The Grubman. (Comment)

Article excerpt

The financial scandals continue to produce more outrageous revelations, but lately they come with lurid personal details more appropriate to bottom-dwelling tabloids than the Wall Street Journal. The tangled plot and expressive names at Citigroup seem borrowed from Dickens. The megabank's well-known stock tout, Mr. Grubman, manipulates witless investors into buying the shares of American Telephone & Telegraph, not to accumulate more worldly wealth for himself or his firm but to get his 3-year-old twins into the prestigious preschool at the 92nd Street Y in Manhattan. Quite ridiculous, Grubman confided to a friend, "but there are no bounds for what you do for your children."

To secure the school's coveted acceptance of his adored children, Grubman enlists the aid of his powerful boss, Weill (some call him "Sandy Wile"), who generously agrees to give $1 million to the school (not his money but the bank's). In return, Grubman pumps up his valuation of AT&T stock to a "strong buy" so that Weill may ingratiate himself with Mr. Armstrong, AT&T chieftain and a Citigroup director. Armstrong is thus recruited for a boardroom plot to destroy Weill's rival for power at the bank ("nuke" him, in Grubman's coarse phrase). All goes as intended. Weill's rival is pushed out. Armstrong, grateful for the shilling of AT&T shares, assigns the bank a lucrative deal that will yield $45 million in fees. And Grubman's little twins are accepted by the 92nd Street Y.

The affair might have passed unnoticed and unknown--save for the killer e-mails. Grubman's boastful communications with friends and colleagues have been disclosed, thanks to a relentless public sleuth named Spitzer, New York's Attorney General. They spell out the wicked drama in which Grubman used Weill and Weill used Armstrong, while Armstrong used Grubman and Weill, all to good personal advantage. Grubman exalted in the triple play: "Once the coast was clear for both of us (ie Sandy clear victor and my kids confirmed) I went back to my normal self." That is, several months later he withdrew the "strong buy" recommendation, no harm done. The only losers, it seems, were those poor chumps, the investors who park their savings at Wall Street's leading financial institution and believe what it tells them.

What do we learn from this instructive tale? That it's not always only about the money. It's also about roaring egotism, the kind of imperial self-gratification the members of a privileged club operating on vast unaccountable power expect. In a twisted way, Grubman's messages were meant to defend his integrity--he wasn't hyping stock values for personal gain, he was doing it as fatherly duty. For love, not for money. The self-portrait is probably sincere--how the players truly see themselves (and their drooling customers). …