How Wall Street’s Billionaires Became Untouchable - William D. Cohan

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1:08It's the new way to use ChatGPT for bigger multi-step projects. And when you need more than just answers, give ChatGPT work access to your apps and files, and it can create real work documents like spreadsheets, slides, and structured reports. Get started at ChatGPT.com by selecting work mode available on Plus and Pro plans. We've created this class, a hubristic class of people. They're able to have anything they want in the world and will forever. I mean, they've created generational wealth. They are untouchable in that regard. It seems that the U.S. has the gold rules. There probably needs to be a more accountability generally.

1:46This is undermining our society when we create the class of oligarchs who seem to have no carburetor on their behavior or on their mouths or any accountability for their actions. And I think that's debilitating to our society. And unfortunately, it's starting at the top of our society too. Welcome to Open Book. I am your host, Anthony Scaramucci. Joining us is a dear friend, Bill Cohen. Bill, what a book this is. Okay, I'm going to make the argument here that this is your best book, and I've read every one of your books. But the title of the book is Money to Burn, The Unvarnished Truth About Leon Black, Apollo and the rise of a new Wall Street.

2:26So one of your reviewers said it was like five different books in one. But the reason I love the book, and I appreciate you giving me an advanced copy, which I read over the summer, is this is an unusual group of people. I mean, this is, and these are contemporaries of yours and mine, and we know these people. And so the research that you did on these people, I think was legendary. But let's start with the title. Why Money to Burn? What is the point that you're trying to make with that title? Well, first, Anthony, thank you for having me. It's always great to see you. You yourself have a new book coming out, which I wish you all the best with.

3:11And I can't wait to, I've read most of it, and I can't wait to see how well it does. uh well credit first to my wife uh your former uh uh teacher's daughter or librarian's daughter out where you all grew up how what a kismet sort of story so i'm going to interrupt you for a second so uh the the former librarian uh of the port washington middle school is your wife's mom Mrs. Futter. Right. And I'm going to tell you, this is a tale out of school, but I think everyone will appreciate this. I had a great relationship with her, and she used to save for me the Sports Illustrated Bathing Suit editions in the archive.

3:58How much do you love that? This is a legendary story in our family. How much do you love a 13-year-old Anthony Scaramucci going into the middle school library and saying, Mrs. Futter, do you have my stash? She says, yes, Anthony. and I would go back at that little study cubicle. And I can totally believe it. I feel like it's completely accurate. I can see you with your ghost motorcycle jacket on going back in the cubbyhole. I mean, that's how we grew up. But she was awesome. And by the way, and you have, I think your sister-in-law was the president of Barnard there for a while, right? That's correct.

4:36She went out to the Museum of Natural History, I believe, as well. Oh, correct. That's true. So she knew how to raise people, that's for sure. All right, but go ahead, Bill. Why money to birth? Well, my wife was very good at coming up with these titles because she has been in the publishing. She runs two publishing companies as part of Macmillan and has for a long time. So we were sort of struggling. I was sort of, you know, something to do with Apollo, Apollo Rising, you know, the whole Greek god angle of this. And then she just came up with that. And I think it really summarizes sort of what's going on here.

5:13I mean, these and again, you alluded to this. I mean, we all started, you know, with these people in the private equity business, you know, on Wall Street in the in the mid to late 80s. And, you know, this could have been us. I mean, if we had been fortunate enough to go in the private equity direction or were, you know, could have had the guts to start a private equity firm ourselves. Now there are these big behemoths, you know, which everybody on Wall Street wants to go work at. And essentially they've become, you know, immensely rich, immensely rich, fabulously rich. All, you know, pretty much anyone who touches private equity has become fabulously rich.

