When Tenenbaum retired, Ray Young, the partner in charge of equity sales, gave Rubin some unsolicited advice. Rubin had to make a choice, Young told him. He could continue to focus on event-driven arbitrage in a trading environment “focusing intently on my business, being short with people, and projecting an impersonal attitude,” Rubin wrote, which would let him “continue as a successful arbitrageur.” Or, Rubin could take Young’s advice and “start thinking more about the people in the trading room and in sales—about their concerns and views—and how to enable them to be successful … [and] become more broadly involved in the life of the firm.” Not surprisingly, soon after Tenenbaum’s departure, Rubin took Young’s advice and began to think more broadly about his role at the firm. “Ray Young’s advice pointed me toward a whole new world that I hadn’t thought much about,” he conceded. Of course not.
Not only had Tenenbaum left behind at Goldman what could have become a major fortune, he also left behind the more enduring legacy of the people he hired, including Rubin, and the men who followed Rubin in the arbitrage department, Robert Freeman and Richard Perry among them. Tenenbaum also hired another young lawyer, Steve Friedman, who would become part of the firm’s burgeoning M&A group.
As for Levy, there was not the slightest crack in his façade of invincibility. In April 1976, Levy gave an interview to a business writer for UPI, and the subsequent puff piece, which did not even mention Penn Central or the lawsuits against Goldman its bankruptcy had spawned, appeared in a number of local papers around the country. The article recounted Levy’s rigorous work schedule, his extensive board seats—of “almost two dozen” American companies—and his vast philanthropic and political reach. It also pointed out how hard people at Goldman worked and conceded Levy was a “demanding” boss. “Sure, there’s a lot of pressure here,” Levy said. “But one secret of our success is to be consistent, and one way to be consistent is to make calls, do your job and be constantly in touch with current and prospective customers. I’ve never heard of anyone complain of overwork here.” The article pointed out that Goldman had become a leader in providing advice to companies that were the subject of hostile advances from raiders and other corporations. Levy noted Goldman’s “policy” of not “siding with firms that want to take over another company against its objections.” He then added, “Sometimes it gets very messy.”
When asked how he did it all, Levy responded, “I wish I knew” and complimented his wife as being “a very understanding woman.” The article credited his lack of sleep—at most, five or six hours a night—with giving him the extra time he needed to get things done. “[T]he bags under his eyes to the contrary,” Levy was, the writer pointed out, a “vigorous, lean, healthy-looking individual.” Levy did not smoke and drank minimally, according to the article, notwithstanding his regular evening martinis. He exercised nearly every day, either on a machine in his apartment or by jogging in a nearby park. “I guess I just happen to have a better than average constitution,” Levy explained.
Six months later, on October 26, while at a meeting of the commissioners of the Port Authority of New York and New Jersey, Levy suddenly put his head down, as if lost in deep thought. He seemed to be napping, which made perfect sense since he had taken the red-eye from Los Angeles the night before after attending a May Department Stores board of directors’ meeting and then working a full day at Goldman. “Knowing of Levy’s habit of intense concentration on something else,” Roy Smith explained, “the other commissioners thought nothing of the fact that he had slumped down in his chair and seemed to be staring straight ahead. After a while someone asked if he was all right, and finding him not to be, called for an ambulance.” He was sixty-six years old. Levy was taken to Mount Sinai Hospital, where he was still chairman of the board of trustees. Novotny told the New York Times Levy had suffered “a mild stroke,” which was almost certainly inaccurate. That night, Levy was kept in the intensive care unit and his condition was listed as “stable,” according to a brief article in the paper.
His son Peter, then a partner at Goldman, remembered being called after the meeting at the Port Authority. “He couldn’t be seen that night,” he said, “and the next day I went to see him. And he seemed okay. Actually he seemed fairly lucid and recognized me, and the next day he didn’t. And then he went into a coma.” Peter Levy sat with his father at Mount Sinai during much of the ordeal but he knew his father’s prospects were grim when he asked the doctor about the prognosis and the doctor shrugged. “The worst thing you can do,” he said. Gus Levy died on November 3.
