Ambush on Wall Street
Ross Perot was had. . . and had in a big way.
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They also wonder whether Perot faced the implicit threat of a sudden and mysterious drop in the price of EDS stock if he refused to play ball. Perot might have been reminded of the fate of Leasco Corp. after its upstart chairman, Saul Steinberg, tried to take over Chemical Bank a few years ago; the financial community retaliated by selling off Leasco stock, driving it down from 135 to 99 within three weeks. In addition, skeptics wonder how NYSE and duPont officials could have so wildly underestimated duPont’s capital needs—until Perot was safely aboard, that is. ‘“I’m sure he feels he was had,” says Charles Stillman, a Manhattan investment counselor who ran a securities firm in Houston for a number of years. Adds John deMott, prize-winning senior editor of Institutional Investor: “Perot was had. The stock exchange guys went shopping for a savior, realized they couldn’t talk a Rockefeller into doing it, and said ‘Let’s try some of those super-patriots out west.’ That’s why they based their pitch purely on patriotic grounds. Anyway, Wall Street people don’t like outsiders. They said ‘What’s this Perot fellow think he’s doing, coming up here on his white horse and trying to tell us how to do things?’ Wall Street was out to destroy Perot from the beginning.”
For the moment, Perot is refusing to comment on his expensive Wall Street education. “My interest in the situation is merely that of an investor,” he has said, with considerable understatement. Perot has returned to Dallas, where he will no doubt concentrate on running EDS. The firm continues to be profitable; net income was up 21 percent in fiscal 1973 to $15 million on record revenues of $112 million. Another healthy increase is expected in 1974. But EDS has lost the 18 percent of its business that used to come from Wall Street contracts, and the price of EDS stock has slid from its 1970 high of 162 to less than 15 by mid-February. As a result, Perot’s holdings have shrunk to about $130 million—not bad for a young man of 43, but nothing like the fortune he had before going to Wall Street. One thing is clear: Perot will probably not be seen around lower Manhattan for some time. “People up here chortled when he took that bath,” says one young Texan in the investment counseling business here. “They’re calling him a dumb son of a bitch. But he had some damn good ideas. Some day they’re going to wish he was back.”
What about the other Texans on Wall Street? Aside from the ones that Perot brought with him from EDS, no Texas securities men here have been reported missing from their desks in the wake of his departure. On the contrary, Texans form a highly visible minority on Wall Street. No one knows just how many there are. Of the 4859 members of the New York Society of Security Analysts, only 26 hail from Texas. But analysts are the bookish fellows who turn out brokerage research reports, and tend to be of a particular ethnic derivation. (The society is uncharitably known among many non-analysts as the Guild for the Jewish Blind.) Texans seem to be more numerous in the corporate finance departments of large banks and investment firms. “People from Texas are just naturally enthusiastic about things,” explains a Houstonian at Morgan Stanley. “That’s important in corporate finance, because raising money for a client is really a matter of inspiring enthusiasm in people. When you bring out a new stock offering for Digital Datawhack, you better fire up some people to help you get rid of the stuff, or you’re in big trouble.”
No firm on Wall Street is considered to be characteristically Texan, as some are known to be predominantly Jewish or old-line WASP. However, Morgan Guaranty Trust Co. is thought to have an impressive number of Texans manning its far-flung empire; a University of Texas alumnus was until recently in charge of recruiting for the firm and liked to visit his alma mater every year. In addition, Lehman Brothers shelters a number of Texans, including two important senior partners, James Glanville and Joseph Thomas; Lehman is also one of the first important New York investment firms to do a considerable amount of business in Texas.
Much of the credit for that volume goes to Joe Thomas, who is something of a legendary figure on Wall Street. Raised in Odessa and Bowie, Thomas arrived on the Street shortly after the Crash of 1929 and has probably helped launch more major U.S. corporations than any other investment banker. Today, 67 years old and suffering from emphysema, Thomas has his potato-shaped nose in more deals than most men half his age. Earlier this year he talked the executives of Halliburton, Inc., the Dallas oil-drilling service company, into going public. That took some talking, since the stock market had been particularly unreceptive to new issues in recent months. Yet the Lehman-managed deal raised $176 million for Halliburton, the largest industrial common stock offering in a decade.
