The Last Tycoons: The Secret History of Lazard Frères & Co. by William D. Cohan

My rating: 4 of 5 stars

Lazard Ltd is one of the most prestigious investment banks in the world, yet one of the least recognisable to the general public. Everybody has an opinion on the dubious nature of corporate- lending institutions that are supposed to oil the wheels of economic growth, yet Lazard Ltd has faced none of the opprobrium its rivals have lived with since September 2008. The chances are you might be learning of its existence for the first time by reading this review.

William D. Cohan’s history of Lazard Freres & Co (the predecessor to the Lazard Ltd now listed on the S&P 500 index) finishes at 2007 and received its first publication just one year before the near-destruction of the American banking system in September 2008. Nevertheless, Lazard must be the only investment bank that does not require an updated chapter on the last eight years to account for the existential threat faced by all other major houses during this time. Its share price trades above $31 as I write this ($10 above its IPO price in May 2005) and has been as high as $58 in the last twelve months. What makes it so special and so mythical in the world of High Finance?

Lazard has always prided itself on its image as the supreme Mergers & Acquisition (M&A) consultancy that offers nothing but the wisdom of its sagacious bankers. It takes no commercial deposits; has no use for transforming liabilities into assets; doesn’t engage in proprietary trading (e.g. using its own capital to bet on commodities and currencies); and has no role in the competitive world of financial derivatives. Besides Asset Management services ($186 billion under management in 2015), Lazard Ltd relies solely on revenue from M&A activity, the sector it has helped to pioneer over the last five decades.

The author, a former Lazard Managing Director, is keen to emphasise the innovative role of the bank over the years and his structure for this book is quite simple – a twentieth century history of High Finance as told through the achievements of its great men. A good number of names have passed through the global offices over the last one hundred years, yet two people stand out in its 150 year-old-heritage – Felix Rohatyn, said by his peers to be the greatest M&A banker of the last sixty years, and Bruce Wasserstein, the CEO that took the firm public in 2005 and made a fortune for himself in the process.

Rohatyn is presented as the resourceful Askenazi Jew who escaped Nazi persecution and found the American dream in the space of a decade. As Wall Street’s original media darling, Felix is all things to all people – cultured, charismatic, driven and socially liberal, yet a nightmare to work with. He also had a role in most US Corporate takeovers between 1965 and 1990, putting him in the same league as John Pierpoint Morgan and other titans of the last two centuries. But Cohan recognises his job is to look beyond the flattery: Rohatyn also comes across as disingenuous during ITT’s hostile bid for Hartford in 1969/70 and we later learn of his reluctance to take up an offer to run the World Bank in 1995 for fear it might be a career dead-end. The chance to become the US Ambassador in France during Clinton’s second administration is also treated with disappointment and scant consolation for not getting the Treasury Secretary position. (He takes it in the end.)

If Rohatyn is not content with being a Master of the Universe, Bruce ‘Bid Em Up’ Wasserstein makes him look modest in comparison. And Cohan is not a fan of the person most synonymous with Wall Street’s excesses of the 1980s, even if he is by far the most interesting of the dramatis personae in the book. No description of Bruce is complete without the word ‘genius’ and ‘shameless’ in the same sentence, whether it’s his New York Times Obituary in 2009, the many portraits of him in Fortune Magazine or in Cohan’s reluctant praise. It’s also in his micro-analysis of Wasserstein that we get to some of the fundamental questions about investment banking (not to be confused with trading).

Though, it takes over 500 pages to ask why M&A bankers get paid so much and with no consequences when their advice leads to bankruptcy, Wasserstein encapsulates the ‘take the fee and move on' mentality that underpins the industry. After all, this is the man who planned Texaco’s disruptive bid to stop Pennzoil from buying Getty Oil for $9 billion in 1984 with a counter offer of $10 billion. Part of the strategy was to extricate Getty from its initial agreement by convincing Texaco to indemnify Pennzoil for any legal fallout from breaking up the Pennzoil-Getty deal. Three years later Texaco received an $11.1 billion bill from the Supreme Court and filed for bankruptcy. Bruce pocketed his fee and moved on to the next deal as if nothing happened. Cohan insists that Wasserstein’s excuse that nobody forced the client to take his advice ‘is surely the last refuge of a scoundrel.’ That this man could take over Lazard with so many enemies on Wall Street is puzzling to the author. ‘Yet thanks to an unlikely confluence of events that could only have happened to Bruce Wasserstein, here he was, as of January 2002, in charge of Lazard and its second-largest individual shareholder.’

But Lazard is not just an American icon. For most of the late nineteenth century up to World War Two, New York played second fiddle to Paris and London. No bank other than JP Morgan had a more global reach in the inter-war years, and few were as revered. From the bank’s brilliant advice to fight the French currency crisis of 1924 with a classic ‘short squeeze’ to London’s secret bail-out by the Bank of England in 1931 following the actions of a rogue trader, the two European houses have a fascinating history of their own. Yet Cohan abandons his interest in the European operations once the great Andre Meyer escapes the Nazis and arrives in the US to take over New York from Frank Altschule. For the rest of the book they are but an occasional footnote in the story of Felix Rohatyn and Steve Rattner and the evolution of M&A banking on Wall Street in the post-war years.

Fortunately, no story of tremendous wealth, opulent tastes, high society and ground-breaking advances in corporate baking is complete without a pompous autocrat who can say with a straight-face, “Beware of self-made men.” Here is the cue for Michel David-Weill, the billionaire despot, to take centre-stage for one-third of the book. As a blood relative of the founding Lazard brothers, Michel is everything you’d expect from a French Jew – desperate to cling to an ideal of aristocracy that ended in the eighteenth-century when his ancestors were still confined to ghettoes. He wiles away his time from the 1970s to the early 2000s amassing one of the world’s most impressive art collections, pursuing mistresses, cultivating the press and pretending to be philosophical. Though an unwitting consequence of Cohan’s portrayal, you cannot help but despise a man who never closes any M&A deals, but holds the purse strings for the year-end bonuses like a slave-master seeking recognition from his chattel. Only a man as pampered and rich as Michel could look back on his escape from Nazi-Europe and say, “Frankly, I had no idea I was Jewish… I learned I was Jewish because of the war.” Somehow, I can’t imagine the more modest (and famous) Rothschild family being so trivial or iconoclastic about their racial heritage. A more capricious or whimsical dynast is unimaginable, but caricaturists will enjoy reading about him.

With other works behind him since writing The Last Tycoons, Cohan is now a master in his field and on par with Michael Lewis as one of the best historians of modern finance. But, unlike Lewis, he prefers the epic survey texts that explore the evolution of today’s Wall Street through the prism of the last 150 years. This is a notable exception to the tendency to focus everything in the post-Bretton Woods era and provides welcome relief to the short-sighted narratives dominating the current bookshelves.

Yes, the Last Tycoons is a big undertaking, not least because it comes in at over 650 pages. But don’t let that put you off. This is better than Cohan’s 2009 history of Goldman Sachs and is not bogged down with complicated interpretations of how Wall Street’s near-collapse symbolises our present age.

One hopes the onward march of Finance & Banking History will take another step in its quest to achieve a foothold in mainstream academia with this book. And why can’t Cohan make it the next big thing in university departments preoccupied with Gender History and Post-Modernism?

A genealogy of Citigroup’s origins in banking and insurance would make a good project for his next work.

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