• Choose a category
• All
• Classic-Fiction

By Root 3236 0

formally notified Salomon that it was investigating the squeeze in the May two-year-note auction, which the letter from the SEC had inquired about. Gutfreund now got serious, said Snow, and hired Marty Lipton’s firm Wachtell, Lipton, Salomon’s outside counsel, to begin its own investigation, on behalf of Salomon, of the circumstances surrounding the May squeeze.34 People within Salomon had mixed views about the squeeze. Some said the Treasury market was inherently designed to be collusive. The job of a dealer was to work with its customers to distribute huge blocks of bonds into the market. Little squeezes happened all the time. This one was big. So what? The Treasury was picking on Salomon. It was the years of hubris, the wildness depicted in Liar’s Poker, the gradual erosion of power that had made Salomon a punching bag.35

But others were furious that Mozer had once again defied the Treasury. They were baffled that he would pull a huge squeeze when it was well-known that he and Basham were already at loggerheads. Later, these questions would increase. Why did Mozer—on probation, told his behavior had been “probably criminal”—taunt the Treasury so outlandishly that his coup splashed headlines all over the financial press, in a way guaranteed to draw even more attention to himself?36

Snow, who reported to Feuerstein on trading operations, had been in charge of the internal investigation involving the May squeeze. In June, he was out of the office some of the time with knee surgery, and neither he nor Feuerstein was involved in the Glauber meeting, nor knew about the subsequent decision to further delay reporting Mozer’s actions.37 But once Snow returned full-time to the office in July, increasingly he started to realize that he was out of the loop. People began disappearing into meetings. The situation preyed on his mind. One night he had a dream. He walked into Feuerstein’s office the next morning and said he had dreamed that he and Feuerstein had actually called Warren Buffett and told him about the false bid, because they were both so frustrated that Gutfreund and Strauss had done nothing about it.

Feuerstein looked at Snow cross-eyed. “No, no,” he said. “It won’t come to that.” Feuerstein was still trying to influence Gutfreund. Going to Buffett would be throwing that relationship away.38 Snow had not intended his account of the dream to come across as a subtle threat to bypass his boss and call Buffett, but he thought Feuerstein seemed to have taken it that way.39

A few days after beginning their work, the Wachtell, Lipton investigators had returned with a preliminary report on the May squeeze. Only now, however, were the investigators told that senior management had known since April that Mozer had submitted an unauthorized bid in the February auction.

With hindsight, Salomon’s actions looked far worse. After learning of Mozer’s false bid in February, which Feuerstein had said was criminal in nature, management had taken Meriwether’s vouching for Mozer and Mozer’s word that he had never done it before, without investigating further or disciplining Mozer in any way. They had left him in place, which allowed the May squeeze to occur. Once it did occur, Salomon was in more trouble, because telling the government they knew about Mozer’s previous phony bids but had only now reported them would probably have conveyed the sense that Salomon was a gang of thieves. Worst of all, Gutfreund had met with Bob Glauber in mid-June about the May squeeze, but had said nothing about all these earlier events. Now, as Snow explained to Maughan, when things started blowing up, everyone involved started excusing the original delay by saying the matter was a single minor event that caused no customer any harm, cost the government nothing, and didn’t make sense, even from the standpoint of the trader involved.40 Given the pressure of business, Gutfreund said, he simply hadn’t deemed it that important.41

Unfortunately, he was wrong about that. The Wachtell investigators had discovered that the February auction was not the only one that