AGENCIES AND RADIO OUT Wall Street Has Jitters at Christmas
NEW YORK (AP) _ Spooked by the insider trading scandal, Wall Street at Christmas is as jittery as that ″squeezing, wrenching, grasping, covetous old sinner″ Ebenezer Scrooge meeting the ghost of his partner Jacob Marley, wired with the firm’s ledgers, deeds and cash boxes.
Word that both investment banker Dennis Levine and Ivan Boesky, ″Czar of the Arbs″ - the arbitragers who speculate in the stocks of companies involved in billion-dollar takeover deals - had been ″wired″ with tape recorders by prosecutors before their downfall swept up the street like the chill wind off the East River.
Rumors, which the street lives on, and guarded whispers of more indictments to come from sophisticated stock surveillance computers moaned through the leafless elms of Trinity churchyard where Alexander Hamilton, father of the financial district, was said to be rolling in his grave beneath the tombstone attesting to his ″incorruptible integrity.″
In the mock Dickensian decor of Harry’s bar on Hanover Square, where three stretch limos out front took up the entire block between William and Pearl streets, worried yuppies in the half-million-dollar income bracket presumably searched their memories for any conversations they might have had in recent weeks with ″Ivan the Terrible.″ He was penalized a record $100 million and barred from the securities business for life by the Securities and Exchange Commission for dealing on inside information bought from Levine.
″There is tenseness, I can see it in their faces,″ said proprietor Harry Poulakakos, who welcomes some of the street’s highest rollers to his oblong bar when the 4 p.m. closing bell clangs at the New York Stock Exchange. ″Sure, big deals are made here, but maybe not so much right now. In time of trouble people stick to their desks.″
Off in a corner, a table of morose regulars, all in three-piece suits, gold flashing at their cuffs, and all apparently under 35, brooded about the tapped 300-line telephone console on Boesky’s desk. ″Everyone talked to Ivan,″ sighed the baby-faced broker in Orphan Annie curls.
The preholiday mood was very upsetting for Lollie, the Argentine waiter who was looking forward to the traditional Christmas largess of Harry’s fast track clientele. ″They tell me some of my customers may go to jail.″
Not everyone was wreathed in a holiday gloom at the prospect of process servers mingling with the sidewalk Santas and the Salvation Army bands along the short street of dreams that Alan Slepman, a young broker at Merrill Lynch, noted ″terminates at either end with the river or the cemetery.″
Certainly Gary Lynch, the SEC enforcement chief, and Rudolph Giuliani, the U.S. attorney, were, like Dickens’ Mrs. Fezziwig, ″one vast substantial smile″ over landing such big fish in their electronic nets and the promise of more to come.
Bankers and brokers who made money the old-fashioned way, in safe blue chip securities, could hardly contain their glee at the flurry of subpoenas reported to be falling on Drexel Burnham Lambert Inc. and other purveyors of junk bonds, the low-grade, high-risk bonds used to finance some of the more than 5,000 mergers and takeovers that changed the financial face of America in the last two years.
″They say Boesky is a very cooperative witness, so there’s a lot of people not sleeping well at night who probably shouldn’t be,″ mused Robert Birnbaum, president of the New York Stock Exchange, in his 12th floor office.
Even with an incoming Democratic Congress already clamoring for more controls on corporate raiders, Birnbaum reflected the buoyant mood of the carolers in the street below whose voices rose above news dealers proclaiming ″BOESKY SINGS″ and similar tabloid tidings of no joy.
″There’ll be a Christmas around my house,″ he said. ″The fact that one of the biggest traders in the world, with huge financial resources, was apprehended shows that the system works. The New York Stock Exchange trades $5 billion a day - a trillion dollars in the last nine months. People who invest in the market should now be quite confident that even a Mr. Big like Boesky can’t escape surveillance.″
Up in the visitors gallery, looking down on the plank floor jammed with brokers, specialists and messengers and awash in a paper sea of order slips and trading cards, Michael Creem, chairman of the New York Futures Exchange, wondered aloud about ″what sort of rules Congress can put in place to make people obey the law? There may be some question of what constitutes insider information, but when you’re paying for it you got to believe it’s illegal or why pay for it?″
Creem doubted that Alexander Hamilton was ″rolling in his grave any more than usual. There’ll always be people who bend the rules. Eventually they get caught. The street will be better off in the long run because even the biggest guy - and Ivan was the biggest - got taken down.″
It took the market only three days to bounce back from the 43.3-point bloodletting in the Dow Jones industrial average that followed the Boesky settlement.
″Sure there has been some loss of public confidence in the marketplace,″ said Lefty Lewis, a member of the exchange with the firm of Gavin, Lewis. ″But the feeling here is that it will be short-lived. They got the king of the heap, and the king was Boesky. Already the shock effect is beginning to fade.