The outpouring of accolades for him was one measure of his importance on Wall Street and in New York. “Gus Levy was a very special human being,” the partners of Goldman allowed. “He was a generous man and devoted humanitarian, championing improved health care, increased educational opportunities, and the brotherhood of man. His untiring efforts on behalf of his clients, friends and associates and his achievements as a leader of the financial community rank him as a truly great man. All of us are richer for having known Gus Levy.” The firm also published a long list of Levy’s civic, philanthropic, and corporate associations, including his thirty-one board seats, his three honorary degrees, and his fourteen-year stint—who knew?—as treasurer of the International Synagogue at Kennedy Airport. Paid tributes in the Times came from his fellow Wall Street titans, including Laurence Tisch, and even a young Henry Kravis. On November 4, the NYSE observed one minute of silence in honor of Levy.
At a funeral service on the morning of November 7 at Temple Emanu-El, on Fifth Avenue, some two thousand people gathered to mourn Levy. Vice President Nelson Rockefeller, a longtime friend, delivered the principal eulogy. But even this moment was stage-managed; Novotny had written the words Rockefeller would utter, even retyping them on a special typewriter so that the vice president, who suffered from dyslexia, could read them. “What an extraordinary man,” said Rockefeller, who had regularly sought out Levy for advice. Walter Frank, Levy’s predecessor at the NYSE, said he was in “shock, shock” when he heard about Levy’s death. “We lost a great man,” Frank said. “He was a great man.” (In 2002, Goldman acquired Frank’s specialist firm.) Stopped by a reporter after the service, former New York City mayor John Lindsay said he was in a “state of shock” over Levy’s death and that “in the years I was Mayor and in Congress, Gus Levy helped me beyond measure.”
The next day, Levy’s body was flown to New Orleans for burial at the Metairie Cemetery, on Pontchartrain Boulevard, in one of the above-ground crypts used in the city because it is below sea level. Nobody from Goldman went to the burial. Nor did Levy’s wife or his two children. “I didn’t go down,” Peter Levy said. “None of the family went down. My mother said, ‘There’s no need to go down. We’ll just mourn for him up here.’ ” Levy left an estate worth “millions,” his son said, including a large apartment at 4 Sutton Place and a country estate—Apple Hill Farm—in Armonk, New York, next to the Blind Brook Club, where he played golf regularly; he was known to take the red-eye back from Los Angeles after a client meeting and head straight to the golf course.
Given the suddenness of Levy’s death, Bob Rubin didn’t get to say his good-byes, either. “After Gus died, I’d always regretted that I’d never asked him what he, driving himself all day long every day, thought life was all about,” he wrote in his memoir. “I don’t know if he would have had an answer, but one answer I don’t think he would have given was money.”
CHAPTER 8
THE GOLDMAN WAY
Time for reflection, or not, Levy’s death caught everyone at Goldman by surprise. There was a firm to run, and there was no one to run it. “As you’ve all heard, Gus Levy died yesterday of a stroke,” Bob Mnuchin told the troops on the morning call. “There’ll be time to discuss his contributions at a later time. Right now, as he taught us so well, it’s important that we all get on with our work and the job to be done today. That’s what Gus would have wanted.”
But what if Levy had somehow,
somewhere left instructions about what was to happen if he were—metaphorically speaking—hit by a bus? There seems to be a fair amount of confusion about whether or not Levy had actually designated his successors. In his memoir, Rubin wrote that Levy was young enough when he died that “he’d been able to ignore the issue of succession at the firm.” While, as one of the costs of getting Sidney Weinberg to move uptown to the Seagram Building, Levy had agreed to put together a Management Committee—the obvious place to look for new leaders—there was never any question that Levy was running Goldman with an iron fist and the other men on the Management Committee served at his pleasure. Levy’s pleasure was to minimize their involvement in the overall management of the firm and leave things to him, alone.
