by Safi Thind
It takes Bud Fox 59 calls to get through to Gordon Gekko. Fortunately, I am on the phone to the real Gekko in just one. Like Fox, I am feeling a bit nervous about this. After all, speaking to a man who helped inspire one of the greatest anti-heroes in movie history – the character who tarnished the image of Wall Street with one famous line – could be tough. I wonder what his opening salvo will be: “Lunch is for wimps,” perhaps, “It’s a dog with fleas,” maybe or how about the notorious “Greed is good”?
But ten minutes into the conversation, succeed in changing anything in the future is a different matter, he believes. “Save Wall Street is a decent thing – whether it has influence or not, at least now they realise who to go for,” he says. “Before, there was a lower poverty rate and a better distribution between the rich and poor. I realise Asher Edelman could hardly be further from Gekko. Charming and frank, his words are a rejoinder to the image purveyed in the press. And, right now, there is nothing he hates more than the greed and incompetence of the banking industry.
“It is now a con game. I think it is presented accurately as a systematic rip-off of the public,” he says. In other words, greed still rules. Greed is still good. Despite experiencing one of its worst crises in the last 100 years, on the face of it an attitude defining event, banking remains as rotten as it had been in the years before 2007.
“People are angry about being ripped off for such a long time,” says Edelman. “I think the malaise is incurable. One would have expected, from the depth of sadness and poverty in the last five years, that there would have been some transfer towards decency by the powerful people. But it seems to have gone the opposite way.”
These are surprising thoughts from one of the original Wall Street corporate raiders. Now a septuagenarian, Edelman spent much of the 1970s and 1980s getting into flagging companies, overhauling management and breaking up businesses that were often sold off in pieces for profit. His successes include companies like Datapoint, Burlington Industries, Telex and Canal-Randolph – the latter, one of his crowning glories, produced $113 per share in value from a company whose shares were once at $25.
But he has also had failures, and run-ins with regulators. In 1991, he agreed to pay $436,858 in penalties after the Securities & Exchange Commission fined him for not publicly disclosing purchases of Datapoint shares that were carried out in order to ward off rivals’ attempts to oust him from power.
It all sounds very BlueStar (the airline Gekko buys into and seeks to break up, much to the anger of Fox, whose father has worked for it all his life), though he says his work was different. “It was specific to hedging and taking over companies.”
But isn’t this what Gekko did? Perhaps there is some regret? Looking back at the time, 30 years on, he says it “was riching if not enriching”. It certainly allowed him to make money in a way he couldn’t have managed in other areas. There was also the intellectual challenge involved.
But it was different then. Things have change since his day. The industry is much more institutionalised now, and the old entrepreneurial spirit is gone. And banks are, quite simply, using public money to fund their risk-taking activities.
An old-school financier, Edelman says things really began to turn sour with the abolition of the Glass-Steagall Act. That was when banks started using public money for trading activities, taking more risks and putting systems under threat.
The changes to the rules were begun under Ronald Reagan and then “they were thrown out of the window with Clinton”. And the rulemakers, the US government, have done nothing to change market practices. The Dodd-Frank Act, designed to reform, has been held up by lobbying banks. It is a sorry state of affairs and one that could be permanent.
“Regulators, legislators, politicians and others in government will get paid to continuously do what banks want,” says Edelman. “The American way has not changed much. You see the continued support of monetary policy which aids the rich and no fiscal policy for the poor or middle class. You see so many lobbyists dropping so much money for these politicians… elections might never again be a force for change, and you may never see that entrepreneurialism again.”
At least the private hedge-fund community pays for its money, rather than leveraging off the public, he says. But they haven’t exactly covered themselves in glory these past few years. “Hedge funds haven’t outperformed the markets,” he explains. “There is no justification for 99% of them to receive fees. But you are an investor and you make your own decisions about investing in hedge funds. This isn’t the case with a bank that has your deposit.
Edelman has never been one to settle for the norm. He had a precocious start to his career and was always interested in maths, calculating options convergence tables in his youth. After odd jobs, including as a runner, he arrived in Wall Street in 1961, and focused on the emerging art of option theory. “I was immediately attracted to the parts others were not,” he says.
With this strong mathematical bent, he went on to develop his interest in financial modelling with no less a luminary of the sphere than Nobel Prize winner Harry Markowitz. His work also led him to Europe, to set up Lehman Brothers’ business there. Along the way, he also cultivated his interest in art and became drawn into the world of New York’s SoHo and the galleries and artists that were there, including the likes of Andy Warhol.
In 1988, after two decades raiding companies, Edelman decided he had had enough of Wall Street. The previous year, he had been blocked from taking over textile group Burlington Industries Inc. when a federal judge ruled that a former Burlington executive had probably passed confidential financial data to the bidders. There were no charges of insider trading, but the outcome was a failure.
And so he moved to Switzerland and set up a contemporary art museum in Pully, near Lausanne. While he still continued to carry out corporate-raiding activities – including on champagne house Taittinger SA – art, which had previously been equivalent to business, now became the predominant force in his life.
He is a well-known name in the art world, running two galleries, and more recently moved into the world of art financing, explaining that he is working on some interesting deals for the future.
Edelman’s artistic side was initially taken as one of the inspirations for the character of Gekko. Wall Street screenwriter Stanley Weiser saw his office and decided to throw it into the mix as the basis for the “veneer of culture” that Gekko cultivates in order to rule New York’s sophisticated society. But he was also the inspiration behind Gekko’s warmongering philosophy. The latter quotes from Sun-Tzu: “Every battle is won before it is ever fought.” This approach could easily have been taken from the course Edelman taught at Colombia University in the 1980s, which was entitled ‘Corporate Raiding: The Art of War’.
But Edeleman hates the comparison – “the boring question”, he says, adding: “I think both Oliver Stone and Michael Douglas will tell you that the parts that had to do with me were the painting and the look of the apartment and the energy. But not the silliness of the movie. No one, not even crazies, would be shouting out insider information in the trading room.”
It is a valid enough point, but surely it must have been fun working with the film-makers? He says that, while they are friends, he threw Stone out of his office – “he is a pest and a bore and misbehaves” – but was happy to allow Douglas to hang around (“he was a good guy”).
In reality, he concludes, Gekko was a composite of several people including Ivan Boesky (“a crook”) Carl Icahn (“a clever corporate raider”) and “me, an activist businessman” as well as Stone himself.
But there is one aspect in which Edelman and Gekko are clearly enormously different – their attitudes towards greed. Edelman says he has given away the vast majority of his wealth, and is quick to insist: “I am not a rich man.” He was also one of the highest-profile supporters of the Occupy Wall Street movement when it broke on the steps of Zuccotti Park in September 2011. The riots and protests of the last few years have at least served to raise people’s awareness of the issues, and “who to go for”, he says.
However, whether the demonstrations of anger that have been seen will eventually succeed in changing anything in the future is a different matter, he believes.
“Save Wall Street is a decent thing – whether it has influence or not, at least now they realise who to go for,” he says. “Before, there was a lower poverty rate and a better distribution between the rich and poor. Now 49% of New York is at or near the poverty level. There are 50,000 homeless people. Children are starving as they are stopping food stamps. This is not necessary – this is one of the richest places on Earth.”
In the end, though, despite everything Edelman says, there are higher forces than greed in the world. “If greed is good, distribution is better.”