6:00And certainly that is the case among Leon Black, Josh Harris and Mark Rowan. And really, it comes from, you know, superb financial engineering, thanks to a benefit in our tax code that allows for the tax deductibility of interest and their own intelligence and smarts and savvy and being in the right place at the right time. And so as a result of having all this money, now they have money to burn in effect. And they're burning it. Well, look, I love the title because you're saying something else in the book, actually. And I'm going to test this on you. And I want you to respond. Okay. When I hear money to burn, I hear that there's a paradox to wealth.

6:43And when I hear money to burn, sometimes you can become so wealthy that it's almost damaging to your brain. It's like that old commercial when you and I were kids in the 80s. This is your brain and they crack two eggs and they say, well, this is your brain on drugs and the eggs are frying. And I sort of feel like there's a paradox to wealth. And you and I have done well. We're not as wealthy as these guys. But sometimes when you get so wealthy, it can cause you to start thinking about yourself differently than other people. What did Leona Helmsley say? you know the the little people right you know not us right us fitzgerald said the rich think differently than you and i and i'm just wondering if that's lace in the story there's a cautionary tale in this story about wealth and almost like psychosis and uh you know so sociopathic behavior am i missing that bill or is that no no that's the threat of the to me i want to give this to my children read the book because you got to be careful in life about excesses and all factors of life am i not am i not reading it right well and and and anthony you had uh a front row seat and continue to have a front row seat you know even uh you know 11 days right in the beating heart of it uh of this new class of uber wealthy people that have been created in this country much more than even in like any of the previous gilded ages i mean we're talking about unbelievable amounts of wealth and and you know leon josh and mark you know they're mere 10 to 15 billionaires they're not like elon and larry ellison i mean and these people just generally these people with so much money they have been able you know tom wolf wrote about insulate insulate insulate in Bonfire of the Vanities.

8:45And that was prescient because, I mean, these people have perfected being insulated, whether it's being surrounded by people who are beholden to them and therefore may not always tell them, give them the best advice or tell them when they're stepping out and behaving poorly. They obviously have every rich person amenity you could possibly imagine jets boats homes and i think even more importantly they seem to be above the law and above any accountability and um you know and again i'm not suggesting necessarily that any of the people i've written about in this book uh you know although others have need to be quote unquote held accountable or broken any laws but we we have certainly created a class from the oval office down of people who consider themselves now above the law, and there's no accountability for them.

9:45And there's really, we haven't figured out how to hold these people accountable. And it's due to their extreme wealth, and therefore the power that derives from that extreme wealth. Well, I don't want to go off topic of the book, but I think this is also related to Citizens United, because I give the money to the politician, and the politician will do whatever I want. Let me give more money to the politician. So now no breakup of the monopolies. I get tax breaks. The big, beautiful spending bill is helping me as a rich guy. Hurts the little guy. If you look at the legislative agenda since that decision was rendered, these guys are way more protected, way more insulated because they're now got the politicians completely in their pockets.

10:25But that's a whole other. And of course, and the president of the United States, you know, is now cannot be held accountable for anything he does while in office. Well, I mean, that's another, there's another big issue for reform, but I, I also saw the house of Atreus in this book. And so just to remind everybody who is in the house of Atreus, this was the son of Zeus who fed his, he cooked his son, Pelops, and he fed it to everybody at the banquet. And Zeus said, okay, your house, the sins of the father will be handed down to the son for eternity. And it was a big message in mythology about your dad and trying to get out of the shadow of your dad if he's not necessarily a good guy.

11:11And let's talk a little bit about Eli Black, who was a prominent businessman whose career ended in scandal. And how did that affect Leon Black's ambition, Bill? Well, I love talking to you, Anthony, because you're so learned and intellectual and so smart. But I mean, it's not me, it's you. Yeah. Well, no, but you - I read the book differently. Everyone's going to read the book and say, oh, this is a Wall Street book and there's a psychodrama. But I read this as like a cautionary tale about watching your own personal crazy. But go ahead. Go ahead. Yeah. I mean, so - Tell me about Eli Black. Well, first of all, Leon Black comes from 10 generations of Orthodox rabbis.

