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Dick Fuld: Lover o' Leverage, Real Estate, Fashion

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Sometimes you have to treat your employees like your battered wives. It's no big deal.

[Mentor and CEO Lew] Glucksman liked to frighten the bankers with his crude physicality and wells of anger--in a rage, he once ripped the shirt off his own back. And Fuld followed in the master's footsteps. The bankers condescended to him, calling him "gorilla" because he seemed to grunt rather than speak in full sentences. Fuld, though, made the aggressive image his own, putting a life-size gorilla in his office off the trading floor. He backed it up with action. He was a gifted trader and legendarily fierce. He once cleared the desk of a manager who asked him to wait, sweeping the papers to the floor with his hand.

(Also, and maybe reading into things here, but does what seems like blind devotion to everything Lew Glucksman does (Glucksman hates bankers, so Fuld hates bankers. Glucksman grew up without money, so Fuld pretends to have grown up without money. Glucksman "acts" like he's on roids so Fuld "acts" like he's on roids. Glucksman uses his left hand for self-love despite being a righty, so Fuld uses his right hand for self-love despite being a righty) maybe speak to daddy issues for DF?)
Obviously not intimidating enough. (Too soon?)

As a manager, Fuld was demanding and intense. "I take it as a personal failure to lose money," he would say. "He thought he could intimidate you out of losing money," observed one colleague.

Fuld quickly instituted a weekly game of Ookie Cookie to weed out the non-team players.

Fuld quickly instituted an on-the-team-or-off mentality at Lehman. He paid bonuses largely in stock and wouldn't let the executive committee reap the full benefit for five years. "It was not a good time to tie up your next five years in Lehman stock," said that member of the original executive committee. "You had to decide whether you were going to stay and try to make this work. A lot of people left."

Um, that bizarre anecdote about him criticizing Joe Gregory's ugly green suit days before he fired the guy? Apparently not an isolated incident! Fuld's bizarre fixation with the sartorial choices made by his employees, and Gregory specifically, goes back years. What's at the root of it? His therapist will weigh in later in the show.

Early on, he took Gregory aside to tell him his wardrobe needed work. "I was one of those people who didn't want to disappoint Dick," Gregory once told a friend.

One part Gorilla, One Part King of the Jungle, One Part Needy Girlfriend Just Calling To Say Hey. "Hey."

With a single stroke, Fuld remade Lehman in his own image--and he loved what he'd created. One executive recalls a time when Fuld took a family vacation to Africa. At night, he'd hike to a spot where he could get a phone signal and call in to his top executives. "I'm out in the bush," he'd tell them. He wanted to catch up on business. "Little business transpired," recalls one participant. "It was more like he missed us."


Finally, in 2004, Fuld elevated Gregory to president.
Gregory was not a detail-oriented manager.

Fuld was just like Steve Cohen, with regard to the fortress-mentality, not so much the mega success (though they are growing more alike every day, and in some people's minds are being tapped to play the leads in the sequal to Twins).

At the top of the organization, Fuld instilled his pugilistic, paranoid view of the world: It's us against them.

Einhorny and his short friends were not not special. Everyone was out to get Fuld and his "soliders." Everyone. Everyone! Though it didn't make it into the article, we're told Fuld encouraged his employees to defend themselves and the firm by carrying a loaded gun, at all times, with the safety off.

"Every day is a battle," he told his managing directors. "You've got to kill the enemy. They tried to kill us."

Goldman Sachs made them do it.

To push the stock price, Lehman had to continually increase revenues. How to do that wasn't a big mystery. "In the late nineties, Goldman Sachs had made a ton of principal investments which paid off four years later," says one former Lehman executive. "It drove Lehman higher-ups to think we weren't being aggressive enough. We had to keep up."

Leverage? Yes, please.

Leverage was the way to supercharge revenues. At one point, it was said that Lehman had borrowed $32 for every $1 in its coffers.

With regard to real estate being finito, Fuld took a "talk to the hand, 'cause this bitch don't want to hear it" approach.

By the end of 2006, some at Lehman had begun to think that real estate was nearing the end of its run. Mike Gelband, who was responsible for commercial and residential real estate, had by then turned decidedly bearish.
"The world is changing," Gelband told Fuld during his 2006 bonus review, according to a person familiar with Gelband's thinking. "We have to rethink our business model."
But given the importance of real estate to Lehman's bottom line, that wasn't what Fuld wanted to hear. Fuld had seen his share of cyclical downturns. "We've been through this before and always come out stronger," was his attitude. "You're too conservative," Fuld told Gelband.

Fuld: Big fan of the "me smart, markets stupid" business model.

Fuld, though, wondered if the problem was with Gelband, not the market.

I'm sorry, but WTF?

At the beginning of March 2007, Gregory took Gelband to lunch in the company dining room. The two had never been close, an ominous sign at Lehman. "When you had no chemistry with Joe, your time was going to be limited," says one person close to him.

Winslet Gregory to Leo Fuld: "You jump, I jump, right?"

Complicating Gelband's life, Gregory agreed with Fuld on the market's direction. "If Dick was rosy, Joe was rosier," said one insider.

Earlier: Dick Fuld: Poseur?


Dick Fuld Needs Your Help

Sleep where the former Lehman Brother CEO hath slept, while he was keeping a low profile post-bank collapse/plotting his comeback.