Ambush on Wall Street
Ross Perot was had. . . and had in a big way.
New York, N.Y.—every day except Sunday, A Gray Line sightseeing bus leaves Rockefeller Center on the hour and waddles south through traffic in search of Manhattan’s principal points of interest. After lingering briefly at Times Square, the Empire State Building and Greenwich Village, the bus arrives at the farthest and most congested outpost of its journey: Wall Street. Perhaps significantly, no one is allowed to leave the bus at this stop.
“Extending for a distance of seven blocks from Trinity Church to the East River, Wall Street received its name from the wall that used to run the length of the street. Erected by Governor Peter Stuyvesant in 1652 as protection against invasion by the British, the wall was torn down in 1699. On your left is the New York Stock Exchange, where more than $1 billion in securities changes hands every working day. On your right is the U.S. Subtreasury Building, where the first U.S. Congress met and where George Washington was inaugurated as President in 1789. Wall Street is the world’s most important financial center.”
And it is no place for a Texan.
The stock market has been wobbling downward since the Dow Jones Industrial Average hit its all-time peak of 1051 in January, 1973; there is some doubt that it will ever make a come-back. Brokerage firms have been disappearing as fast as independent gasoline stations, especially since the advent of negotiated (and thus usually lower) commission rates on large stock trades in 1971. Last year alone, member firms of the New York Stock Exchange collectively lost about $80 million. Employment on Wall Street has not risen appreciably in years. Salaries have, if anything, failed to keep pace with the cost of living in New York, which rose about half-again as fast as the national average last year. And there is general agreement that senior partners of leading brokerage and investment banking firms are no longer making the leisurely fortunes they used to.
For those reasons, Wall Street may not be the place for any young man to seek his fortune these days. But it has been particularly inhospitable to Texans. Or at least to the kind of Texan that many neurotic, alienated, oft-jostled, much-mugged and generally cynical Manhattan cave dwellers have come to cherish and admire. That Texan is canny and adventurous, as frank and friendly as a puppy dog. He (or she) need not be as rich as H. L. Hunt, but must be self-made, unpretentious, and not more than one generation removed from some dusty ranch out where the world is still flat. It is, of course, a stereotype; but one that was forged without malice, and one that bears vague resemblance to some occasional Texas visitors to lower Manhattan: Sid Richardson, Clint Murchison, Jimmy Ling and, more recently, Ross Perot (about whom more later). Texas businessmen and financiers, according to local myth here, have a style and scope that differs dramatically from the operative folkways of Wall Street. New Yorker writer John Bainbridge has described the Texas entrepreneur: “He shuns conferences, paperwork, consultations with lawyers, and other time-consuming activities that pass for accomplishment in the life of the ordinary businessman ... In what appears to be an unquenchably lighthearted and casual mood, he is constantly in the process of extending his enterprises by buying, selling, borrowing, merging and trading. His transactions, always called deals, usually involve sums of at least seven digits; to save time in calculating, he customarily drops the last five.”
A bit overdrawn, perhaps. But even if your typical Texas operator is only one-tenth that stimulating, he would be as incongruous on Wall Street as a flowering barrel cactus. The spirit that moves Wall Street these days is caution, and the ruling elders of that gritty granite canyon tend to have rather narrow minds and mossy backs. The ethnography of senior partners at leading investment firms—as well of members of the governing boards of the major exchanges—holds no surprises: They tend to be male, white, and Protestant, or else second-generation immigrant Catholics and Jews who dress, act and think like WASPs. Many of them are self-made men these days; they are all intelligent and capable, to be sure. But somehow they seem to lack the creativity, gusto, style, panache and verve that characterizes much of life in New York. “There’s nothing about these guys that you could call ‘New York,’ ” says a 30-year-old from San Antonio who left a corporate finance job on Wall Street to enter the real estate syndication business uptown. “They all live way out some place like Greenwich, Locust Valley or Short Hills. They’re too suburban. That’s the trouble with Wall Street. It’s not New York enough, it’s too suburban. A lot of these guys wouldn’t know a bagel from a subway token. They’re dull, that’s all.”
They can also be smug, myopic and insensitive. In the long, hot summer of 1967, when the central precincts of a number of major U.S. cities were being laid waste by their unhappy residents, the president of a medium-sized brokerage firm, a man with two college degrees and a subscription to the Metropolitan Opera, asked me in all seriousness: “What’s so bad about living in a ghetto? What’s the matter with these people, don’t they have air conditioners?”
A better indication of the depth of smarminess among securities men is not what they say, but what they do—and fail to do. It has taken years for them to agree on creating a combined ticker tape that would carry stock quotes from a number of exchanges, allowing an investor to get the best available price for his stocks. (The agreement has been reached, but the tape itself may still be years away.) Wall Street continues to rely on those quaint, floridly engraved paper stock certificates, which have an irritating habit of getting lost and which almost drove the industry to collapse during the famous back-office paperwork crunch of 1968 and 1969; IBM cards would probably be cheaper, safer and more efficient. And when trading volume and profits began to turn down a couple of years ago, the brokerage community responded by raising commission rates. As my West Side neighbor Jesus Ortega, who sells pretzels at the corner of Wall and Broad streets and is a trusted source for many financial journalists, put it so irrefutably: “Man, if I tried to get more business by raising my prices, I’d have a hell of a lot of pretzels to eat every night.”
Into this hotbed of financial genius, this street paved with gold, this world capital of capitalism, strode Ross Perot in 1971. What happened to him after that should serve as a warning to any honest, ambitious young Texan who might be entertaining thoughts of a career in lower Manhattan. Ross Perot dropped nearly $100 million on Wall Street. It would be one thing if he had lost it honestly on some dog of a stock, or in one of those periodic market slides colloquially referred to as “corrections.” Yet there is a quiet suspicion among some of the more candid and thoughtful residents here that Ross Perot was a victim of the small-minded schemings of the men who run Wall Street, and the casualty of a subtle, snobbish Manhattan xenophobia. In short, that Ross Perot was had.
Perot, as even many non-readers of financial pages know by now, is the cattle-trader’s son from Texarkana who made a billion or so dollars in the computer software business in Dallas, and then in 1971 bailed out duPont Glore Forgan, a failing Wall Street brokerage firm, with a timely infusion of capital. Last July, Perot began pouring money into another troubled firm, Walston & Co., the nation’s second largest brokerage (after Merrill Lynch). He partially merged the two firms, gave Walston the retail stock-trading operation and let duPont Glore Forgan handle customer accounts, stock clearing and other record-keeping tasks with data processing techniques that Perot imported from Dallas. Like many of Perot’s ideas for remodeling the securities industry, that arrangement held considerable promise. But the two firms continued to show red ink, and Perot announced last January that he was closing Walston. Since Walston was duPont Glore Forgan’s only data processing customer, it too is expected to fold. Altogether, Perot invested about $98 million in the brokerage business—much of it his own money, some of it borrowed. He’ll be lucky to get back ten cents on the dollar.
The circumstances surrounding Perot’s arrival on Wall Street were, to say the least, unique. The industry was still beset by its aforementioned paperwork problems, the stock market was just picking itself up off the floor, and a number of brokerage firms were teetering on the brink of insolvency. Goodbody & Co., at that time the nation’s second largest brokerage, had just announced its imminent demise. Merrill Lynch quickly agreed to take over Goodbody, averting certain panic. But Merrill Lynch officers demanded that the New York Stock Exchange indemnify them for up to $30 million in losses from any legal suits over Goodbody’s assets, and said that they would back out of the deal if any other major brokerages collapsed before the rescue operation was finished.
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