11:54So right there, I mean, that is an incredible fact. and, you know, which no one, I think, really appreciated or had knowledge of. His father was an Orthodox rabbi, too, practiced, you know, in like the five towns region of Long Island, south of where you grew up and my wife grew up. And, you know, he did that for like three years. And then at one point he decided, OK, enough. I don't really I'm not really enjoying being an Orthodox rabbi. I'm going to, you know, somehow pivot to being a businessman. And you do that, of course, like the same way I did it from being a journalist to being a banker by getting my MBA.

12:40He went to Columbia, the same place I went to get my MBA. And that allowed him to go to Lehman Brothers, believe it or not, and be a banker. and then from there he went and worked for one of his clients and running one of the clients portfolio companies took it over it was a company called seal cap which made believe it or not you might remember this anthony the paper tops that went on glass milk bottles that were delivered on our doorstep when we were kids i remember those very well okay and he made those uh his company that he ran owned made those paper tops to the milk glass milk bottles which of course now of course don't even exist even in fossil form and he converted that into a conglomerate you know conglomerates were really big in the 70s 60s and 70s you know whether it was ITT or GE or any of the other big conglomerates well he created one called United Brands the big centerpiece of which was United Fruit, which was the largest importer of bananas.

13:54You know, we don't grow bananas in this country, never have. The climate's not right. So we have to import them from Central and South America. So he created, he bought all these companies. He at one point owned Baskin Robbins and A &W Root Beer and Foster Grant Sunglasses. So his father was like a big deal they lived on park avenue they had a uh weekend home in westchester county uh he worked in the pan am building which is now the met life building uh and so um long story short and i want to ruin it for people uh there was a scandal involving tariffs which you know is very relevant to our life today uh and uh when leon was in his second year of harvard business school where he went because his father basically insisted he didn't want to go.

14:46Leon was like a philosophy major at Dartmouth and a very smart guy. But he did so well at Dartmouth that he easily got into Harvard Business School and went even though he didn't want to, didn't like it. And then when he was his second year at Harvard Business School, his father jumped out of the Pan Am building onto Park Avenue from the 44th floor, somehow broke the panes of glass with his briefcase i'm not exactly sure how that happened committed suicide amid a scandal which i talk about in the book uh and that's the so-called rosebud chapter of course and uh you know leon who you know was thinking about how to use his philosophy degree from dartmouth uh his father was a big businessman uh with wealth tied to the stock of United Brands jumps out of the window of the Pan Am building, and next thing you know, the family is in turmoil.

15:42Stock goes down, money is lost, wealth is lost. His mother is an artist, his aunt is an artist, is an art dealer, and his sister is a teacher. So guess what? It falls to Leon in his second year of Harvard Business School to try to figure out how to resurrect the family, not only its reputation, but it's how it was going to survive, you know, day to day and make a living. And, of course, that became, you know, I think his driving force in life. And he, you know, exceeded it in terms of wealth. But then, of course, had his own scandal. So there you go. Back to your mythology. Yeah, well, he's haunted.

16:28And it's obvious that he's haunted. And also the book, you know, Bill, among the many things I love about you is that you're an observer of human nature, but we're also both fallible guys, right? So we both also can own our own fallibility. But in this book, when I read about Leon Black, Josh Harris, and Mark Rowan, I know both of them. I've not met Leon. But when I read about them, it's like a rock and roll band. Okay, now Keith Richards and Mick Jagger could keep it together, okay? They punched at each other for 60 years, but they're still making music together. Okay, Paul, Ringo, George, right?

17:11John, they couldn't keep it together, right? They let the egos in. And so these guys built arguably one of the most successful businesses in the world, right? It's certainly the best thing that comes out of Drexel, but they can't keep it together. they are beating the daylights out of each other inside that firm so tell us a little bit about that and tell us a little bit about why human nature is like that because this is a predictable story it's not you know i'm reading the book and i'm like okay yeah that happens it's not that's not unpredictable guys thank you so much for listening and subscribing to open book you know we've got 200 authors on this show it's been a lot of fun for me but i'm also an author now too and i've got All the Wrong Moves available.

