KAI RYSSDAL: Much of the news from Wall Street comes prefaced with a mention of one or the other of the big investment banks. But before there was a Goldman Sachs or a Morgan Stanley, there was a company named Lazard Freres.
For decades, Lazard was the most prestigious firm on Wall Street. . Its partners knew who to talk to to get the deals done. And how to profit without putting their own capital on the line.
William Cohan spent six years working at Lazard. His book is called “The Last Tycoons: The Secret History of Lazard Freres & Co.” Not so secret anymore, I guess. Mr. Cohan, welcome to the program.
COHAN: Thank you, Kai.
RYSSDAL: Lazard Freres was, maybe still is, one of the iconic names on Wall Street. Where does it fall sort of in the pantheon of the big, big investment banks that have been in history?
COHAN: Well, I think it depends upon the time frame that you are talking about. Because there was a time, sort of after World War II and before the 80s, when all of Wall Street firms were small, private partnerships. So during that time frame, Lazard was as competitive and as strong — in some ways even stronger in mergers and acquisitions — than any firm on the Street.
RYSSDAL: They never really put their own capital on the line. These guys basically gave advice and made a whole lot of money doing it.
COHAN: Exactly right. I believe that people like Felix Rohatyn and Michel David-Weill and Andre Meyer really created the business of giving . . . advice to corporations. What they got paid for — what most of Wall Street continues to get paid for — is essentially getting close to corporate CEOs, winning their trust, cozying up to them, becoming their trusted adviser. And when it comes time to . . . as CEOs are doing more and more in this particular cycle, decide to buy a company or merge with another company — they seek the advice of these trusted financial advisers.
RYSSDAL: There’s a mystique, though, that comes with Lazard, that Goldmann or J.P. Morgan or Merrill Lynch or any of those guys, they just don’t seem to have, really.
COHAN: For a period of time — and a long period of time — Lazard was able to attract the best and the brightest minds inside its doors. Because it offered the chance to work with all the best and brightest minds on Wall Street. We used to say about Lazard that it would compete with intellectual rather than financial capital. And it really set it apart from other firms, and that’s I think why the mystique was created.
RYSSDAL: What eventually happened to Lazard, and what’s it doing now?
COHAN: As the competition rose, other firms on Wall Street in the 90s and continuing to this day figured out a way to compete with Lazard. You know, come 2001, the firm was in crisis mode. I think Lazard is still able to compete effectively and it’s had, you know, a great run under Bruce Wasserstein as a public company. But I don’t . . . I think, as I say, I find it to be common now.
RYSSDAL: What’s your opinion now, having spent years researching this book and talking to people on Wall Street, what’s your opinion sort of in a very macro sense of investment banking and the function it serves in a capitalist society?
COHAN: I’ve spent a lot of time thinking about that. On the one hand, where Wall Street takes risks with their own capital, underwrites stocks and bonds and puts their money on the table and risks that money, they deserve to get well paid for that risk. The world of M & A advice is a risk-free world. No money is put up by the investment banks, and so what I’m still, you know frankly unable to reconcile after all these years, is why investment bankers who provide M & A advice get paid so much. I just don’t understand it. I don’t understand why the fees are so high. And I think it has to do with the fact that a lot of corporate CEOs look at this advice as a quote unquote “insurance policy,” something they can point to if things go bad. And I think there’s also a cartel element. There’s really, you know, maybe 10 or 15 firms globally that provide this advice on a first-class basis, and they’re able to set the fees.
RYSSDAL: William Cohan’s book about Lazard fair is called “The Last Tycoons.” Mr. Cohen, thank you so much for your time.
COHAN: Thank you very much. It was a pleasure to be here.
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