Money and Power Page 11

  To avoid potential costly litigation against the directors for their obvious negligence, the men decided to chip in some $600,000 to the McKesson & Robbins coffers, including $75,000 from Weinberg alone. He remained on McKesson’s board for years after the scandal. During the SEC’s investigation, Weinberg testified, and his correspondence with Coster/Musica combined with his previously published polemic about the responsibilities of directors and officers “gave Sidney some uncomfortable moments in the witness chair,” Fortune reported. When the SEC’s attorney wondered why he had failed to act in accordance with his treatise, Weinberg “pointed out to him that Moses had brought down the Ten Commandments from Mount Sinai, that we all believed in them, but that unfortunately few of us live in accordance with all of them.”

  Mostly, though, Weinberg was a corporate juggernaut, which greatly benefited Goldman Sachs, and Weinberg himself. “My partner, Sidney Weinberg, is supposed to be the finest professional director in the country,” Walter Sachs said in 1956, with a noticeable level of resentment about what that meant for him in terms of having to run the firm day to day. “He devotes more time to it than I do. His theory is a little different, and that’s all right, I don’t quarrel with it. He wants to be on the executive committee. He wants to get his finger into every question. And he’s been a very valuable director to the companies he’s on, no question about that.” Sachs conveniently overlooked Weinberg’s omissions during the McKesson & Robbins scandal. “I would say 90 percent of his activity has been in his director relationships,” Sachs continued, “and that’s been very valuable to Goldman, Sachs and Company, and has led to a lot of business. He’s done more of it—I mean, consciously more of it—than I have because I’ve had to watch administrative work in the firm.”

  The occasional sniping aside, the consensus seemed to be that Weinberg’s genius was essential to the revival of Goldman Sachs’s fortunes. “Sidney Weinberg has this alchemy—there is no other word for it—of converting an ordinary business relationship into a very real and abiding friendship,” Robert Sheehan wrote in Fortune. “He is not, as the surface facts might suggest, a mere trader of favors. He is, rather, a gregarious, accessible and outgiving man who has soaked up a tremendous knowledge of the business world and the people who make it, and who finds his greatest pleasure in life in putting that singular knowledge at the disposal of others. Of course, as with the Biblical bread, all this has come back to him manifold. As an underwriting technician, Weinberg is top flight, but no better, perhaps, than a dozen other bankers in the Street. But a vast amount of business flows into Goldman, Sachs as an almost unsolicited gesture of goodwill to Sidney.”

  Even if he merely just showed up at the board meetings and told a joke—he had by all accounts a fine sense of humor—his weekly workload would have defied imagination. But Weinberg was an extraordinarily devoted and engaged board member, in part because of his manifesto on corporate director responsibilities, in part because it was (very) good for Goldman’s business, and in part because he believed passionately in this kind of service. Of course, as his eighth-grade teacher at P.S. 13 observed, “He is happy when he is busy.” Quite simply, Weinberg’s willingness to serve on corporate boards, while time-consuming, was vital to resurrecting the firm’s public image in the wake of the Goldman Sachs Trading Corporation disaster and Eddie Cantor’s ongoing efforts to make the firm the butt of his jokes. “Once into this activity, however, he made such a job of it as few individuals before him ever attempted,” Fortune reported in October 1953. “Of each company he requested in advance an agenda of the directors’ meeting, and full sets of figures pertinent to the issues to be discussed. He put his boys at Goldman, Sachs to work analyzing those figures, and set up an office on the top floor of his Scarsdale home where he devoted his weekends to preparing for board sessions. As word of these conscientious practices got around, the presence of Weinberg on the board became a point of pride with many companies.”

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  THERE IS NO question that Weinberg, and Goldman, were aided immeasurably in their efforts to win new business by Weinberg’s decades-long involvement in national politics, his years in public service—including when he took two separate leaves of absence from Goldman during World War II and a third as the Korean War was unfolding—and the lifelong friendships with important businessmen and politicians he made along the way. “Sidney’s a sucker for anything patriotic,” is how one of his friends described him. Writers have variously described him as having a “gourmand’s appetite for public service” and as “an ambassador between financiers and politicians.”