17:55Go to scaramucci.net backslash all the wrong moves. You can buy your copy today. It's a lot of fun and lots of commentary about what's gone on in the U.S. over the last three decades. Well, you're right. I am a student of human nature and I love it. And I love a great narrative. And one of the reasons I wanted to write this book is because it's a fascinating story right from the get-go with Leon's family and then drexel blowing up i mean we could talk about that for hours too but uh and then out of that comes this firm apollo which of course is the metaphor for rising from the ashes itself and so uh it was definitely leon's firm he brings together the merry band of people he wants from drexel and you know off they go trying to build a different kind of private equity firm uh and they you know but they did keep it together for, you know, you know, a long-ish time.

18:53You know, it was definitely Leon's firm. Eventually, when it came time to go public, Leon wanted to show that it wasn't just Leon's firm and that he had a succession plan sort of in hand, which is why he named Mark and Josh sort of his co-founders, even though they weren't, and why he gave them, you know, know 58 million apollo shares which instantly made them billionaires when apollo went public so that was the plan uh and two out of the three of them had to agree on things for anything to happen and of course leon basically you know used his influence as the largest shareholder and the real founder he had 93 million shares to you know get get his way and so uh over time you know each of them did their own things uh they had uh some great deals some deals that stunk uh but i think they had an understanding at the firm that you know we're going to do good deals we're going to do bad deals it's not going to hurt your career and so then and it'll come uh you know in the 2020 uh time period or you know six or so years ago uh you know leon decides it's time to retire He's going to be 70 and he wants Mark to succeed him, even though Mark had been on like a semi sabbatical or, you know, and sort of taking his time away from the firm after he had built a theme, this insurance behemoth, which has been the origin of the private credit market.

20:23And anyway, the feud became, you know, who was going to succeed. Leon and Josh, of course, wanted to be the successor. Mark was playing it cool. Leon wanted Mark. And eventually, you know, Leon got his way. Got to get to Jeff Epstein here. Well, of course. I mean, here we are. Back to Jeff Epstein. You know, I... A guy who will not die. I often say to people, I mean, I mean, in some ways, thank God I wasn't rich and or famous when Jeff Epstein was in his heyday, right? Because, you know, I miss Jeff Epstein, thank God. But these guys didn't. They all got ensnared by him. And I mean, this is - Well, Leon especially, obviously.

21:07Well, this is an incredible story. He pays$158 million for tax and estate work to Jeff Epstein. So, yeah, you know, Bill, come on, baby. When the windows open and you hear clippity-clop outside, it's a horse. It's not a zebra. OK, that's a cover up right there. OK, so what happened? OK, he regrets the relationship that law for every honor rates and blah, blah. Right. But this has destroyed the guy. Right. So what happened? You know, this is so remains a bit of a mystery. I mean, I think people have been trying to get to the bottom of this for years. I think, you know, the FT, The New York Times, Wall Street Journal have been trying to get to the bottom of this for a long time.

21:51I, of course, wanted to get to the bottom of it. You know, at least I had Leon talking to me on the record about it. Very open and, you know, by and large, I think honest. But, you know, we'll never know, Anthony, because like the other guy who was involved takes two to tango in this situation. The other partner in this is dead and isn't speaking. And, you know, if Jelaine knew anything about all this, she's not speaking either. So, you know, I pieced as best together as I could from talking to Leon, from exploring in great depth the Jeffrey Epstein files, you know, three million of six million.

22:36Who would have thought that when I started this book, that would be a source of material? And, you know, talking to the various lawyers who did Leon's tax and estate work. And the bottom line is, you know, 158, 158 million is an outrageous number for tax and estate advice. And when the Decker report came out, I wrote a piece in Vanity Fair saying, you know, come on, Leon, you don't expect us to actually believe this was for tax and estate advice. And, you know, I'm still somewhat incredulous, but, you know, I also haven't, as much as I would have liked to have found some sort of smoking gun that refuted everything Leon is saying, because, you know, sometimes investigative journalists like being that guy who figures that out.

