Money and Power Page 12

  His plumage back in place, Weinberg returned to his position at the WPB with renewed enthusiasm. His most crucial role in government, it turned out, was to recruit other businessmen—who would not normally be sympathetic to Roosevelt’s call—to Washington to help with the war effort. He became known as the Body Snatcher. Not surprisingly, given his bias toward persistence, he could be quite persuasive with those executives reluctant to abandon their cushy posts and join the WPB. He would route his calls through the White House switchboard to give them a heightened air of importance. He would also bad-mouth in the business community those executives who tried to avoid his calls or public service. Since business executives generally viewed Weinberg with great respect and affection, this ill will had the desired effect—rather quickly in fact—of getting the recalcitrant executives to return Weinberg’s calls and to enlist in the war effort.

  Weinberg’s greatest recruiting coup, many thought, was his snatching of Charles “Electric Charlie” Wilson away from his position as president of General Electric to join the WPB in 1942. Wilson, who barely knew Weinberg and who had been in his position at GE for only two years, was reluctant to give up the post and move to Washington. Wilson also believed that GE was already so actively involved in war production that his highest and best use during the war would be to stay put, overseeing GE’s work. But after a meeting in Washington with the secretaries of war and of the navy, Owen Young, the retired chairman of the GE board, told Wilson, “Somebody’s put the finger on you.” When Young relayed to Washington Wilson’s preference for staying at GE, the message came back that Roosevelt wanted to meet with Wilson at the White House. That did it. Wilson signed up. “Sidney Weinberg never materialized in any of the negotiations involving me,” Wilson said later. “But I could see that somebody had put the heat on, and I knew from conversations I had later with Roosevelt and members of the Cabinet that Sidney had had a hell of a lot to do with it. I wasn’t in Washington very long before I realized that a good many other people around were there because of Sidney, too.”

  After Independence Day 1943, Weinberg submitted his resignation to Nelson, effective August 1. Without elaboration, Nelson told the New York Times that Weinberg resigned “on the advice of physicians who have ordered [him] to obtain rest and medical treatment.” He returned to New York and to his post at Goldman.

  Whether Weinberg was genuinely ill or whether this was a cover to allow him to pursue his next assignment for the U.S. government is not clear. On November 5, 1943, at the request of William J. Donovan, the New York lawyer and head of the Office of Strategic Services, Roosevelt approved the appointment of Weinberg to go to “Russia openly as the representative of the OSS,” assuming “Mr. Weinberg can be persuaded to go.” Roosevelt initialed Donovan’s request—“O.K. FDR—11/5/43”—and returned the memo to Donovan. Even though Weinberg was Jewish and spoke no Russian, or so he had earlier claimed, this time he took on the assignment. What he did in the Soviet Union for the U.S. government—and how long he was there—is not known. The CIA, the successor to the OSS, did not respond to a Freedom of Information Act request seeking information about Weinberg’s mission. One of his grandsons, Peter Weinberg, a former Goldman Sachs partner and the founder of Perella Weinberg, a boutique investment bank, was not aware of what his grandfather did in the Soviet Union during the war or even that he had gone there.

  Regardless of his secret mission and what he did on it, Weinberg returned, apparently at the request of Roosevelt, to the WPB—this time as vice chairman—in June 1944, eleven months after he left, supposedly for health reasons. His job this go-around was to handle “special problems” for Nelson and to once again act as the Body Snatcher to fill executive positions at the WPB. But his true mission was to see if he could end the public feuding between his two former clients—“Electric Charlie” Wilson and Donald Nelson. The two men’s public disagreements stemmed from a dispute about when to reconvert the country’s industrial production to public consumption from wartime consumption. Thinking the war almost won, Nelson wanted to revert back to manufacturing for consumers. Wilson, citing the judgment of the Joint Chiefs of Staff that an ammunitions shortage was looming, wanted to keep the country’s industrial production focused on the war.

