House of Cards, page 24
He recalled a number of “showdowns” with Lewis, and especially one from the early 1960s: “I went to Cy one day and said, ‘You ever heard of a company called Rudd-Melikian?' He said, ‘What's Rudd-Melikian?' I said, ‘We have a position in it. It's gone from twenty to five.' I named a few similar situations and said if it didn't stop I was going to quit.” Finally, one day, he told Lewis he was quitting.
“You're what?” Lewis responded.
“I'm leaving,” Greenberg said. “There's nothing to talk about.” He walked out of the office.
That night, Lewis called Greenberg and invited him to come over to 778 Park for a conversation. Greenberg went reluctantly. Lewis demanded to know why he was resigning. They spoke again about Rudd-Melikian, the vending-machine manufacturer in which Bear Stearns owned 10,000 shares. “It's down ten points,” Greenberg told Lewis, “and you didn't know we own it. And that's why I'm leaving—because you won't take losses. You buy these things and you won't sell them.”
The next day, Lewis asked Greenberg to come to his office. “All right,” Lewis told him. “I'll make a deal with you. You're right. I'm a terrible seller. I hate to admit I'm wrong, so you can sell anything you want at any time. I promise I won't interfere.” Lewis was true to his word, though it cost him a chunk of his legendary power at the firm. Greenberg quickly started to sell Bear Stearns's money-losing positions, including that of Rudd-Melikian, and plowed the money into the shares of American Viscose Corporation, the publicly traded manufacturer of rayon fiber based in Marcus Hook, Pennsylvania. Greenberg was betting big—with the firm's money—that American Viscose would be a takeover target. At first, though, nothing happened, and Greenberg began to worry that his gambit with Lewis would leave him wounded politically or, worse, out of a job. But then, as fortune would have it, in 1963 FMC Corporation came along and bought the company. The U.S. government tried to block the deal on antitrust grounds, but that effort failed and the deal closed. Greenberg had bet well, and wisely. His power at the firm rose exponentially from that moment.
IN ADDITION TO the difficulties Lewis had with Greenberg as the latter became increasingly powerful, Lewis's personal behavior began adding to the existing turmoil. He had a long-term and very public affair with one of his wife's best friends, Valerie Dauphinot, the wife of Clarence J. Dauphinot, the founder of Deltec International, a Latin American conglomerate of which Cy Lewis and his friend Gus Levy were appointed board members in December 1955.
By the late 1950s, Cy Lewis also had health problems; in 1960 he had his right breast removed because of breast cancer, which is exceedingly rare in men. Lewis also had become a heavy drinker and was said to drink a “pitcher of martinis” every day at lunch in the Bear Stearns dining room. On top of it all, he was a very lonely man. While Lewis was still a formidable figure, Greenberg began to exert greater and greater control over Bear Stearns. “He was the only one who could stand up to the senior partner and win,” Ehrlich and Rehfeld wrote in their book.
JIMMY
n the late 1960s, against the protests of both Lewis and Low, Greenberg wanted to expand the firm's fledgling retail brokerage business based on his perception that the growing cohort of baby boomers that was starting to move into its peak earnings years would have considerable amounts of disposable income that needed to be invested.
It was in pursuit of an expanded brokerage business that, serendipitously, in 1969, Greenberg happened to interview Jimmy Cayne, then a thirty-five-year-old municipal bond salesman and championship bridge player who had never sold a share of stock to anyone in his life. At Bear Stearns, Cayne interviewed with Harold C. Mayer Jr., the son of one of the three founders of the firm, but there appeared to be no chemistry between them. As Cayne got up to leave, Mayer suggested he say hello to Greenberg, “the man who is going to run this place.” Again, there seemed to be no connection between the two men, but in an effort to make a little small talk, Greenberg asked Cayne if he had any hobbies.
When Cayne told Greenberg he played bridge, “you could see the electric light bulb,” Cayne recalled. “He says, ‘How well do you play?' I said, ‘I play well.' He said, ‘Like how well?' I said, ‘I play quite well.' He says, ‘You don't understand.' I said, ‘Yeah, I do. I understand. Mr. Greenberg, if you study bridge the rest of your life, if you play with the best partners and you achieve your potential, you will never play bridge like I play bridge.’” Enough said. On the spot, Greenberg guaranteed Cayne $70,000 a year if he joined Bear Stearns.