A large number of Texans have been imported into lower Manhattan to make money for their employers at those arcane disciplines for which the Lone Star state is perhaps best known: oil and cattle. Unfortunately, there is a subtle tendency at some firms to channel Texans into those quintessentially Texan industries whether they like it or not. Says one 30-year-old former Dallas resident who passes his days syndicating oil-drilling deals: “One of the reasons I left Texas was because the only way to make real money there is to go into oil or cattle. So I come to New York, and where do you think these bastards put me?”
Not everyone objects to that arrangement. “After all, Texas is a pretty important state in terms of the U.S. economy,” says John E. McFarlane of Palestine, who raises money for large cattle-feeding and oil-drilling undertakings at Drexel Burnham. “It never hurt anybody to know something about cattle. In fact, I rather enjoy mastering a subject that not many New Yorkers understand. Most people here wouldn’t know cow patties from peanut butter.”
Regardless of what task they are assigned, most Texans who come to New York do not last more than a few years. Indeed, many arrive with the intention of staying only for lunch, picking up experience and a new entry for their resumes, and then moving on. “It’s a game a lot of us play,” says a 26-year-old University of Texas graduate who has been trading government bonds on Wall Street for a year now. “You make a name for yourself here, flirt with the firms in Texas and make them break the bank to get you back there.”
Other Texans come with the intention of staying for supper. But they usually learn to loathe the place, largely because living conditions are incontestably inferior to just about anything in Dallas or Houston, and twice as expensive. Example: A two-bedroom apartment in the East 70s, a relatively safe and pleasant neighborhood, now fetches from $450 to $950 a month, and probably comes with cockroaches. Says McFarlane: “I love New York, but I can see why a lot of people prefer Texas. New York is a good place for two kinds of people: the rich and those who intend to be rich.”
Texans are probably coming to Wall Street in fewer numbers these days. Joe C. Ondrey, placement director for the University of Texas College of Business in Austin, figures that less than 5 percent of this spring’s graduating class will end up in New York, a figure that has been dwindling steadily over the years. More and more business graduates are heading for provincial capitals like Chicago, Denver or San Francisco, where salaries have in some cases eclipsed those on Wall Street, traditionally the highest-paying financial district in the nation. New York salaries are still about 10 percent to 20 percent higher than those in Texas; a newly minted MBA who can start at $14,000 in Dallas or Houston can expect to make $16,500 a year in New York, Ondrey says.
Those figures are misleading. Not only are local taxes and living costs higher in Manhattan, but Texas-based investment firms are usually smaller than their Wall Street counterparts, and allow a beginner more responsibility—and sometimes better perquisites. Dallas real estate promoter Trammel Crow, for instance, hired a half-dozen Texas B-school grads last year at the unimpressive salary of $12,000 a year, but gave them unlimited expense accounts. Even Joe Thomas thinks the bloom is off Wall Street’s rose: “I’d never advise any young man to come to Wall Street today. It’s the twilight of the gods here as far as making money is concerned. You’re better off staying in Texas.”
The decline of immigration from Texas to Manhattan could be a minor catastrophe for Wall Street. For one thing, it will deprive many home-grown financiers of the opportunity to observe Texans close-up. As a result, the Manhattan xenophobia that victimized Ross Perot—and, some say, Jimmy Ling when his LTV empire got too big and complex for Wall Street to understand—may spread and deepen. “People here still think all Texans are rich as hell, fly around in private jets and wear vicuna coats from Neiman Marcus,” laments Thomas. “Sometimes I get pretty upset with people in New York who think that this city is America. Hell, New York is no more America than East Berlin is.”
The twilight of the Texan on Wall Street also means the diminution of a crucial input of talent, enthusiasm and vitality—qualities that are in short supply in that dismal district. Without the inspiration of people like Ross Perot and a long line of other unorthodox operators, the securities industry may become even more languid and unresponsive than at present. “The biggest thing that makes Texans on Wall Street different than other people there is that they have more guts,” says Mike Thomas, son of Joe, and a Manhattan financial consultant in his own right. “Also, Texans have tremendous enthusiasm for things Texan. When they get up here they transfer that enthusiasm to whatever they happen to be working on. You go down to Houston and they’ll tell you that they’ve got the best this, and the best that—well, it’s the same thing here. A Texan on Wall Street will tell you he’s working on the best deal that ever was. The amazing thing is that, for him, it really is the best deal ever. I’m afraid that what happened to Ross Perot is going to make a lot of Texans think twice about coming up here. And that would be unfortunate for all of us.”
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