  In what seemed to be a fairly typical pattern on Wall Street, especially these days, as Weinberg’s importance at—and to—Goldman Sachs increased in the wake of Waddill Catchings’s escapades at Goldman, Weinberg ratcheted up his dealings with politicians, especially those in Washington. He was the assistant treasurer of the Democratic National Committee—and one of its most able fund-raisers—in both the 1932 and 1936 presidential elections. In April 1933, he wrote to Roosevelt asking him to make a radio address referencing the embargo on gold, and he shared his views on the proposed federal Securities Act. In July 1935, Roosevelt invited Weinberg and a dozen or so other business leaders to join him, the vice president, the Speaker of the House, five cabinet members, and eight senators for the weekend at the Jefferson Islands Club, in Chesapeake Bay. The previous year, the club built a lodge for Roosevelt’s exclusive use for fishing, hunting, and “exceptional social companionship.” The purpose of the July 1935 weekend was supposed to be fishing. “But observers here found it hard to believe that two score leading Democrats could get together without considerable discussion of the program and tactics to be pursued during the remainder of the Congressional session,” the Times reported.

  Weinberg was in attendance at the April 1937 funeral of W. Forbes Morgan, the former treasurer of the Democratic National Campaign Committee, when he was buried at Arlington National Cemetery. Morgan was related by marriage to Eleanor Roosevelt. His funeral was a big event, and all the New Dealers turned out for it. A photograph that appeared the next day featured Roosevelt’s key advisers, including Cordell Hull, the secretary of state; James Roosevelt, the administrative assistant to the president and his oldest son; Edward J. Flynn, the New York secretary of state; Joseph T. Robinson, then Senate majority leader; Alben Barkley, soon to be the Senate majority leader (and later vice president under Truman)—and in the middle of them all, Sidney J. Weinberg. No less a master politician than President Roosevelt himself referred to Weinberg as “the Politician.” Indeed, “many grimly intransigent members of the business community” at the time “were fully convinced that nothing but Weinberg’s temperate advice to the Roosevelt administration was saving the capitalistic system from annihilation.”

  In exchange for this advice, Roosevelt offered Weinberg not only access to him—as long as it was properly scheduled, of course—but also various positions in his government. In June 1934, along with the CEOs of Sears and IBM, Weinberg was rumored to be among those Roosevelt would appoint to the first board of the U.S. Securities and Exchange Commission.

  Weinberg was also reported to have been offered a cabinet post and several undersecretary slots. Then, in the summer of 1938, Roosevelt offered Weinberg the chance to succeed his friend Joseph Davies as the U.S. ambassador to the Soviet Union. Davies had already offered Weinberg the position, and the Soviets had already approved the choice. It was a done deal, notwithstanding the U.S. Senate had not yet voted to approve the appointment. The problem was Weinberg didn’t want the job. Not only was there no one at Goldman of his stature and business-getting prowess around in 1938 to take over for him; as Goldman’s largest shareholder, his entire net worth was on the line at the firm and he likely had little interest in being forced to sell his stake to take the ambassadorship or to leave others to manage the firm—and his fortune—without him. There was also the small matter that his two sons were both in middle school, and educating
them in the Soviet Union or being thousands of miles apart was not particularly appealing. In addition, there was the issue of Weinberg being Jewish at a time when anti-Semitism was on the rise throughout Europe and the Soviet Union. His reasons for not accepting the post were “entirely personal,” Weinberg wrote to Stephen Early, Roosevelt’s press secretary. To the outside world, Weinberg said simply, “I don’t speak Russian. Who the hell could I talk to over there?”

  On July 5, 1938, Weinberg wrote to Roosevelt. “Ever since Joe Davies on your behalf offered me the Ambassadorship to Russia, I have intended to thank you for this honor, and tell you how deeply appreciative I am of your confidence in me, as evidenced by your consideration of me for this important post …,” he wrote. “I did want you to know how grateful I am to you for this distinction, as well as other evidences of friendship which you have shown to me during the past several years.” The president wrote Weinberg back that “I fully understand” and that he hoped to see him again soon “after I get back from my cruise.”