By then, the raffish Cayne had proved himself to be a superb salesman—of photocopiers, of scrap iron, of adding machines, of municipal bonds, but mostly of himself. For reasons that are not readily apparent from his middle-class Chicago upbringing, Cayne had fashioned himself into a supremely confident and idiosyncratic shark who felt right at home in the rough-and-tumble confines of Bear Stearns. The only son of Maurice Cayne, an Evanston, Illinois, patent attorney, and Jean Cayne, a housewife who devoted herself to fund-raising for Jewish causes on the North Side of Chicago, Jimmy Cayne supposedly spent much of his youth just having fun. He couldn't have been more different from his intellectual father, who learned by reading document after document but never took the time to take his son to a Cubs ballgame. “I don't want to read and absorb,” Cayne explained. “I hear and I absorb.” What he really wanted to do was become a bookie but thought that profession might bring shame upon his family. Instead, he used his brains and his card-playing skills to get ahead.
Laurie Kaplan, who would eventually become Jimmy Cayne's boss for a few years at his family's scrap iron company on the South Side of Chicago, then his brother-in-law, and eventually his ex-brother-in-law, first met Cayne when they attended summer camp together. Laurie was twelve; Jimmy was eleven. Laurie was from the South Side of Chicago; Jimmy was from the North Side. “He was very sharp,” Kaplan said “He used to get together with the thirteen-year-olds in Cabin 13. They would get people into poker games.” The stakes were small potatoes—nickels and dimes—but Kaplan suspected that Cayne had teamed up with the older boys and somehow rigged the games. “It was three against one. He was very sharp.” (For his part, Cayne said Kaplan never participated in these poker games.)
Cayne and Kaplan renewed their friendship when they both found themselves at Purdue University and in the same fraternity, Sigma Alpha Mu. Cayne enrolled in the mechanical engineering program at Purdue in 1950, since his father hoped that he, too, would become a patent attorney. But Cayne didn't like the rigor of engineering and was an indifferent student at best. After two years, he transferred to the liberal arts curriculum but spent much of his time playing bridge in his fraternity at an octagonal table. His parents had played bridge, but he hadn't taken much notice of it. In college, though, the game became a passion. “I knew immediately I was better than they were at bridge,” he explained of his frat brothers, “but on a scale of 0 to 100, I was still only a 2 because I had no teacher.”
“He didn't study very much,” Kaplan recalled. “He just was an average student, because he would spend all of his time playing bridge at the octagon table.” A group of the fraternity brothers—the ones “with some money, whose fathers were successful,” Kaplan said—including Cayne and Kaplan, used to go out to dinner regularly in West Lafayette to escape the tasteless food at the Purdue dining hall. “We would supposedly split the bill,” Kaplan said. “But it ended up we were always short. We figured out that [Jimmy] wasn't putting the right amount of money in. So we called him on it. He was a finagler. He was always that way. He was that way when he was ten years old, and he was that way in college. He was always angling.” (Cayne said he never skimped on the check.) Kaplan, using his scrap iron connections, bought Cayne a 1930s junk car for $25 that Cayne used to tool around town. But when his father found out about it, he made Cayne sell it. He would have to earn that reward, his father insisted.
On the academic side, Cayne ran into trouble almost immediately with the new liberal arts curriculum when he realized he needed two years of a foreign language to graduate. He chose French, and he managed to get through the first year with a B average by dating the daughter of his French professor. For that B, his parents gave the goal-oriented Cayne a beat-up Ford. His senior year, though, he had a different French professor and a different girlfriend. He stopped going to classes and completely lost interest in school. “I was massively irresponsible,” he said. He started hanging out in downtown Lafayette and shooting pool, playing poker at Riley's, and chasing women. There were apparently seven houses of ill repute back then that Cayne frequented. “I was like Action Jackson,” he said. The best the school could do for him was to give him an incomplete in French. If he wanted to graduate, he would have to return for another year of college. “The chances of me going back for another year were zero,” he said.
