Sandy Weill and the Making of Citigroup
by Amey Stone and Mike Brewster
(John Wiley & Sons, New York, 304 pages) $24.95
reviewed by Gregory Bresiger
Sandy Weill beat them all: James Robinson, his former boss at American
Express who helped push him out. John Reed, his former co-chief executive officer at Citigroup, who was to share power with Weill (ha! ha!). Jamie Dimon, his former protege at Shearson and later Citigroup, who clashed with Weill's daughter, a rising star at Citigroup, and consumer group advocates such as Ralph Nader, who didn't like Weill's end run three years ago around the nation's ancient banking laws.
All of these corporate players and gadflies have learned a hard lesson. The demanding Sandy Weill will beat anyone and everyone in a corporate or political alley fight. And even if he loses a match once in a while (as in the case of his unpleasant experience at American Express), he will come back later and win.
That is the central premise of this slender book, which is written by a pair of business journalists. It is neither an official biography nor an authoritative account (Weill apparently didn't cooperate with the authors, who often had to rely on the work of other business journalists).
Military Academy
Nevertheless, despite the book's limitations, the authors tell an interesting story. He is born in 1935 to a Brooklyn businessman who was a dress manufacturer. His father was fined during World War II for violating wartime price controls. Weill, as a young man, attends an upstate military academy and later graduates from Cornell University in upstate New York. He begins on Wall Street in the late 1950s as a runner for Bear Stearns for $150 a month. That's a $150 a month for a man who was going to become a billionaire! That was a low salary even in the 1950s, the authors explain.
By 1960, Weill is on his way. He and three partners begin their own brokerage firm, Carter, Berlind, Potoma & Weill. Three years after starting the firm, Weill takes on a new partner, young Arthur Levitt. Weill borrows money from his mother to help fund his share of the firm. Weill's timing is perfect. The 1960s bull market is about to begin. A pattern is about to be established. Although Weill is only an equal partner, he soon dominates the firm and becomes the top man, pushing out other partners.
Close to 40 years later, Weill will repeat this power to dominate at Citigroup, when he sends John Reed packing. Reed, the authors say, had thought that he and Weill would jointly leave and another person would be found to succeed them.
Weill is neither a Frank Cowperwood nor a Commodore Vanderbilt. He doesn't make outrageous statements telling the public to be damned. He doesn't live the high life with his net worth of $1.6 billion. He doesn't write self-promoting books about the art of the deal, he just makes bigger and bigger deals.
Weill is a fascinating, at times, ruthless executive, certainly worth a full-length biography. However, this one is not comprehensive, but it will have to do until someone comes along with the inside sources to tell us the whole story. Nevertheless, the authors tells us enough of the story to hold one's attention.
Heads Roll
Weill builds company after company, then puts them together into financial powerhouses. Still, when he puts companies together heads roll. Costs are cut. Consolidations take place. But the firms are quickly in the black and shareholders always end up praising Weill.
The authors contend that Weill went against his instincts when he agreed to become a number two when Shearson is bought out by American Express. That was a mistake in a number of ways. Cost savings were not realized at Shearson, which started to have problems. The cross-selling/financial supermarket idea was a disaster from day one.
As the authors quote one executive who saw it all, "There were attempts at cross-selling but at the end of the day the credit card people were not going to open their business to thousands of salespeople. They just weren't going to do it. The credit card list was called the crown jewel of American Express and the thought of having a couple thousand salespeople calling credit card holders to try and sell them common stocks, unit trusts, annuities, and partnership interests just never worked." (page 125).
Imperious Nature
More importantly,Weill, because of his imperious, demanding nature, was congenitally incapable of number two status. Robinson rubbed it in by telling Weill that he was on trial. For the imperial Weill, who had been used to having his own way and running things, that must have been infuriating.
But Weill starts all over again after the American Express debacle with more deals, although they seem like minor league deals after his days at Shearson. He became chief executive of the shaky Commercial Credit operation in Baltimore. But after he sets things right in the city of H.L. Mencken, he then uses Commercial Credit as a base to obtain the Travelers, Smith Barney and, finally for sweet revenge, he buys back Shearson from American Express. The latter has run the once premier brokerage firm into the ground. After several surprising moves,Weill is back on top of the greasy pole.
That's because he takes gambles on markets and on his ability to find the best people who will put up with his mercurial behavior, which, the authors remind us, is usually tempered by a generosity in giving anyone and everyone stock in his businesses.
He also takes gambles on pols and wins with them. (Although a Democrat, the authors note that he also works well with Republicans.) An example of this was his decision to merge the Travelers, which contained Salomon and several other financial subsidiaries, with Citibank, which became Citigroup. This was a gamble on at least two fronts.
One, Weill agreed to the merger based on sharing power with Reed. Weill believed he could defeat him at corporate politics; that he wouldn't make the same mistake he had at American Express, where he had failed to cultivate the board of directors. Second, the 1998 proposed merger was a violation of the Great Depression era Glass-Steagall Act, forbidding the melding of commercial and investment banking.
"The deal," the authors write, "was a direct challenge to the decades old regulations that prohibited companies from selling insurance, issuing securities, and providing banking services under one umbrella.
Weill lobbied incessantly – even placing a call to President Clinton just before the deal was announced – until he got what he wanted. A little more than one year after the controversial merger was completed, the financial services laws he defied were rescinded." (page 3).
Cuba Embargo
As a business leader in a more brutal time might have put it: "What's the constitution between friends?" Still, Weill has lost a lot of friends because he is always ready to make unpleasant moves in order to produce shareholder value. There are new deals ahead. The authors conclude that he is trying to end the embargo with Cuba. There is a suggestion that he may try cross selling again at Citigroup.
Whatever he tries – no matter how risky – the betting line is that he will probably win. Weill and his empire are so complex and interesting they need a modern day Gibbon to explain them. Weill is a kind of Roman Empire of the business world. Will the Roman Empire ever fall?
I doubt it.