  By this point, President Roosevelt was not an easy man for a Wall Street banker to like, or to support financially. Toward the end of 1936, as he was campaigning for his second term as president, Roosevelt earned the endearing enmity of many on Wall Street by speaking often about “business and financial monopoly, speculation, reckless banking.” Roosevelt knew he was making Wall Street angry but said, “I welcome their hatred.” Weinberg stayed by Roosevelt’s side through the 1936 election and continued to raise impressive amounts of money for him. At one point, Weinberg acknowledged what Roosevelt had done to begin to repair the battered economy through both his Keynesian approach to fiscal policy and his panoply of new regulations covering Wall Street’s behavior. “FDR saved the system,” Weinberg said. “You could have had a rebellion; you could have had a civil war.”

  On September 1, 1939, the German army marched into Poland, marking the start of World War II. Weinberg, vacationing with his family in Nantucket, cabled Roosevelt. “I offer you my services in any capacity during these critical times,” he wrote. That same day, Edwin Watson, secretary to the president, wrote back, “The President has asked me to acknowledge your telegram … and to assure you of his deep appreciation of your kind offer of service.”

  At first, the letters on both sides seemed gratuitous, in part because Roosevelt probably wasn’t sure what role Weinberg could play or what that role should be, and in part because Weinberg had started to question whether he wanted to support Roosevelt’s bid for an unprecedented third term. In the end, Weinberg pulled back from Roosevelt after concluding that a third term would be “unsound” and threw his considerable fund-raising muscle behind lawyer Wendell Willkie, the Democrat turned Republican from Indiana. “I did not support him after the first two terms,” Weinberg recalled. “I had a great argument with him. I didn’t think any man should serve more than two terms. I was getting a little tired, too, of all the New Deal things.” Weinberg joined the short-lived Democrats for Willkie organization, whose members decided to back Willkie because they feared electing Roosevelt for a third term would be a dangerous precedent and one that could lead to dictatorship. Although Willkie received more popular votes—22 million—than any previous Republican candidate for president, Roosevelt thrashed him, receiving 27 million votes and 449 of the 531 votes in the electoral college.

  Weinberg quickly fell back in line supporting Roosevelt, his president, during wartime. On April 20, 1941, he joined a committee of other bankers, chaired by Robert Lehman at Lehman Brothers, to raise money for the Royal Air Force Benevolent Fund of the United States of America. Then, nine days later, on April 29, Roosevelt appointed Weinberg as a special consultant in the purchasing division in the Office of Production Management, or OPM, which Roosevelt had created in January 1941 “to increase production for the national defense through mobilization of material resources and the industrial facilities of the nation.” Weinberg, along with eight other men, was appointed by Roosevelt that day, all earning one dollar per year plus their living expenses. They became known as the “dollar-a-year men,” a precedent that would be revived during the financial crisis of 2008 (and many of the men receiving the dollar a year would be, coincidentally—or not so coincidentally—former Goldman partners).

  On May 5, Donald Nelson, the director of purchases at the Office of Production Management and a former vice president of Sears, Roebuck (technically, Weinberg was once his boss since he was on the Sears board), announced Weinberg’s appointment as “a consultant on various industry problems” who “would report for duty” on May 15. This, of course, meant taking a leave of absence from Goldman Sachs and leaving behind—for the time being—his board seats at twelve companies (including Sears). With Weinberg’s leave of absence, Walter Sachs took over the day-to-day management of Goldman, a position, he explained, he had occupied “for a great many years” anyway.

  For his part, Sachs knew “Frank” Roosevelt from Harvard—they worked on the Crimson together—and found him to be “a man of great charm, there’s no question about that,” but they were not close socially or politically. Sachs, whose “father was a stricter man,” lived in simpler student housing in Harvard Yard, where there was no running water in the rooms and showers had to be taken in the basement. “And it was pretty damn cold …,” Sachs said, “and we had no running water, and the water would be frozen in the pitcher in the morning and it had to thaw out before we could wash.” On the other hand, Roosevelt lived on the “Gold Coast” of Cambridge, on Mount Auburn Street, in Claverly Hall, “one of those private dormitories where men lived whose families had a certain amount of money, and were more social, more elegant.”

