With Steinberg’s Death, U.S. Business Lost an Archetype
Saul Steinberg, one of the high-flying corporate raiders of the postwar U.S., who died last week, led the way for a generation of aggressive financiers. He was from the start a canny investor with seemingly unlimited reserves of adrenaline.
And before the giants of private equity popularized leveraged buyouts in the public imagination, there was Saul Philip Steinberg: archetype.
Steinberg’s acquisitive lifestyle in the 1980s would set New York a-chatter, and his appetitive investing behavior and outsider’s audacity would help shape the course of American business.
A 1986 humor book titled “How to Be a Mogul” identified Steinberg as an example of a breed known as “The Great White Mogul, A.K.A.: Jaws (Nicknames: the Liquidator, the Prowler, the Raider).” The book described the Great White as: “Small for his size, but no anchovy, this wily fish preys on larger members of its own species, devouring Mogul empires, firing management, and dissolving company assets into hard currency.”
It continued: “Between meals, Jaws’ cheeks appear deceptively flaccid, but while engaged in a ‘hostile takeover’ his powerful mandibles fill with tough, folksy wit, swelling at times to such a great size he must conceal them behind banks of telephones and dummy corporations to prevent enemies from spotting him and devouring him first or to keep fans from mobbing him.”
Perhaps most interesting about Great Whites was that “as a rule” they “did not set out to be sharks, just went with the flow.” That wasn’t Steinberg: He really did want to be a shark in the world of finance.
Steinberg was born in Brooklyn and grew up on Long Island. He went to the University of Pennsylvania’s Wharton School, and he graduated in 1959 with a bachelor’s degree in economics and a big idea. Sensing the importance of the coming information era, he noticed that computers were still too expensive for companies to buy; that’s why International Business Machines Corp. (IBM) rented and serviced them through expensive four-year leases.
In 1961, at age 22, he borrowed $25,000 from his uncle and his father, who ran a rubber-products manufacturer. They created the Ideal Leasing Co., which would later become Leasco Data Processing Equipment Co. (his father and uncle were partners). According to the Philadelphia Inquirer magazine, Steinberg purchased IBM’s “used computers after the leases expired, re-leasing them to smaller companies at more affordable rates, and extending IBM’s four-year equipment depreciation charge to an additional eight years, long enough to claim generous federal tax benefits.”
Steinberg hadn’t even turned 30 when, in 1968, Leasco acquired -- despite intense opposition from its officers and directors -- a staid $700 million fire-and-casualty underwriter called Reliance Insurance Co. (code name: “Raquel”). The company would later make Steinberg a vast fortune.
The tumultuous Leasco-Reliance merger attracted the attention of two congressional subcommittees, focusing on antitrust issues. Steinberg now had a larger audience, and the business press began to pay a lot more attention to this brash invader. In 1967, Merrill Lynch included Leasco as one of 50 major tech stocks, along with IBM and General Electric Co. (GE)
In 1969, Steinberg almost became a household name when he scandalized the establishment by making a bid to acquire Chemical Bank of New York, the old-line predecessor of JPMorgan Chase & Co. (JPM) and the nation’s sixth-largest bank. In 1984, he bought shares in Walt Disney Co. in a hostile- takeover bid. Although Disney management retained control of the company, Steinberg succeeded in forcing the giant to buy back his shares at a premium in exchange for walking away -- a practice that became known as greenmailing, which he learned to perfect. He also greenmailed Lomas & Nettleton Financial Corp., Quaker State Oil Refining and Chris-Craft Industries.
According to Forbes magazine, Steinberg’s personal wealth at one point exceeded $600 million. But he fell short of his outsized ambitions. In his early days, he told the financial writer Dan Dorfman, “You watch: like the Rockefellers, I’ll own the world. I could even be the first Jewish president.”
In the 1990s, however, things took a turn for the worse. Steinberg suffered a stroke. Reliance soon foundered. Steinberg was forced to sell assets, including an enormous Park Avenue apartment, a collection of Old Masters and, famously, a $2 million commode. As his finances and personal life spiraled into Shakespearean decline -- his own mother even filed a lawsuit against him (later settled) -- he came to embody a less savory corporate archetype that would became all too familiar in the years to come.
Jaws, in the end, succumbed to his own appetites.
(Elizabeth Manus is a writer living in New York. The opinions expressed are her own.)
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