearns became a symbol of the financial crisis when it
nearly collapsed in March 2008 as clients grew concerned about the
risky mortgage securities Bear had created, and pulled their money
en masse. J.P. Morgan Chase & Co. bought the New York firm for
$10 a share after initially striking a deal at $2.
In addition to serving as CEO, Mr. Greenberg was Bear Stearns'
chairman of the board from 1985 through 2001. After that, he served
as chairman of the firm's executive committee until Bear was
acquired by J.P. Morgan in 2008. Mr. Greenberg told associates he
was angry at how loosely the firm had been run in its later
years.
Mr. Greenberg's death was confirmed by his son, Theodore.
For years, Mr. Greenberg reflected the securities firm's outcast
culture on Wall Street. Rather than seek Ivy League talent, Mr.
Greenberg looked for what he called "PSDs"--poor, smart employees
with a deep desire to get rich. He often hired people who were
fired from rival firms.
A legendary trader, Mr. Greenberg was fanatical about having
static or losing trading positions sold--quickly. For years, he led
what Bear Stearns called "cold-sweat" meetings in which he would
grill traders on their positions. The firm printed an
"aged-position report" that showed "stale" trades not sold within
90 days. He recalled that his father, a clothing retailer, often
told him: "If something isn't moving, sell it today because
tomorrow it will be worth less."
At a key risk meeting during the financial crisis, Mr. Greenberg
had reviewed a number of the firm's negative stock bets, and wasn't
happy. The positions were too risky, he warned, and should be
closed out immediately. He also wanted the firm's heavy inventory
of mortgage securities slashed. "We've got to cut!" Mr. Greenberg
demanded.
Mr. Greenberg helped hire "ferrets," or trading police. With
nicknames like "snoop" and "the hawk," these employees would
scrutinize trading records. When the ferrets helped nab a Bear
trader who had allegedly mismarked an options position and tried to
cover it up, Mr. Greenberg fired him on the spot. "The definition
of a good trader is a guy who takes losses," Mr. Greenberg said.
"The definition of an ex-trader is one who tries to cover up a
loss."
Mr. Greenberg urged traders and others to take calculated risks.
If you haven't taken losses recently, he told traders, you haven't
been taking enough risk.
Mr. Greenberg broke the tension on Black Monday in 1987 by
getting up from his chair on the trading floor, practicing his golf
swing and loudly announcing he was taking the next day off--even
though he didn't play golf and came in the following day. Despite a
$96 million loss in the crash, he said: "I wanted to show that
there was no panic at Bear Stearns."
Amid the turmoil of the financial crisis, Mr. Greenberg, wearing
his trademark bow tie, performed magic tricks to amuse
colleagues.
He didn't like long conversations. At his desk on Bear's trading
floor, Mr. Greenberg once answered a phone call from a Bear trader,
paused, then barked: "Who's buying it? A client? Are you making
anything off it? We can't make a living making a 16th of a point."
Then he hung up.
Mr. Greenberg was one of Wall Street's quirkier characters. He
was as well known for his voluminous memos and expertise outside
Wall Street as his trading acumen. In 1988, he printed a bound,
50-page booklet of his memos, "Memos from the Chairman." Of the
more than 100 memos he wrote between 1977 and 1993, nearly half
concerned controlling costs.
His most famous memo was about expenses. The message: Stop
buying paper clips.
"All of us receive documents every day with paper clips on
them," he wrote. "If we save these paper clips, we will not only
have enough for our own use, but we will also, in a short time, be
awash in the little critters. Periodically, we will collect excess
paper clips and sell them (since the cost to us is zero, the
Arbitrage Department tells me the return on capital will be above
average)."
He found all kinds of ways to cut costs. At a junk-bond
conference at the Waldorf-Astoria once, some Bear executives wanted
Aretha Franklin to sing. But Mr. Greenberg thought she was too
expensive; the firm settled for the Temptations.
A Bear executive once returned with Mr. Greenberg to New York
from a trip to Mexico and called his secretary to arrange a car to
pick them up at Kennedy Airport. "My secretary ordered you a car,"
the executive told Mr. Greenberg. "Why?" Mr. Greenberg responded.
"Are the yellow cabs on strike?"
Warren Buffett, the billionaire investor, once said that Mr.
Greenberg "does almost everything better than I do--bridge, magic
tricks, dog training, arbitrage --all the important things in
life."
Mr. Buffett, who was traveling on Friday, said in a brief
statement that Mr. Greenberg was "a wonderful friend and always fun
to be with."
Lisa Schwartz
and Anupreeta Das contributed to this article.
Write to Michael Rapoport at Michael.Rapoport@wsj.com
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