  As Weinberg did, Sachs also wrote a letter to Roosevelt after his election in 1932. Roosevelt sent back a letter “in which he thanked me and said he wanted all the advice he could get from his friends.” In the early days of the Roosevelt administration when he closed the banks, Sachs urged caution. “I remember telling people that I might have been wrong about this man and to give him a chance,” Sachs explained. But he quickly parted ways with his Harvard classmate. He hated the New Deal. “I felt there were a great many things that were just a great, great mistake,” he wrote. “What I probably resented, and we’ll look at the psychological aspect of it, that when one talks about driving men out of the temple, I couldn’t help but think, Franklin Roosevelt knew Arthur Ballantine”—the founder of the law firm Dewey Ballantine—“me, Eugene Thayer”—the president of the Chase bank—“and others like us, and he classed us altogether. There were the passions of the times, and I was against him.”

  While admitting he was a “dyed-in-the-wool Republican” he was also “resentful” of Roosevelt’s “attitude” toward bankers and Wall Street in 1929. “Not that I didn’t realize as much as any man the errors in judgment and mistakes that were made,” but Roosevelt “knew enough men” on Wall Street that “his shattering attack on business as a whole, I thought, was entirely unjustified.” Sachs said Roosevelt “must have known in his heart of hearts” that the men on Wall Street, many of whom Roosevelt knew from school and elsewhere, “may have been subject to poor judgment or been carried away by waves of the speculative era, but he must have known that we meant to do the right thing. Those are the things that I couldn’t quite forgive him.”

  Reflecting back, though, Sachs said “maybe it was partly my own fault” and “maybe I should have sought him out the way my partner Weinberg did, who was a Democrat for a while.” These choices made, Weinberg went to Washington to help Roosevelt with the war effort and Sachs stayed in New York to hunker down and to run Goldman Sachs—not that there was much business to be done during America’s involvement in the Second World War, or in the year or so leading up to it.

  In short order, Weinberg took on more and more responsibility at the OPM, becoming head of the OPM Industry Advisory Committee designed to help streamline the process of manufacturing goods needed in the war effort. But he also came in for his share of par
tisan criticism. Time magazine accused him of being “small” and “gossipy” and complained he was “Wall Street’s Walter Winchell,” the creator of the gossip column. In February 1942, the New York Times profiled Weinberg in a more laudatory way, suggesting that his appointment as Nelson’s aide was “tantamount to a guarantee that if finance and industry really want to do a job they will receive a fair hearing.” The newspaper recounted his Horatio Alger rise to fame and riches at Goldman and described how his collection of the letters, documents, and pictures of Abraham Lincoln—“one of the largest private collections”—that was kept “in the vaults of Goldman, Sachs & Co.” kept him busy “in spare time, if he has any.” (He also had a collection of Roosevelt campaign buttons that he later gave the president.) The Times explained how Weinberg was now “hustling around for the War Production Board just as he did in private life for his own organization.”

  For much of Weinberg’s time in Washington, there was considerable confusion about just what his responsibilities were first at the OPM and then at its successor, the War Production Board, or WPB. “Every time I went to a meeting with Nelson, this fellow would be there,” according to Weinberg’s friend General Lucius D. Clay. “He had no apparent responsibility, and I kept wondering why Nelson had him around. Then I realized he was acting as a counsellor and adviser—as a Minister without portfolio, you might say. That’s the way Sidney likes to operate—in a little back office, as somebody’s assistant.”

  Despite his efforts to stay in the background, Weinberg did—briefly—get a dose of unwanted attention when Senator Harry S. Truman (D-Missouri) accused him of favoring the big corporations—where he had served as a director—in the procurement and production process over smaller businesses. Weinberg told Roosevelt he “resented” Truman’s accusations and “having his motives impugned” and was “going to quit.” But Roosevelt talked him off the ledge. “That’s ridiculous,” he told Weinberg. “Look at what they say about me every day. I don’t quit.”