Alan C. “Ace” Greenberg, who as chief executive officer of Bear Stearns Cos. transformed a small bond shop into the fifth-largest U.S. securities firm before it collapsed in 2008 in one of the key events of the global credit crisis, has died. He was 86.
He died Friday at Mount Sinai Hospital in New York of complications from cancer, his son, Ted Greenberg, said in an e-mail.
An amateur magician and bridge player, Mr. Greenberg took over New York-based Bear Stearns in 1978, when it was a private partnership with about 1,000 employees and $46 million in capital. He expanded shareholders' equity to $1.8 billion and headcount reached 6,300 by 1993, when he handed power to James “Jimmy” Cayne, himself a one-time professional bridge player. Mr. Greenberg stayed on with Bear Stearns as an equities trader.
The forced sale of 85-year-old Bear Stearns to JPMorgan Chase & Co. in March 2008 followed a bank run by clients that left Bear Stearns on the brink of bankruptcy. The firm's troubles traced to 2007, when two of its hedge funds tied to the real estate market collapsed. In a 2010 book, Mr. Greenberg said the run on Bear Stearns in 2008 stemmed from “a groundless rumor” that it had a liquidity problem at a time when it had $18 billion in cash reserves.
On March 16, 2008, JPMorgan Chief Executive Officer Jamie Dimon agreed to buy Bear Stearns for $2 per share, later raised to $10. The stock had traded at $172 in January 2007. After the sale, Mr. Greenberg became vice chairman emeritus of JPMorgan.
“It's hard to imagine a financial services industry without Ace,” Mr. Dimon and the firm's head of asset management, Mary Erdoes, said today in a memo to employees.
(See also: Glass-Steagall and the almost panic of 1970)
“Whether he was building Bear Stearns into an industry powerhouse or wowing the trading floor with his penchant for magic, Ace's personality permeated everything he did,” they wrote. “His intelligence and wit was only surpassed by his generosity and thoughtfulness.”
Mr. Greenberg blamed Mr. Cayne, his successor as CEO, for the demise of Bear Stearns. In his book, he described Mr. Cayne as a megalomaniac more interested in playing bridge than in representing the firm. He said Mr. Cayne became “more aloof and full of himself” as the firm's share price rose in 2007, which “couldn't help but impair certain business judgments.” He said the Bear Stearns fixed-income department used too much leverage to build its mortgage-backed securities portfolio.
“I didn't think Jimmy was going to turn into somebody you couldn't talk to, or an absolute demagogue,” Mr. Greenberg told Bloomberg Businessweek in 2011. “Meetings were horrible. Whatever I said, Jimmy Cayne would say the opposite, no matter what it was.”
Mr. Cayne, likewise, had little nice to say about Mr. Greenberg.
There “isn't anybody that will tell you he's an honest guy,” Mr. Cayne said to William Cohan for “House of Cards,” a 2009 book. “There isn't anybody who will tell you that he's sincere. There isn't anybody that would tell you they choose him as their best man, or best friend, or one who they would have lunch with, or go on a trip with, or socialize with, or whatever. They don't exist. He had one friend — me.”
Some Wall Street veterans said the reluctance of both Mr. Greenberg and Mr. Cayne to venture into new markets restricted the firm's growth. “They underinvested in new businesses and international expansion in the past and focused on maximizing return on equity,” Brad Hintz, an analyst at Sanford C. Bernstein & Co. and a former Wall Street executive, said in a November 2006 interview.
Mr. Greenberg, whose clients included billionaire real-estate developer Donald Trump and Henry Kravis's KKR & Co., followed a simple stock-market philosophy: Take losses as soon as the price falls.
“I put my children's accounts with him,” Mr. Trump said in an August 2006 interview. “That should tell you how much I trust him.”
A reputation for discretion made Mr. Greenberg valuable to corporate raiders including Mr. Trump, Mr. Kravis and Irwin Jacobs when they tried to buy shares of target companies quietly. Mr. Greenberg helped Mr. Trump collect 9.6% of Bally Entertainment Corp. during his 1986 unsuccessful takeover attempt of the rival casino operator.
A member of the Society of American Magicians, Mr. Greenberg enjoyed showing magic tricks to reporters during interviews and at public events such as fundraising dinners for the Jerusalem Foundation or the Parkinson's Disease Foundation. He required all Bear Stearns executives to contribute 4% of their salaries to charity.
