Alan Greenberg: Financier who built up the Bear Stearns empire but who was partly blamed for the global financial crisis


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The Independent Online

As chief executive officer of Bear Stearns, Alan "Ace" Greenberg, transformed a small bond shop into the fifth-largest US securities firm before it collapsed in 2008 in one of the key events of the global credit crisis. Greenberg took over the New York-based firm in 1978, when it was a private partnership with about 1,000 employees and $46 million in capital. He expanded shareholders' equity to $1.8 billion, and by 1993, when he handed power to Jimmy Cayne, the company employed 6,300. Greenberg stayed on with Bear Stearns as an equities trader.

The forced sale of the 85-year-old company to JPMorgan Chase in March 2008 followed a bank run by clients that left it on the brink of bankruptcy. The firm's troubles went back to 2007, when two of its hedge funds tied to the property market collapsed. In a 2010 book Greenberg said the run on Bear Stearns in 2008 stemmed from "a groundless rumour" that it had a liquidity problem at a time when it had $18 billion in cash reserves.

On 16 March 2008, JPMorgan's CEO Jamie Dimon agreed to buy Bear Stearns for $2 per share, later raised to $10. The stock had traded at $172 in January 2007. After the sale, Greenberg became vice chairman emeritus of JPMorgan.

Greenberg, an accomplished bridge player, blamed Cayne for the demise of Bear Stearns. In his 2010 book The Rise and Fall of Bear Stearns he described Cayne, a former professional bridge player, as a megalomaniac more interested in playing cards than in representing the firm. He said Cayne became "more aloof and full of himself" as the firm's share price rose in 2007, which "couldn't help but impair certain business judgements."

"Meetings were horrible," Greenberg said. Cayne, likewise, had little nice to say about Greenberg. There "isn't anybody that will tell you he's an honest guy," he told William Cohan in the 2009 book House of Cards. "He had one friend – me."

Some Wall Street veterans said the reluctance of both Greenberg and Cayne to venture into new markets restricted the firm's growth. "They underinvested in new businesses and international expansion in the past and focused on maximizing return on equity," said one analyst, Brad Hintz.

Greenberg, whose clients included the businessman Donald Trump, followed a simple stock-market philosophy: Take losses as soon as the price falls. "I put my children's accounts with him," Trump said in 2006. "That should tell you how much I trust him."

A reputation for discretion made Greenberg valuable to corporate raiders including Trump, Kravis and Irwin Jacobs when they tried to buy shares of target companies quietly. Greenberg helped Trump collect 9.6 per cent of the Bally Entertainment Corporation, during his 1986 unsuccessful takeover attempt of the rival casino operator.

A member of the Society of American Magicians, Greenberg enjoyed showing magic tricks during interviews and at public events such as fund-raising dinners for the Jerusalem Foundation or the Parkinson's Disease Foundation. He required all Bear Stearns executives to contribute 4 per cent of their salaries to charity. Some of Greenberg's hand-outs created controversy, however. In 1998 he donated $1 million to help poor elderly men who couldn't afford the impotence drug, Viagra.

He was born in 1927, in Wichita, Kansas, the grandson of Russian Jewish immigrants. When he was six he moved with his family to Oklahoma City, where his father, Theodore, opened a women's clothing store during the Great Depression.

Greenberg attended the University of Oklahoma on a football scholarship for a year before a back injury ended his playing career. He transferred to the University of Missouri, where he earned a degree in business as well as the nickname "Ace," suggested by a friend who thought he'd get more dates with a less obviously Jewish name. Inspired by a book he had read about the financier Bernard Baruch, Greenberg moved to New York to start a career on Wall Street. Of six job applications, the only offer came from Bear Stearns.

Greenberg started at the firm as a clerk in 1949, putting pins on a map to locate oil wells. He was noticed by John Slade, head of the arbitrage trading desk, who took Greenberg under his wing. When Slade became head of international business, Greenberg took over arbitrage. Six years later, at 31, he was made a partner and began managing the firm's principal investments. He also was diagnosed with colon cancer and given a 25 per cent chance to live. After surgery he had regular check-ups for the next 12 years.

Greenberg clashed with the firm's managing partner, Salim "Cy" Lewis, demanding that falling stocks be sold. He became CEO when Lewis died in 1978. The firm grew in profits and personnel under Greenberg, who said he sought to hire people with "PSD" degrees, meaning "poor, smart and a deep desire to become rich." In 1985 he took the firm public and became chairman, a post he held until 2001. In 1987, at the age of 60, he married his second wife, Kathryn.

He scrimped to save every penny made by his firm. He told employees to turn off the lights when leaving and to seal envelopes only partially so they could be re-used. Those edicts and others were immortalised in a collection of his internal missives to the staff, published in 1996 as Memos from the Chairman.

Under Greenberg, Bear Stearns expanded into investment banking, where it was traditionally weak, and transaction clearing, a business he discovered earlier than his bigger rivals. Before it collapsed, those businesses generated a quarter of the company's revenue.

In 2004, Greenberg appeared on Donald Trump's television show, The Apprentice, to interview the two finalists. "You have something going for you," Greenberg told the winning candidate. "You have not only led, but you followed, and that's important in business."

Alan Courtney Greenberg, financier: born Wichita, Kansas 3 September 1927; married firstly Ann (divorced 1976; one daughter, one son), 1987 Kathryn Olson; died New York 25 July 2014.

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