  Weinberg sided with his friend Wilson over his friend Nelson and then was criticized for “stabbing his old friend Don Nelson in the back,” according to Fortune. “Not so, states Weinberg. What he thought of Nelson’s actions, in this instance, he told him, in anguish and bald Brooklynese, to his face.” By August 31, Weinberg’s latest mission was over. “I have just learned, with real regret, of your resignation from the War Production Board,” Roosevelt wrote to him. “I am indeed sorry to see you go and I want to send you this little personal note to tell you how very much I appreciate the many sacrifices you have made in order to serve the Government during these trying days. You have done a grand job and I am grateful to you.” Weinberg later made light of the dispute with Nelson and chalked up his departure to boredom. “There was less and less real work for me to do,” he said. “In the winter I was reading important papers until eight p.m. Last spring, I’d be finished by three. When I was done by ten a.m., I knew it was time to resign in Washington and return to New York.” Just over two years later, in September 1946, President Truman awarded Weinberg the Medal for Merit for “outstanding services” for his role working at the War Production Board.

  ——

  BY THEN, WEINBERG had returned to Goldman, just in time for the firm to celebrate its seventy-fifth anniversary. To mark the occasion, the firm held a dinner at the Pierre Hotel on Fifth Avenue (now the Pierre) for the partners and employees. At that time, Goldman had eleven partners, including Walter and Howard Sachs and Weinberg, and branch offices in Boston, Philadelphia, Chicago, and St. Louis. Despite the firm’s many successes to that point—many of them thanks to Weinberg’s perspicacity and determination—Goldman was still a firm on the outside of Wall Street looking in, like many of the predominantly Jewish firms.

  Anti-Semitism continued to complicate the calculus of doing business. But mores were changing, too, albeit slowly. One morning after Weinberg’s friend Paul Cabot had dinner with Weinberg and another man at the exclusive Brook, a club on East Fifty-fourth Street, the acting president of the club came over to Cabot’s table as he was eating breakfast to tell him it had been “inappropriate what he had done the night before.”

  “Did we speak in too-loud voices?” Cabot asked him, knowing full well to what the man was referring.

  “Oh, no, it wasn’t that,” came the reply. “It was the individuals at your table.”

  “What’s your exact meaning?” Cabot demanded to know.

  “You know we don’t accept Jews at the Brook,” the man said.

  “Well,” Cabot replied, “I’ve read the by-laws and there’s nothing on the subject there.… If that’s the way this club is to be run, you can stick your club you know where. You will have my resignation this very morning.”

  After the dispute with Nelson, Wilson went back to General Electric as a top executive. Weinberg’s reward for his loyalty to Wilson was nearly immediate when GE appointed him to its board of directors in June 1945. No board was more prestigious at that time, but it would be years before his spot there would translate into business for Goldman Sachs.

  The Korean War further enhanced the relationship between Wilson and Weinberg. In 1950, President Truman asked Wilson to head up the Office of Defense Mobilization, a new version of the WPB. Once again, Wilson was reluctant to give up his post at GE because he felt if he left again he would have to leave the company for good, in fairness to the management team. He asked Weinberg, the board director and Wilson’s friend, what to do. “Sidney spoke right up, as he always does,” Wilson recalled. “ ‘Hell you’re going to go,’ he told me. ‘Of course, you’ll go. And I’ll go with you.’ That made up my mind.” Once again, Wilson and Weinberg returned to Washington—for six months—to remobilize America�
��s war machine.

  But this time, the country was less passionate about the war effort, as Wilson and Weinberg figured out quickly. On their first day in Washington for the new assignment, in December 1950, there was no one around to let them into their offices at the Old State Department Building. So they pulled up a couple of chairs and sat in the corridor outside their offices and began to sketch out the plan for the defense mobilization effort. For months, they were inseparable, sharing a suite at the Shoreham Hotel and having lunch together in a small private dining room near their offices. But “it was a tougher task than either of them experienced in World War II,” Fortune reported. “The political atmosphere was hostile, the press was waspish, the response of industry was somewhat grudging.” They had their victories—for instance, the decision to produce more than just weapons—but “this whole chapter seems, in some strange way, to have slipped off the pages of history.”

  In 1952, Weinberg had once again changed his political leanings and agreed to serve as the treasurer of the Citizens for Eisenhower-Nixon. This was a splinter group, especially when compared with the powerful Republican National Committee. At one point, Weinberg and John Hay Whitney, another leader of the citizens committee, agreed to a rapprochement with the RNC. To get the deal done, Whitney—who had been meeting with the party’s leaders in Cleveland—called Weinberg at home at two-thirty in the morning seeking his advice on some concession or other. Weinberg advised Whitney to make the deal. “Jock, if they cut us down, we got to go along,” Weinberg told him. “I learned long ago that if you’re born a pygmy, you got to live a pygmy.”