Some of Mr. Greenberg's handouts created controversy. In 1998, he donated $1 million to help poor elderly men who couldn't afford the impotence drug Viagra. “It's something that will give a lot of pleasure to a lot of people,” Mr. Greenberg told the New York Times.
Alan Courtney Greenberg was born on Sept. 3, 1927, in Wichita, Kan., the grandson of Russian Jewish immigrants. At 6, he moved with his family to Oklahoma City, where his father, Theodore, opened a women's clothing store during the Great Depression.
Mr. Greenberg attended the University of Oklahoma on a football scholarship for a year before a back injury ended his playing career. He transferred to the University of Missouri a year later, where he received a bachelor's degree in business as well as the nickname “Ace,” suggested by a friend who thought he'd get more dates with a less obviously Jewish name.
Inspired by a book he read about financier Bernard Baruch, Mr. Greenberg moved to New York after graduation to start a career on Wall Street. His attempts suffered because he “wasn't from an Ivy League school,” Mr. Greenberg told the Horatio Alger Association of Distinguished Americans, which honored him in 1997. Of six job applications, the only offer came from Bear Stearns.
Mr. Greenberg started at the firm as a clerk in 1949, putting pins on a map to locate oil wells. He got noticed by John Slade, head of the arbitrage trading desk, who took Mr. Greenberg under his wing. When Mr. Slade became head of international business, Mr. Greenberg took over arbitrage.
Six years later, at 31, he was made partner and began managing the firm's principal investments. He also was diagnosed with colon cancer and given a 25% chance to live. After surgery he submitted to regular checkups for the next 12 years.
Mr. Greenberg clashed with the firm's managing partner, Salim “Cy” Lewis, demanding that falling stocks be sold. Usually, Mr. Greenberg got his way. He started running the company when Mr. Lewis fell ill and became CEO when Mr. Lewis died in 1978.
Mr. Lewis's son, Sandy, told Mr. Cohan that his father “hated” Mr. Greenberg, a man “so cold my father used to say he pissed ice water.”
The firm grew in profits and personnel under Mr. Greenberg, who said he sought to hire people with “PSD” degrees, meaning “poor, smart and a deep desire to become rich.” In 1985, he took the firm public and became chairman of the board, a post he held until 2001.
In 1987, at 60, he married his second wife, Kathryn, after 12 years as a bachelor frequenting the New York social circuit. He had two children, Lynn and Theodore, from his first marriage.
He scrimped to save every penny made by his firm. He told Bear Stearns employees to turn off the lights when leaving and to seal envelopes only partially so they could be re-used. Those edicts and others were immortalized in a collection of his internal missives to the staff, published in 1996 as “Memos from the Chairman.”
Trying to alert employees to perceived excesses in equipment purchasing, Mr. Greenberg ribbed them in a 1991 memo: “Two important milestones were reached last week. McDonald's sold their 70th billion hamburger and Bear Stearns bought their 10,000th fax machine.”
Under Mr. Greenberg, Bear Stearns expanded into investment banking, where it was traditionally weak, and transaction clearing, a business he discovered earlier than his bigger rivals. Before it collapsed, those businesses generated a quarter of the company's revenue.
In 2004, Mr. Greenberg appeared on Mr. Trump's television show, “The Apprentice,” to interview the two finalists. “You have something going for you,” Mr. Greenberg told the candidate he favored, who eventually won. “You have not only led, but you followed, and that's important in business.”
Mr. Greenberg never spoke of an intention to retire.
“I do plan to die some day,” Mr. Greenberg told Traders Magazine in 2000. “I definitely plan to die, but I haven't picked a time yet.”
Mr. Greenberg is survived by his children, Ted, and Lynne Koeppel; his second wife, the former Kathryn Olson; a brother, Maynard; a sister, DiAnne Hirsch; and five grandchildren.
In 2012, after Citigroup Inc. founder Sanford “Sandy” Weill recommended that deposit-taking banks and investment banks be separated again, to avoid the hazards posed by “too-big-to-fail” institutions, Mr. Greenberg disagreed.
“That was not Sandy,” he joked in an interview on Bloomberg Television. “I think it was a guy making a movie about Wall Street or something.”
“I think this is a huge country,” he said. “I think we need big banks.”