The Weekend That Changed Wall Street

selling Equity Office Properties Trust, a conglomerate of 573 properties, to Schwarzman’s Blackstone Group for $39 billion. Blackstone flipped the majority of them, and Zell and Schwarzman walked away with big profits right before the real estate bust sunk most of the properties’ values.
In May of 2006, I was a guest host for Charlie Rose. As I sat at Charlie’s famous “table” with Schwarzman and David Rubenstein, chairman of the private-equity powerhouse Carlyle Group, I was impressed with how both men oozed confidence and optimism as they talked about making bigger and bigger deals. At one point I said, “You’re in the Golden Age of private equity. Do you think the day will come when trees don’t grow to the sky and the market shifts away from you?”
“Only foolish people believe that trees grow to the sky,” Schwarzman said with a chuckle. “Or young people who haven’t experienced trees being cut down. It’s important to shine an amber light, to slow down, to not get caught up in the mania.”
Indeed, Schwarzman had never been accused of getting caught up in the mania. He was a smooth operator, even-keeled—“Not a screamer,” a colleague once observed. But on that day in May, he was on top of the world, and the trees in his garden did seem to be growing to the sky.
When I saw Schwarzman again in the fall, I casually asked him, “So, how’s your apartment? You know, we had our engagement party there. It’s an unbelievable place.”
He was enthusiastic. “Maria, you’ve got to come over and see it.” And he invited me to his holiday party.
I was interested in going, of course—not just because I was curious about the apartment, but also because I was a business reporter. Schwarzman’s guest list was sure to include many of the captains of finance. So I accepted.
I hadn’t realized that the Schwarzman holiday parties were always themed. That year’s theme was Bond—as in James, not municipal. The host was dressed in a snazzy tux, portraying 007 with Christine shimmering at his side in a silver gown. Scantily clad “Bond girls” roamed the party serving drinks and hors d’oeuvres. There were repeated joking references to “Goldfinger” throughout the evening.
The apartment was crowded with well-known Wall Street faces. John Thain, chief executive of the NYSE, was there, having recently purchased an apartment in the building for a reported $27.5 million. I spotted a smattering of “real” celebrities, and smiled when I saw Paris Hilton holding court, surrounded by an admiring group of investment bankers from Bear Stearns, Lehman Brothers, and Goldman Sachs.
At one point in the evening I found myself in a corner chatting with Jimmy Cayne and Dick Fuld. Cayne, the flamboyant chief executive of Bear Stearns, was enjoying himself, as always, despite the buzz of criticism about his extremely large Christmas bonus of nearly $15 million. Fuld, the head of Lehman Brothers, known to be a lone wolf, hugged the corner, having private conversations and at times looking uncomfortable.
A couple of Bond girls slid over to us, and suddenly a photographer appeared. “Take your picture?” he asked. Fuld jumped up in alarm. “I’m not getting my picture taken with any Bond girls,” he barked, and took off. Cayne laughed and shrugged. He didn’t mind. Nothing could touch him—or so he thought.
In retrospect, the Bond theme was an interesting commentary on the era. Schwarzman might well have imagined himself as the 007 of Wall Street, smoothly sailing above the troubles that afflicted others. He appeared to enjoy playing the sophisticated man’s man; the male ideal; a magnet for power, money, and women for whom danger and intrigue were all in a day’s work.
Schwarzman was the envy of his peers, but he and they might have paused to consider that in 2006 the primary characteristic of James Bond was that he was an anachronism, and those who aspired to walk in his shoes were perhaps headed in the wrong direction.
This wasn’t the only high-profile party the Schwarzmans threw during that season. The Bond party was followed on February 14, 2007, by a $3 million sixtieth-birthday bash for Schwarzman at the Armory in New York. Jonathan and I were in attendance there as well. The Valentine’s Day birthday party got plenty of media coverage, thanks to its dazzling guest list, which included a roster of New York celebrities—Donald and Melania Trump, Barbara Walters with Vernon Jordan, Tina Brown, former New York governor George Pataki, Charlie Rose, Barry Diller, and Cardinal Egan. In addition, there was the familiar cast of Wall Street regulars—John Thain; Lloyd Blankfein, CEO of Goldman Sachs; Stan O’Neal, CEO of Merrill Lynch; Jimmy Cayne; Sandy Weill, now the former chairman of Citigroup; Jamie Dimon, CEO of JPMorgan Chase; and real estate tycoon Jerry Speyer.
Having just been to the Schwarzmans’ apartment, I noticed right away that the Armory was decorated as a replica of their living room. Everything was absolute perfection, as one would expect of a party with such a hefty price tag. Schwarzman’s favorite entertainer, Rod Stewart, performed. (I’m told his fee was $1 million.) Patti LaBelle sang “Happy Birthday.” It was yet another lavish, over-the-top celebration of capitalism, paying homage to the new captains of finance. Life was good.
“It was a great age of leverage, credit, and debt entitlement,” Mohamed El-Erian, CEO of Pimco, the world’s largest bond investor, told me later. “People felt entitled to do all sorts of things using debt. You suddenly had a massive innovation that reduced the barriers of entry to credit markets. Wall Street believed that it could build one liquidity factory after another after another after another.”
El-Erian noted that the mind-set at that point was that everything was basically stable. It was a “Goldilocks economy”—never too hot or too cold. The aura of stability led to false confidence, which led in turn to excessive leveraging and riskier activity. His take seemed to be accurate. The people whom I interviewed didn’t appear to have a care in the world. But Schwarzman’s