According to Roy Smith, though, Levy’s secretary “rummaging through his desk” found “an envelope addressed to the Management Committee,” which contained a letter stating that “if anything happened to him,” the Management Committee should “consider” replacing him with the “Two Johns”—John Whitehead, a patrician, silver-haired banker, then fifty-four years old, and John Weinberg, then fifty-one, one of Sidney’s sons and also a banker, who had supposedly managed the firm’s commercial paper business. Smith cited no source for the story about Levy’s secretary finding the letter.
For his part, Rubin said that although he never saw the letter—“I’m not saying there wasn’t one, I’m just saying nobody ever saw it,” he explained—if such a letter existed, then it was George Doty who supposedly found it, not Levy’s secretary, and that the letter contained the news that Levy was going to name the Two Johns as Goldman’s vice chairmen, not as the next leaders of the firm. But the letter never materialized. Peter Levy said he “never was aware of the letter, although he certainly did appoint the Two Johns.” Doty told Charles Ellis, “Gus would never have retired,” adding some credence to the idea that Whitehead and Weinberg were to be named vice chairmen, although in his book Ellis ignored the controversy altogether and instead told a story of Levy’s secretary finding in his desk a drawing of Levy—“a stick figure with a big cigar”—that one of his partner’s sons had made on a Friday after Thanksgiving and given to Levy.
Doty, who is now in his nineties, said in an interview that there was never a letter, just Levy sharing with him his plans for the Two Johns in the weeks before his death. “Gus had spoken to me shortly before he had his stroke,” Doty said. “He was perplexed by a problem: how to deal with the Two Johns. His solution was to make them both a vice chairman. He couldn’t pick either one of them without creating a problem. It seemed logical enough to me. I don’t think he was asking me for my agreement. He was telling me the way it was.” In her Goldman book, Lisa Endlich wrote that while Levy had indicated publicly he had “heirs apparent” in mind, he had never named them. “Leaderless, the firm was left in turmoil,” she wrote.
Three years earlier, in his November 1973 Institutional Investor interview, Gilbert Kaplan asked Levy about the future leaders at the firm. “I think the firm would be equally strong if I wasn’t here,” he said. “Mr. Weinberg created an aura of leadership, and he was a great leader. I hasten to add that I’m not in his class.” He added that, under his leadership, Goldman had a Management Committee for the first time and worked in teams, with any number of senior people getting to know the firm’s clients. “[I]n case I’m out of the country, or drop dead or something, these people know whom to call at Goldman, Sachs. We’ve got some wonderful young fellows coming along, and some who’ve come around already who could step into my shoes in a minute.” When Kaplan asked directly if Levy had an heir apparent, Levy responded, “I wish you wouldn’t ask me that question. It would cause too much trouble around here. But yes, there are heirs apparent.” He said he would have considered it “a failure” to find a new leader for the firm from outside its own ranks.
When Whitehead heard the news about Levy’s stroke, he tried to go see him at Mount Sinai but could not get in for a day or so. But when he did, Whitehead “could tell he was obviously a very sick man—weak, frail and ghostly pale. Even if he survived, I couldn’t imagine he would ever come back to running Goldman Sachs. That was a terrible blow to the firm, as well as to me personally.” According to Doty, “We had a partners meeting in which the subject of succession came up. And I told the partners what Gus had said to me. It wasn’t the word of God, you know, but it was a leader who had thought about the subject and it was an acceptable solution. There was no better solution on the horizon anyway.”
In Whitehead’s version of events, “while Gus lay dying at Mount Sinai,” he and John Weinberg “sat down together at the Goldman Sachs office to decide what to do.” Whitehead made no mention of any letter stuffed in a desk. Rather, he observed, Levy “had made no such decision” about succession “because he had no thought of retiring.” Whitehead decided, though, that since he and Weinberg were tied for second—behind Levy—for taking home the greatest percentage of the firm’s profits, “it was clearly up to us to take strong leadership in this sudden crisis and make a clear recommendation to the management committee and all of the partners about who would succeed Gus.”