Cayne left Purdue one semester shy of his diploma. He figured at some point he would be drafted—the Korean War was winding down— so he made the unusual choice of solving his academic problems by volunteering for the draft. He drove home to Chicago to tell his parents the news. “They were blown away,” he said. “To say they were upset was an understatement.” They took his car away, and kicked him out of the house. His sister let him stay with her as long as he agreed to drive her around town as directed. He decided to drive a cab in Chicago for two weeks to fulfill his sister's condition and to make some money before he headed off to Missouri for basic training. When he got his orders to ship out to the Far East, he called his parents and cried since the Korean War was over and he believed it was unlikely he would be sent overseas. But Cayne drew easy duty as a court reporter at Camp Zama, twenty-five miles southwest of Tokyo, distilling down lengthy war trial transcripts. Camp Zama looked like a mini-Pentagon surrounded by a golf course. According to Kaplan, “He told me all he did in the army was play golf.”
Back home, in 1956, Cayne chose not to return to college and get his degree. His father kicked him out of the house. At first, he again drove a cab in Chicago and lived with a fraternity brother. He also thought to call Maxine Kaplan, Laurie's younger sister, whom he had met previously when she visited her brother at Purdue; by this time she had dropped out of Sarah Lawrence College and was living at home. “He knew she was attractive,” her brother said, “and he knew she had some money.” Because Cayne and Maxine Kaplan loved to dance, he became known as the “mamboing cab driver.” They called each other “Twerdle.” They fell in love and eloped, but eventually had a ceremony in 1956 at the Standard Club, in Chicago, one of the swankiest private clubs around. She was the daughter of Harvey Kaplan, one of the seven Kaplan brothers who owned and ran the M.S. Kaplan Company, a large Chicago scrap iron and metals broker and one of the largest in the United States.
Then, thanks to Cayne's brother-in-law, Arnold Perry, he got a job at the American Photocopier Company selling copiers in a nine-hundred-mile territory stretching from Salt Lake City to Boise. Perry was the company's national sales manager. The newlyweds first moved to California before settling in Salt Lake City, and Cayne became a road warrior to cover his large territory in the mountain states. “I averaged ninety-five miles per hour,” Cayne said of his frantic driving.
During one long and onerous sales trip, he ended up at a gas station in Twin Falls, Idaho, on his way to Boise. The roads were icy but he decided to push on anyway. The next thing Cayne knew, he had smashed his Ford into a telephone pole. He was thrown from car onto the ground in the frigid night air. The impact of the crash pushed the steering wheel into the driver's seat. “If I had been wearing a seat belt,” he said, “I'd be dead now.” He spent a couple of days in the hospital but was largely uninjured and lucky to be alive. Adopting the respectful tone he'd learned in the army, he told the local justice of the peace that there was “no excuse, sir,” for his behavior. But the judge thought he needed to be taught a lesson, and restricted his license so that he could no longer drive after dusk. “You're a danger to the world,” the judge told him. His career as a traveling salesman was over. The Caynes moved back to Chicago and rented an apartment near Jackson Park. His brother-in-law Laurie recommended to his father that the Kaplans hire Cayne to be a salesman in the scrap iron business. “He had experience selling,” Kaplan said. “He was personable. And he was very smart and streetwise.”
He was a natural and soon enough was making $30,000 a year. “One of the reasons he did very well is that he doesn't look Jewish,” Kaplan continued. “His name is not Jewish, but his mind is Jewish. Most of our customers and the people he called on—factories and foundries— were not Jewish. The scrap iron business, at that time, was a Jewish business, maybe 95 percent Jewish. So they really wanted to do business with gentiles.”
In 1960, the Caynes divorced—amicably, according to both parties. “I'm crazy about him and always have been,” Maxine Kaplan said. “But I was a typical housewife and I wanted a husband who would walk the kids around the neighborhood on the weekends and that wasn't Jimmy.” Bridge was the primary culprit. “At this time, he was one of the best bridge players in Chicago,” Laurie Kaplan said. “In fact, that's the reason for the divorce. There was no other woman or anything like that. The correspondent in their divorce was bridge. He spent all of his time playing bridge—every night. He wasn't home.”
