No Heroes in "King of Club"
February 2008
King of the Club
Richard Grasso and the Survival of the New York Stock Exchange
Author: Charles Gasparino (Harper Collins, New York, $27.95)
Richard Grasso was driven to succeed at the New York Stock Exchange. He fought his way up from a Queens working-class neighborhood straight out of Archie Bunkerland. Grasso came from a modest Italian-American home and had few advantages. He did not attend an elite high school, university or business school.
Actually, he was a Pace University dropout. Grasso quietly seethed against those who had every advantage, men like his former boss, NYSE chief executive William Donaldson, whom Grasso would eventually call "the empty suit." (See sidebar)
His underdog background, which nearly led him to work as a mover or to obtain an appointment as a city cop, made him fanatical in his pursuit of success, according to the author of this fascinating biography. Charles Gasparino is a former reporter with The Wall Street Journal, the publication that, more than any other, brought about Grasso's downfall.
Horatio Alger
But before Grasso's fall, there was a relentless climb. Here is a Horatio Alger story. Grasso began at the Big Board with an entry-level position in the listings department. Soon, he was more than a clerk. He became a master of the listings universe, advising corporate bigwigs about takeover rules. It was a remarkable achievement, given that Grasso was not a lawyer.
"In the listings department," writes Gasparino, "Grasso began by reading the job manual cover to cover. He sought out and read several books that described the history of the exchange from its beginnings. He read company documents that provided details of stock listings and began to gain a vast knowledge of some of the NYSE's biggest customers." (p. 41).
His listings expertise would not only help Grasso climb up the corporate ladder, but later, when he became the NYSE's chief executive, he developed a remarkable ability to pirate companies away from competing exchanges. These skills would put money in the pockets of NYSE members. They were also why many members voted to give Grasso more power and money, even though many of them hated his imperious ways. Eventually, as NYSE chairman, he would be paid like a sports star, with close to $200 million in accumulated cash.
Grasso's Case
Was the head of an investment utility worth it? This tough biography makes a mixed case for Grasso.
Yes, he protected the floor, preserving the specialist system for longer than many thought possible, and making a lot of people who also didn't have elite degrees very rich. Yes, Grasso was brilliant in selling the NYSE, keeping it ahead of Nasdaq and making the case for human intervention. Yes, he took the NYSE through incredibly difficult times, keeping the exchange afloat after September 11 and staving off would-be electronic competitors for a while (By the end of the book, the author says electronic trading firms like Goldman Sachs triumphed. Specialist firms-like LaBranche & Co. that were also fighting with Grasso and his arrogant ways-were on the run and facing a difficult business model that could lead to their extinction, Gasparino writes.)
On the other hand, Grasso is often depicted as insolent and avaricious, winning in a business jungle in which animals eat their young. His regulatory oversight group is staffed with people whose qualifications are based more on loyalty than competence. There are numerous cases of specialist skullduggery, happening right under the noses of Big Board regulators. In short, Gasparino says, NYSE regulation under Grasso was often a joke. But few people seemed to care. That is as long as the Big Board, using a human-based auction trading model that appears to be living on borrowed time, prospered.
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