23:25um you know i've not been able to find out uh anything that kind of refutes that i mean the 158 went for a lot more than just tax and estate advice and and i'm not you know uh no innuendo in that i mean he he you know he also helped him structure uh the purchase of his airplanes and his boats and uh his art you know buying and selling art collections in a tax efficient manner So the guy, Jeffrey Epstein, obviously was some sort of Svengali, had a lot on a lot of people and surrounded himself with all these powerful people. And somehow they were attracted to him. I mean, that maybe we'll never understand how that happened.

24:09But he also, for some reason, was an autodidact and, you know, didn't graduate college. Not that you need to necessarily do that, but it worked for me. you know he somehow he wasn't a tax and estate expert but he he did have some insight he like he advised a lot of family offices on their tax and estate manners and how to buy and sell things in a tax efficient manner and he had some insight which I've confirmed into a problem that Leon was having with his GRAX his estate planning for his kids and if it weren't fixed it was going to cost him two billion dollars in taxes and so he tried to go to you know the typical places you would go if you were a rich wall street guy you'd go to solomon cromwell and paul weiss and you know while gotchall and these other places and they couldn't really help him and so uh jeffrey epstein was on his board of his family foundation which, you know, I've asked Leon about and, you know, it's basically just a, you know, there wasn't a whole lot of substance to that position.

25:20And he said to him, you know, by the way, I've got this potential problem here. Can you help me? And not knowing whether he could or not. And he sent him the documents and Jeffrey Epstein came up with a solution. Now, you're a lawyer, a Harvard Law School graduate, Anthony. So you know about the concept of consideration. So to get these documents to change, he needed consideration. And he found some what I call the miracle consideration, which was that Leon was somehow getting had gotten 400 million of extra dividends from his Apollo stock that he shouldn't have gotten. And so he agreed to give that up.

26:00And in exchange for that consideration, he was able to redraft these documents in a way that wouldn't cost him the$2 billion in taxes. And I'm not sure I'm explaining that right. I'm not sure I fully still understand it. But that is what Jeffrey did for him. Listen, you explained it right, and you also explained it in the book, but I think there was something more nefarious. A lot of people do. I'm going to test a theory on you, okay? We're going to see if there's a generation gap, because I have young kids. You know what the riz is, Bill Cohen? What's the riz? Yeah, I think the buzz or whatever.

26:37Yeah, the charisma, charisma. Yeah, yeah. So I submit to you, if you had no riz and you had no swag in high school and you were nerditatious, which isn't a word, but what's close enough to a word, you were easy prey for Jeff Epstein. Am I wrong about that? No, you're not wrong. And back it around to page - That was the honey trap, wasn't it, sir? Yeah, back it around page 575 of this book, I explore that theory. uh with somebody who has some you know specific ideas about this you know uh yeah leon was not a cool kid in high school you know he was not one who i think uh you know you know got the ladies so to speak and um but you know once you become neither you know no like bill gates like whoever it is, I think you're right.

27:38Jeffrey Epstein preyed on these people, and he had a real sense that there was, you know, rich people who could use his services, so to speak. Now, you know, whether Leon availed himself of Jeffrey's services in that way or just, you know, availed himself generally. I mean, he obviously had affairs. We know that. And, you know, I document the one with, you know, Gazelle Gagneva in the book because that became public. You know, Leon was hoping it wouldn't, but it did. And so, you know, then that was all revealed about Leon's willingness to, you know, step outside of his marriage in that way. So, yeah, I'm not here to attack the guy as much as I am to observe it as the cautionary tale that it actually is.