Although Whitehead was three years older than Weinberg and had been at Goldman three years longer, they had both become partners on the same day in 1956, “moved up in the firm in lockstep,” and received “identical increases in compensation at every stage.” Apparently, they were also good friends. “We’d often have lunch together at Scotty’s Sandwich Shop,” Whitehead said. “Scotty’s made the largest egg salad sandwich I had ever seen, and I ate my share of them. John and I would complain to each other about all the things wrong with Goldman Sachs, and talk about how things would go if we ever had a chance to run the firm.”
Now that the opportunity was within their grasp, with Levy close to death, Whitehead “floated the idea” that he be the firm’s chairman and that Weinberg be vice chairman. “John’s face fell,” Whitehead noted. “I could see he didn’t take that too well. As Sidney’s son, and a proud man in his own right, he was not inclined to settle for being my number two.” John Weinberg had graduated from Princeton and, in World War II, joined the marines as a private and emerged from the war a second lieutenant. In the Korean War, he went in a first lieutenant and came out a captain. “My father was a very tough man,” he once said, “but I had a gentle upbringing. The Marines were good for me.” The Two Johns considered putting the matter to a vote of the Management Committee or to the entire partnership, but that “semipublic process” would have been “messy,” Whitehead said, “with factions forming on each side” without producing the “united front the firm needed at such a difficult time.” Additionally, according to Whitehead, neither John wanted to risk losing and having one John being hailed as the winner while the other John was labeled a loser.
Out of the conundrum came the unprecedented idea—at least on Wall Street—of having the two men share power as co-chairmen. “John and I were the logical choices,” Weinberg said. “Gus had brought us along together and our perceptions and goals for Goldman had evolved according to our own thinking, which was done together.” “After we’d decided, we both felt relieved,” Whitehead wrote later. “Neither of us had to shoulder the entire responsibility of running Goldman Sachs alone, and neither of us had to settle for being number two. We’d each be free to travel without worrying too much about what was happening back at the office. The arrangement seemed ideal.” The Two Johns also saw the marketing potential in the arrangement as clients often wanted to meet “with the top man,” and now Goldman had two top men. “We could meet twice as many clients …,” Whitehead observed. “By pooling our abilities, we figured we would make the top of Goldman Sachs that much stronger.” They decided to make sure to speak every day and have adjoining offices, with a shared conference room. Whitehead’s former investment banking colleagues believed Whitehead made a major concession to John Weinberg. “I thought that John Whitehead would clearly have been chosen as the sole leader,
” recalled former partner Alan Stein, “but I think he decided, and I thought intelligently, that there was something to hold on to here in the Weinberg name.” Over time, a revealing picture of Elizabeth Taylor appeared in the partners’ bathrooms. “Two are better than one,” read the caption.
After Levy’s death, Whitehead and Weinberg told the—now eight-member—Management Committee of their decision. “The idea met with its approval,” Whitehead said, “and so we informed the other partners.” Doty said the idea just made sense. “John Weinberg was a great business getter and Whitehead was a better organizer,” he said. “But Whitehead was not deeply loved by a great many people in the securities side of the business. And so it was a combination everyone could live with. Those two guys were sort of joined at the hip. It didn’t seem unusual.” Novotny also went to work, disseminating the news to the media. The Times, though, beat him to the punch and reported correctly two days after Levy’s death that Whitehead and Weinberg would succeed him. Novotny denied that any decision had been made but the paper reported that the two men would be co-chairmen of the Management Committee and that they had “tremendous mutual respect for each other.” Whitehead was described as a “planner and an organizer” while Weinberg, then head of the firm’s fledgling fixed-income division, was known for “bringing in new business.” The Times, kindly, reported a number of famous Goldman tropes, including that the “transition” from Levy’s leadership to that of Whitehead and Weinberg would be a smooth one. “Among the 1,500 employees and at its 14 domestic and foreign offices, teamwork is a hallmark that built Goldman, Sachs to its present eminence in the competitive investment world.”
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