Cayne remained in Chicago, rented a new apartment at 20 East Delaware Street, and continued to work for his ex-father-in-law after the divorce. “This was a testament to my sales skills,” he said. “I mean, how often do Jewish ex-sons-in-law continue working for their ex-fathers-in-law?” In addition to being a well-paid salesman, Cayne was dating a Playboy bunny and honing his bridge expertise. The game was the perfect outlet for his intelligence, aggression, and tactical skills. With his then bridge partner, Gunther Polak, Cayne won the 1961 Midwest Regional Bridge tournament, among many others during the three years they played together. “He was aggressive and he was intuitive,” Polak recalled about Cayne's bridge game. “His talent was apparent almost immediately. When you play with somebody really good, your success escalates as well. And he enhanced my game.” But with all the time he was devoting to playing bridge, his work at M. S. Kaplan suffered. “He played so much bridge while he was working for us that he fell asleep when he came to work,” Kaplan said. “He just lost interest in the business.”
In 1964, Cayne moved to New York City to try to become a professional bridge player, hoping to earn $500 a week. “I lived the life of a bachelor,” he said. “I had zero community responsibility. My focus was on enjoying myself.” In 1966, he won the Lebhar Trophy after he and his team won the Master Mixed Teams competition, his first national bridge tournament title.
For about a year, Cayne had been playing bridge regularly at the now-defunct Cavendish Club, on East 73rd Street. One day, George Rapee, the legendary bridge champion, invited Cayne to play as a professional in twice-weekly rubbers with wealthy businessmen. “I don't know you very well,” Rapee told Cayne, “but you seem to have an extremely good talent for playing with bad players.” Through these games, Cayne met the likes of Percy Uris, the Manhattan real estate magnate, and Larry Tisch, the self-made billionaire and investor. He would play with these wealthy businessmen in their homes on Fifth Avenue or Park Avenue. Rapee told Cayne the rules for these games were simple: keep your cool, no frowning, no berating your partners for dumb moves, and no soliciting the players for business.
Like Cayne, the world's best bridge players started learning and playing the game at a young age and have continued playing through adulthood, often while being high achievers in another profession. “It's extremely hard to come into the game in, let's say, your fifties after you've made your multi millions and expect to become that good,” explained Phillip Alder, who has played against Cayne and writes the bridge column for the New York Times. “It's just not possible. You had to learn when you were young…. People like Jimmy Cayne kept playing through careers as well. If you really want to play at top level, you have to keep playing.” Alder said he thought bridge appealed to Wall Streeters. “It's primarily a mathematical game,” he said, “and it's logic, deduction, and flair. In bridge you have to be able to read your opponents, to know what your opponents can and can't do, and get a sense of what they are doing and not doing at the table.”
Alder said that Cayne has the ability to read his opponents' body language, and that is one of the reasons he is easily among the best hundred bridge players in the world. “He's not absolutely top drawer,” Alder said, “but he's pretty close.” He continued, “Bridge is addictive. You get very intense in it. And it's impossible to play perfectly, and you just try and do the best you can. Some days you're in the zone, and some days you're less in the zone.”
But Cayne soon grew tired of the life of a professional bridge player. “I loved the bridge,” he said, “but I needed a different experience. My net worth was zero or its equivalent. I thought, ‘I can't continue this. I'm a vegetable.’” He concluded he should return to the scrap iron business, the only business he knew well. One night at a cocktail party, by serendipity, someone he was chatting with suggested he apply for a job opening “for a nice Jewish salesman” at Lebenthal & Co., the municipal bond brokerage. He interviewed with the firm's matriarch, Sayra Fischer Lebenthal, who offered Cayne the spot. He quickly became a top salesman at the firm, even though he only worked around three hours a day. Jim Lebenthal, who took over the management of Lebenthal & Co. from his mother, remembered Cayne well as a “highly decent fellow with a pleasant, courtly style” and a “cool demeanor” who learned that municipal bonds could be a safe and reliable investment. Lebenthal, who graduated from Dalton, Andover, and Princeton, said he was not concerned in the least that Cayne was cut from a different cloth.
