Authors: William D. Cohan
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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.
W
einberg 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.
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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.”
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E
VEN IF
W
EINBERG
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.
Fortune,
in its profile of Weinberg, made much of the fact that he was not on the Owens-Corning board of directors and that Goldman had never before done any business with the company. But it made clear that Weinberg had relationships all around it: without mentioning the (plenty important) familial relationship,
Fortune
reported that both
Amory Houghton, the chairman of Corning Glass, and
William Levis, chairman of the Executive Committee of Owens-Illinois, were said to be “really good friends” of Weinberg’s from their days together on the War Production Board; that Boeschenstein also knew Weinberg from the War Production Board; that
Keith Funston, the president of the
New York Stock Exchange and a member of the Owens-Corning board, also knew Weinberg from the War Production Board; and that another
Owens-Corning board member,
Robert Stevens, then the secretary of the army, was also Weinberg’s “very good friend.” Both Funston and Stevens, it turned out, served together with Weinberg on the board of General Foods, and this bit of serendipity proved to be essential in getting Weinberg the hearing with Boeschenstein after Funston and Stevens relayed to the Owens-Corning CEO some of the details of a supposedly masterful piece of
financing that Goldman and Weinberg had executed for General Foods. When Boeschenstein heard of this, the decision was made to “ask Sidney about this.” When Boeschenstein asked the Goldman senior partner what he thought his company’s stock was worth, Weinberg reportedly “gave him a figure off the cuff that was practically the price at which the stock was ultimately offered.” This insight combined with Weinberg’s extensive
personal connections to the decision makers was the key to Goldman being selected as the lead underwriter of the IPO. “Such is the familiar pattern—the threads of Weinberg’s three lives interweaving to produce a beautiful piece of business,”
Fortune
observed.
Any solution for Owens-Corning was further complicated by the
New York Stock Exchange rules, which required that companies listed on the exchange be widely held, meaning that more than 50 percent of the stock of the company be owned, after the IPO, by the public. This was potentially problematic for Owens-Corning because the two partners—Corning Glass and Owens-Illinois—together owned 84 percent of the company and were not so keen on
selling down to below the 50 percent threshold level. But this is where Weinberg’s skills as a banker—and a diplomat—were thrust into sharp relief. Not only did he convince his friend Funston at the New York Stock Exchange (how convenient) to relax the rules about how widely held the stock issue needed to be—the 50 percent rule was reduced to 20 percent, at least in this case—he also convinced his pals at Owens-Illinois and Corning Glass to sell
more stock than they initially wanted to so that after the IPO the public owned the 20 percent that Funston had agreed to. These compromises resulted in a bigger IPO—ultimately it was $22.5 million, $15.5 million of which went to Owens-Corning itself—and more fees for the underwriters, $866,000, led by Goldman Sachs. One admiring competitor of Weinberg’s said of him after the successful Owens-Corning IPO, “
Sidney
is a wizard at reconciling groups with different objectives. In the Owens-Corning deal, as in so many others, he made all the rival interests end up thinking that they’d won the day.”
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B
Y THE TIME
the blockbuster opportunity to underwrite the initial public offering of the Ford Motor Company popped up onto the radar screens of every investment banker on Wall Street in October 1953, all the pieces of the puzzle were in place for Weinberg and Goldman Sachs to be selected as the lead underwriter of one of the most prestigious and important financings of all time. Not only was Weinberg close with “Electric Charlie”
Wilson, the chairman of the finance committee of the
Ford Foundation—one of two major Ford shareholders looking to sell
stock (the other being the Ford family, of course)—but he also had long known the Ford family’s matriarch,
Mrs. Edsel Ford. As for her son,
Henry Ford II, who became president of the company in 1945, Weinberg had known him since 1947, when he became a member of the
Business Advisory Council of the U.S. Department of Commerce.
Weinberg helped to organize the Business Advisory Council in 1933 in order to increase communication between the Commerce Department and the business community and, of course—in time-honored tradition—as a way for powerful businessmen to influence government officials. The council met with the secretary of commerce several times a year, either in Washington or in resorts such as the Greenbrier, in West Virginia, or Sea Island, Georgia, or Sun Valley,
Idaho. (Just how cozy these businessmen were with the government became the subject of a congressional investigation, led by Brooklyn congressman
Emanuel Celler, in July 1955.)
Weinberg’s courting
of Henry Ford II was not nearly as seamless as his other personal and professional triumphs. Part of the problem may have stemmed from the fact that Henry Ford—the patriarch and Henry Ford II’s grandfather—was notoriously and grotesquely anti-Semitic. Ford’s
Dearborn Independent,
which once had a circulation of more than seven hundred thousand readers, began attacking Jews in May
1920—after the end of
World War I—and kept at it for years. Sadly, the diatribes were collected, bound, and published as
The International Jew: The World’s Foremost Problem
. A small sample of Ford’s thinking suffices to convey his ignorance. “
The Jew is the world’s enigma,” Ford’s surrogates wrote in the
Independent
. “Poor in his masses, he yet controls the
world’s finances. Scattered abroad without country or government, he yet presents a unity of race continuity which no other people has achieved. Living under legal disabilities in almost every land, he has become the power behind many a throne. There are ancient prophecies to the effect that the Jew will return to his own land and from that center rule the world, though not until he has undergone an assault by the united nations of mankind. The single description[,] which will
include a larger percentage of Jews than members of any other race is this: he is in business. It may be only gathering rags and selling them, but he is in business. From the sale of old clothes to the control of international trade and finance, the Jew is supremely gifted for business.”
After the death of Edsel Ford, the old man’s son, in 1943, an ailing Henry Ford Sr. took back the reins of the company for two years before elevating his grandson, Henry Ford II, to run the company. Weinberg first met Henry Ford II the same year—1947—that Henry Ford Sr. died. Soon thereafter, the chatter began on Wall Street that the Ford Motor
Company would consider an IPO as a way for the family’s he
irs to diversify their holdings.