  It was a good deal for the Republicans, given the staggering amount of money Weinberg was able to raise. “Without any doubt, Sidney is the best money-getter I’ve ever seen,” Whitney said. “He’ll go to one of his innumerable board meetings—General Foods, or General Electric, or General Whatever—and makes no bones about telling everybody there what he wants. Then he’ll say, ‘Come on boys, where is it?’—and up it comes.” In return for all this fund-raising, Weinberg got what he really craved—unlimited access to power.

  After Eisenhower’s election, the president-elect surrounded himself with three trusted advisers: Sherman Adams, Herbert Brownell, and General Lucius Clay. Weinberg, of course, knew Clay from the Second World War, when Clay was in charge of procurement for the army. In 1950, Weinberg had also recommended Clay to be the chairman and CEO of Continental Can Company, where Weinberg had been a director since 1930. Early one afternoon after the 1952 election, Adams, Brownell, and Clay were meeting together at the Commodore Hotel, in New York, for the sole purpose of figuring out whom they should recommend to Eisenhower for treasury secretary. By three o’clock that afternoon, after going around and around making little progress, Clay called Weinberg in his Goldman office at 30 Pine Street and begged him to recommend someone in the next two hours. Weinberg no doubt had already been giving the matter some thought and continued his thinking as he hopped on the subway—his preferred mode of transportation—to meet the men at the Commodore, on Forty-second Street. (Weinberg used to proudly tell his partners he saved five dollars a week by taking the subway.)

  “I didn’t have any clear idea of the matter when I got on the train,” Weinberg recounted later. “Then I began thinking about Clay. I’d been against him in a number of fights about war production, but I’d always thought this, this Clay fellow could run anything. The trouble is he’s not a fiscal expert, of course.” At about Fourteenth Street, still on the subway, Weinberg had an insight. “I suddenly said to myself, ‘George Humphrey’s like Clay! Goddam it, why not George Humphrey? I’ve always said he’s one of the ablest fellows I know in industry.’ ” By the time he arrived at the hotel, Weinberg had convinced himself that Humphrey, a steel executive, should be Eisenhower’s treasury secretary. He quickly convinced Eisenhower’s advisers of his belief as well and then introduced Humphrey to the president. The two men had never met, and Eisenhower did not know of Humphrey. He served Eisenhower for more than four years and became a powerful force in the cabinet. “When George speaks, we all listen,” Eisenhower used to say. Naturally, after Humphrey’s appointment, he and Weinberg spoke regularly about the economy and fiscal policy to the point where if the two men did not speak in a given day, Weinberg would worry about the machinations going on at Treasury. The irony, of course, was that had Weinberg wanted the job—or likely any other cabinet post by that point—he could have easily had it, but he chose instead his preferred path of being a power behind the throne.

  CHAPTER 4

  THE VALUE OF FRIENDSHIP

  Weinberg wanted to get back to Goldman and reap what he had been sowing during the war years. With America’s enormous productive capacity turned back again toward meeting fifteen years of pent-up consumer demand, Weinberg had figured correctly that Goldman was in position to make vast profits by providing capital to meet those needs. After years of Weinberg’s politicking and public service, it was time for Weinberg and Goldman Sachs to make some serious money.

  After he was elected to the board of General Electric in 1945, no small accomplishment for a Jewish banker from Brooklyn, GE’s board chairman, Philip D. Reed, asked Weinberg to address a group of company executives at a banquet at the Waldorf-Astoria hotel on Park Avenue in Manhattan. In introducing his new director, Reed felt certain Weinberg’s comments would be enlightening, but in any event he assumed that Weinberg felt as Reed did that GE “was the greatest outfit in the greatest industry in the greatest country in the world.” Most Wall Street bankers would hit that softball out of the park by sycophantically agreeing with the boss. Not Weinberg. “I’ll string along with your chairman about this being the greatest country,” Weinberg told the crowd, “and I guess I’ll even buy that about the electrical industry being a pretty fair industry. But as to GE’s being the greatest business in the field, why, I’m damned if I’ll commit myself until I’ve had a look-see.” He then sat down abruptly and reveled in the warm applause from the stunned group.

