John Gutfreund, who died Wednesday at 86, symbolized the driven, cigar-smoking swagger of profane Eighties’ Wall Street excess and was a fixture on the gilded social scene.
As a pivotal figure in Michael Lewis’ 1989 book “Liar’s Poker,” Gutfreund, who had been chief executive officer of Salomon Brothers, gave the book its title, which refers to a bluffing game he played on the Salomon trading floor with then-head of trading John Meriwether.
Gutfreund and his second wife, former stewardess Susan Penn, whom he married in 1981, had become poster children for Eighties ostentation, with a duplex apartment at 834 Fifth Avenue, decorated by Henri Samuel to the tune of an estimated $20 million, which featured their collection of Impressionist art, its centerpiece a Monet water lily painting. Then there was their triplex in a hotel particulier on rue de Grenelle in Paris, where the Gutfreunds astonished their neighbors by constructing an unheard-of $1 milllion underground parking garage and car wash. Gutfreund was crowned King of Wall Street in a Business Week article in 1985. He and his wife are also thought by many to be the originals of the Bavardages, the Wall Street tycoon and his wife in Tom Wolfe’s 1987 novel, “The Bonfire of the Vanities.” In 2008, Lewis wrote in Condé Nast Portfolio, Gutfreund told him, “Your f–king book destroyed my career, and it made yours.”
One night in New York, for instance, Susan had designer Madison Cox create an intimately scaled 18th-century French garden with a waterfall as a centerpiece for a dinner party for Jayne Wrightsman. Then there was the evening she served three different kinds of caviar. Members of the gratin in Paris and New York got used to receiving hand-written invitations from Susan hand-delivered by her driver. She was also said to have a special refrigerator in her Fifth Avenue apartment for chilling her fragrances. “They’re free to judge me any way they want,” she told W in July of 1994. “I was really only interested in pleasing my husband and making a life for us that would give us and our friends pleasure….I never used public funds to put one pillow in my house, so I never felt the need to apologize for anything.” She noted in the same story, “I regret the pain my husband has suffered. He is the most deserving man, and I think he has been abused beyond belief. It’s been very painful to watch.”
Gutfreund, the son of a man who owned a meat-trucking business, grew up in Scarsdale and attended Oberlin College. After serving in the military in Korea, he joined Saloman Brothers in 1953, working in the bank’s municipal securities business. He became a firm partner in 1963 and succeeded William Salomon as senior partner in 1978. He had promised William, a scion of his firm’s founding family, that he would keep the firm private, but didn’t. Three years after he became senior partner, Gutfreund sold the partnership to Philipp Brothers, a commodities company, then became ceo of the combined firm, which was the biggest merchant bank on Wall Street during the go-go Eighties. Salomon was known for its fixed-income trading, making money on swings in the bond market, and introduced the first mortgage-backed security.
Ron Perelman tried to take over the company in the late Eighties, but Gutfreund turned to Warren Buffet as a white knight. Then Salomon got caught up in a major scandal involving illegal bond trades, and the firm was fined $290 million. Gutfreund was forced to resign, had to pay a $100,000 fine and was banned from running a securities firm for life. The firm was weakened by this, which led to its being bought by Travelers Group. It became Salomon Smith Barney; then the name Salomon was dropped. Gufreund, for his part, spent the next three years pursuing $55.3 million he believed that he was still owed under his contract; eventually, the courts tossed out his suit. Meriwether went on to found Long Term Capital, which famously collapsed in 1998. Gutfreund was also the man who fired Michael Bloomberg from Salomon in 1981; Bloomberg used his $10 million settlement to fund the start-up he launched the next day.
As Gutfreund said to Lewis in 2008 about the ceo’s of banks, “I didn’t understand all the product lines, and they don’t, either.” Nor do bank chiefs control their subordinates, he noted. “They’re buttering you up and then doing whatever the f–k they want to do.” What caused the 1987 economic collapse? “Greed on both sides — greed of investors and the greed of the bankers.” And the major effect of going public was to transfer the financial risk to the shareholders. “When things go wrong, it’s their problem….It’s laissez-faire until you get in deep s–t.”
Gutfruend was senier adviser to the investment partnership Collins Stewart from 2002 to 2008, and served on the boards of Nutrition 21 Inc., Evercel, on that of Compudyne Corp. from 2004 to 2007 and those of other firms. He was a lifetime member of the board of trustees of the New York Public Library and chairman emeritus of the Aperture Foundation.
He is survived by his wife and four sons, three by his first wife, Joyce Low, and one, John Peter Gutfreund, by Susan.