″More shoes undoubtedly will drop. That’s not a major concern of anyone down on the floor who was trading within a system that works but certainly was not as lucrative as the numbers that Boesky ran up. These investigations may go on for months, even years. The worry down here is that the whole securities business will be affected.″
Hours before the market’s 9:30 opening bell, chauffered stretch limos and an occasional Maserati circled the Regency Hotel on upper Park Avenue. They waited for the wheeler-dealers attending the ″power breakfasts″ pioneered by the Tisch clan, who among other acquisitions took over the Loews hotel chain. But the subdued noise levels indicated the only mergers on the agenda involved scrambled eggs and lox.
Suddenly, as if belatedly reflecting the true meaning of Christmas, ethics were back in style, or at least in earnest conversation on Wall Street.
The morality of inside information was raised during the noontime prayer meetings and study groups that two Jesuit priests conduct in an upstairs, computer-equipped mission around the corner from the New York Stock Exchange.
″Info-manics, as they’re called down here, are on everybody’s mind now,″ said the Rev. Neil Doherty. ″Trust is elemental to the whole operation of the market. Trading is done by voice auction, faith in another person’s word. It’s supposed to be a fair playing field, but the inside traders had a sense of somehow being exempt.″
On the Tuesday after Boesky’s downfall, the question of what constitutes illegal information came up in a seminar on ″Faith Life and Work Life″ conducted by the Rev. Joseph Dirr, director of the Jesuit office.
″The market works on rumor, a mosaic of piecing information together,″ Dirr recalled the discussion. ″But there are so many people who have access to privileged information - not just the dealers and the board of directors, but attorneys, secretaries, printing people, cleaning ladies - how do you determine in your own conscience when a tip is in the realm of rumor or inside information?″
In the frail wintry shadow of Trinity Church’s brownstone steeple, where he has been snapping his shoe cloths at the feet of the financial world’s movers and shakers for the past two decades, Brown called on St. Paul to testify to the mood of Wall Street.
″The love of money is the root of all evil,″ he quoted from ″memory and experience. Play that market and you’re bound to be worried up with things of the devil.″
Religion also made the financial pages with the announcement that the Ivan F. and Seema Boesky Family Library had changed its name to the Library of the Jewish Theological Seminary.
Veteran market watchers speculated that the bleakest Christmas mood gripped those who took a beating in what they denounced as ″ultimate insiders arbitrage,″ when Boesky was allowed to dump a half-billion dollars worth of securities in advance of the wrongdoing revelations that drove down their prices.
″You just have to look at the movement of stocks to know that a lot of these guys have been hurt and hurt badly,″ observed veteran arbitrager Leonard Sheriff, who has been doing business on the street for 40 years. ″These big dealers are not engaged in classic arbitrage, which means a public announcement and then you deal. They are high-risk speculators or worse.″
According to Henry Gellermann, retired from the investment firm of Bache & Co., now a part of Prudential Bache Securities Inc.: ″The street always has fluctuated between greed and fear. The big difference today is that you have a lot of people below the age of 30 controlling vast sums of money. These bright, brash MBAs went through a fairly brief course of training that had no time for ethics but imbued them with the feeling that their first obligation was to cheat.″
As a Salvation Army band pumped out the unintentionally accusatory carol, ″Do You Hear What I Hear?″ the calm of the Christmas season seemed to settle with the dusk over the jittery street. Harry’s l4 private dining rooms, accommodating up to 500 guests, were booked solid from here on out for Christmas parties.
Santa would still come to Drexel Burnham where Levine was the top merger maven and where the chairman griped that investigators were asking for such detailed information the firm could hardly do business. Salaried staff would receive a Christmas bonus of 35 percent of their annual pay. At Goldman Sachs brokerage house, the bonus would be 25 percent, and at the American Stock Exchange, l2.5 percent. Still, some of the joy was missing from the color- coordinated downtown toyland of white knights, blue chips, greenmail and golden parachutes.
″This time you knew the trouble hit close to home, because the jokes didn’t pop right out,″ observed Lloyd Fitzsimmons, polishing glasses behind the bar of St. Maggie’s Cafe at the river end of Wall Street. Here the brashest and the brightest of the new young breed of brokers wait for the ″rigger boats,″ the upscale ferries that take them to their parked Porsches and Jaguars on the Jersey side. ″Now they’re just beginning to trickle out.″
Fitzsimmons diplomatically couldn’t think of any at the moment. But ″Pops″ Gunnerson, the grizzled chestnut vendor on South Street who ″got out of the rat race more than a half-century ago″ when Richard Whitney, former president of the New York Stock Exchange, traded in his banker’s pinstripes for the wider-banded Sing Sing model, obliged with a few recent chestnuts.
″Drexel Burnham has switched from junk bonds to bail bonds.″
″Now the only safe place to deal is in the steam room of the Downtown Athletic Club where you know no one is wired.″
End Adv Sunday Dec. 21