28:31fascinating. I think that this book is your best for a number of different reasons, but the main one, Bill, is the subject material. I mean, I read your book on Goldman. I said, okay, that's super accurate. You worked there. Yeah, I worked there. It's a great book, and I have it right here in my study. I read the book on Bear Stearns and still vividly remember the CEO's urinary tract infection. Okay. I mean, that's how brilliant your writing was. So I get the writing. I've read Power Failure, interviewed you on this program for Power Failure. But this is about brilliance, ambition, extreme wealth, rivalry, secrecy.

29:20But the one I want you to talk about, Bill, is hubris. Okay? I thought you were going to say that word. Okay? Yeah, it is. So when I say the word hubris to you, what do you think? Yeah, I mean, as it gets back to sort of what we were talking about towards the beginning, where we've created this class, a hubristic class of people who are able to do and they're able to have anything they want in the world. I mean, and will forever. I mean, they've created generational wealth. They are untouchable in that regard. Right. And, you know, Leon has had his share of legal challenges, shall we say. He's been able to prevail on all of them, maybe because he can afford the best attorneys, maybe because the facts are with him and not with the plaintiffs.

30:14You know, but this is something we see play out, you know, all the time, every day. It seems that, you know, he who has the gold, the golden rule, he who has the gold rules. And there probably needs to be more accountability generally. I mean, we've just this is undermining our society when we create the class of oligarchs who seem to have no carburetor on their behavior or on their mouths or or any accountability for for their actions. and I think that's debilitating to our society. And again, unfortunately, it's starting at the top of our society too. Yeah, listen, I'm blown away by the book.

31:03I'm down to the five words here. You know, we got to fix that bill, right? We needed Teddy Roosevelt to come in and try to create some reform here. Hopefully we'll get that. But let's go to these five words. My producer and I took these out of your book. Okay, you've written six books on Wall Street. So, I mean, one of the reasons... Let's talk about Wall Street. Tell me about Wall Street. One of the things that's different about this book, in addition to being sort of a history of Leon's family and Drexel and Apollo, is that Mark Rowan has effectively, through creation of Athene and the fact that Athene, this big annuity insurance company, is now part of Apollo and creating all this capital that Apollo is then using to lend out and creating what we now are known as the private credit industry.

31:57And if you look at Apollo's assets under management, Anthony, they have about a trillion dollars,$850 billion of which is private credit,$150 billion of which is private equity, which is, of course, how they all started. Now, you know, private credit just dwarfs the private equity business at Apollo and at other firms too. So they followed Apollo's footsteps. So I also wanted to explore in the book how Mark Rowan has changed Wall Street. And it really is sort of a quiet revolution that people I don't fully appreciate yet. But I mean, you know, a lot of the risk that used to be housed in the Wall Street firms and that, you know, resulted in the 2008 financial crisis, which was the result that, you know, that I wrote about in House of Cards and in the Goldman book, because of Dodd-Frank, because of Federal Reserve regulation of Wall Street banks, a lot of that risk now, by definition, has moved out of those Wall Street banks.

33:01It hasn't stopped them from being incredibly profitable. I mean, I think JPMorgan Chase is going to make$66 billion in net income this year, which is astounding, but has moved into these alternative asset managers like Blackstone, KKR, Apollo, Brookfield, Aries, you know, et cetera, et cetera. And they're just exploding in terms of their assets under management and the amount of private credit that they are, money that they are lending to all sorts of companies. and the question is have we have we in effect slowly but surely created the seeds of the next planted the seeds of the next financial crisis through this private equity explosion of private equity and we've seen cracks in this dam in the last six months or so people get concerned about private credit it hasn't really blown up yet and the question is is this going to be where the next crisis is going to come from oh very very well said okay give me a couple sentences on drexel i mean you know you you remember this uh anthony i mean drexel was the place everybody uh who went to wall street wanted to be i mean it wasn't uh you know like leon and mark you know turned down goldman sachs josh harris left uh you know well he left blackstone to go to apollo i mean everybody wanted to be at Drexel because it was the most innovative.