The adjective “venerable” is not hyperbolic when applied to Lehman Brothers. The firm began trading commodities in Montgomery, Alabama, in 1850. After the Civil War, the three brothers, immigrants from Bavaria, moved the firm to New York City. Younger relatives joined them, the company grew, and by the end of World War I investment banking had supplanted commodity trading as Lehman’s chief focus.
Though non-family members were accepted as partners after 1924, several generations of Lehmans guided the firm until 1969. After that, the company went into a period of decline until a change of management occurred in 1973 when Pete Peterson, a former secretary of commerce in the Nixon Administration, became chief executive officer.
Peterson concentrated on making the firm efficient and created modern, full-service corporate and marketing plans. Lew Glucksman, a partner who specialized in commercial paper, worked to rebuild the company’s finances through trading, which brought in three times the income of banking.
By 1983, Peterson recognized Glucksman’s contribution by elevating him to the post of co-ceo. Within a short time, the “trader” Glucksman turned on the “banker” Peterson and forced him to leave the firm. Within a year, the House of Lehman fell apart.
This, however, is not a simple tale of good guys and bad guys. It is instead a story that tells of recent changes in the financial community. Private investment banking firms can no longer compete with the better-financed, more versatile, efficient, publicly traded giants like Shearson any more than the corner grocery could fend off supermarkets.
The partnerships either have to make stock offerings to raise capital or consent to be acquired. The irrational feuding and greed within the firm did not cause its end, nor should the reader feel sorry for the forty-four partners, each of whom received a windfall settlement in the millions after the buy-out.