  Such antics were typical of Weinberg and merely endeared him further—for reasons not entirely clear—to his fellow board members. In 1953, for instance, at a GE board meeting, there was a proposal for the directors to consider about awarding women employees, or the wives of the male employees, five shares of GE stock should they happen to give birth to a child during the year, which also happened to be the company’s seventy-fifth anniversary. “His lips characteristically pursed,” Weinberg bided his time after considering the proposal and then offered his fellow board members—not a young man among them—one hundred shares of GE stock if any of them again became a father. “The others could barely wait to get out of the room and broadcast this—to them—hilarious proposition among their friends,” according to one account of the meeting.

  No doubt his fellow board members enjoyed Weinberg’s levity because he also was plenty serious about the business at hand. As Walter Sachs had observed, Weinberg liked to be part of the board committees—for instance, the Executive Committee, the Compensation Committee, or the Audit Committee—where the real work of the corporation got done. Thanks to his weekend sessions at his home in Scarsdale, he was always well prepared—the McKesson debacle notwithstanding—and therefore could be a real ally, assuming he agreed, to a chief executive looking to pursue a particular path. After World War II, for instance, GE’s executives wanted to spend several hundred million dollars pursuing an aggressive expansion program to take advantage of what they perceived to be—correctly—a coming boom in demand among Americans for GE’s products. But the amount of capital to be committed was not trivial, and Charles E. Wilson, GE’s president, was not certain the board would go along. “Sidney had done his homework, and that was all I needed,” Wilson recounted a few years later. “He seconded my proposals in his inimitably persuasive fashion, and after that there was nothing to it. He’s a great man to have on your board.”

  It wasn’t until 1956—eleven years after Weinberg’s appointment to
the board—that Goldman joined Morgan Stanley as the lead underwriter of a $300 million bond issue for General Electric. “That, as Bobby Lehman was good enough to say, is a great triumph for the firm,” Walter Sachs recalled. “I told him when he called me at the hospital that I thought it was a great triumph for Sidney Weinberg, which it is.” As Sachs pointed out, the “Morgans have always been the bankers for General Electric.” It was “through Sidney’s relationship with Charlie Wilson and his work during the War, the Second World War, on W.P.B., [that] they became good friends.”

  ——

  EVEN IF WEINBERG was not on a company’s board, he was still able to figure out a way for Goldman Sachs to benefit from his relationships. In 1949, Weinberg’s son, Jimmy, began working at Owens-Corning Fiberglas, which was a joint venture between the Owens-Illinois Glass Company and Corning Glass Works and the Houghton family, the high WASPs of Corning, New York. Two years later, Jimmy Weinberg married Elizabeth Houghton, itself a bit of a coup, but nothing—it turned out—compared to the refinancing Weinberg arranged for Owens-Corning Fiberglas. The same month that Jimmy Weinberg married into the Houghtons, Harold Boeschenstein, the CEO of Owens-Corning Fiberglas, contacted Weinberg about how the company might raise some additional capital. The two parent companies, which together owned 84 percent of Owens-Corning, were not permitted by the Justice Department to own any more of the company and so could not invest anything additional.

  There were any number of possible solutions to the question of what Owens-Corning should do, of course, including obtaining a bank loan, or selling corporate bonds, or issuing equity publicly for the first time in an IPO. Of the three options, the most lucrative for Goldman Sachs from a fee perspective was the IPO—but it was the most risky. Even though Weinberg was in the Presbyterian Hospital, in New York, for surgery and “flat on his back,” he gave the matter of how Owens-Corning should raise the needed capital some considered thought. He was not alone in thinking through this issue, of course, as the proposed financing was one of the most coveted assignments on Wall Street at the time. Not being on the board of Owens-Corning at first seemed like a disadvantage for Goldman Sachs and Weinberg, notwithstanding the business of the royal nuptials. While he was recuperating in the hospital from his surgery, Weinberg wrote Boeschenstein a memorandum recommending that Owens-Corning raise the needed capital through an IPO.