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September 19, 2008 6:56 pm
Last Sunday evening, Bob Diamond was walking to a Manhattan restaurant with his wife and daughter when he received a phone call. It was Bart McDade, a senior executive at Lehman Brothers, the embattled Wall Street bank.
Mr Diamond and his team at Barclays Capital had spent the previous four days frantically working on a rescue takeover of Lehman, but it fell apart when the US government refused financial support. Mr McDade asked if Barclays would consider buying Lehman’s businesses out of bankruptcy. After sleepless nights, Mr Diamond agreed to try. Arriving at the office at 6am the next day, he began finessing a deal to keep Lehman’s US operations intact. The next afternoon, Mr Diamond walked on to the trading floor of Lehman’s head office near Times Square. To raucous applause, he declared: “You have a new partner.”
By snapping up one of Wall Street’s most venerable names, the 57-year-old Mr Diamond has demonstrated the traits that have characterised his investment banking career: supreme self-confidence, single-minded determination, an ability to motivate people and take risks. Three decades after he started in a lowly position in IT at Morgan Stanley, the deal elevates him instantly into Wall Street’s elite.
Mr Diamond was not destined for a banking career. Born in Springfield, Massachusetts in 1951, his father was a university lecturer, a man he calls “his hero”, who taught him: “Don’t look for status. Don’t look for glory . . . He taught me that if you couldn’t have your dream, you made the most of what you had,” he told graduates at his alma mater, Colby College, a liberal arts college in Maine, in a commencement speech this May.
In his career he has been willing to take calculated, circuitous routes to get where he wants. After an MBA at the University of Connecticut and a brief stint teaching, he joined a small medical technology company to soak up experience faster. Then he worked towards his desire to be a bond trader, finally reaching Morgan Stanley’s trading floor. In 1992, after 13 years, he defected to Credit Suisse First Boston . He described the four years at the Swiss bank as “really miserable”, he said in his May speech. “Without those four years, I wouldn’t have known that the most important thing in successfully building an organisation or building a business is talent and culture.”
He left CSFB after a row over bonuses – his team thought it deserved bigger ones – moving to London as head of fixed income at BZW, then Barclays’ investment banking arm. His timing was poor. Within a year, Barclays ditched its investment banking ambitions. Mr Diamond took charge of the remaining business, “the rump”, and built up its fixed-income operations. A year later, Barclays Capital suffered heavy losses following Russia’s default. Despite pressure to close the business, Barclays stuck by him. “At the time, no one gave the organisation any credibility,” says Jerry del Missier, president of Barclays Capital and one of Mr Diamond’s longest-serving associates. “The positive thing was that the board really had to commit to be in investment banking.”
For the next nine years, Barclays Capital rode the debt markets boom fuelled by low interest rates and the arrival of the euro. Mr Diamond forged a competitive culture, poaching teams after a rigorous interviewing process. Potential recruits are subjected to four-hour interviews to reveal their true characters and to weed out those who are not team players. Mr Diamond calls this the “no-jerk rule”.
He can be funny and charming and enjoys being the centre of attention. Colleagues praise his willingness to listen to advice or criticism, though he can be ruthless with those who do not meet his standards. Even so, he inspires immense loyalty and prefers to be close to the action – operating from a glass-fronted office on Barclays Capital’s trading floor, which gives him instant feedback on the markets. It is decorated with sports memorabilia, golf balls (he has a respectable handicap), and family photos. “He has his ear on the trading floor and knows what is going on. That is a key element,” says Hans-Jorg Rudloff, chairman of Barclays Capital.
As his empire expanded, Mr Diamond’s influence within Barclays also increased. He was a contender for chief executive in 2004, but was passed over for John Varley, the cerebral Englishman. Mr Varley promoted him to president and he joined the board – a move that forced the disclosure of his enormous pay. He made £21m last year, making him one of the UK’s best paid bosses. He found the tabloid backlash intrusive, but also sees his elevation as a sign that the 300-year-old British bank is beginning the embrace the meritocratic ethos that has inculcated at Barclays Capital.
Barclays’ head office struggles to exert its influence over his Mr Diamond’s empire, which at times operates as an independent institution. Though the two men insist they get on well, a former colleague describes relations as “verging between cordial and strained”. This year he moved to beef up his US operations and declared his intention to spend more time in New York, in part to be near his three children, who are all now in the US.
Even though London has been his home for more than a decade, and he has dual nationality, Mr Diamond remains unabashedly American. His key concessions to life in London are as chairman of the Old Vic theatre and a love of Chelsea football club, which he supports with the same fervour as the Boston Red Sox and New England Patriots. “If I think about my fellow American expatriates who have been in London a long time, he’s the person that has changed the least,” says Michael Cohrs, head of global banking at Deutsche Bank, who occupies the executive box next to Mr Diamond’s at Chelsea’s Stamford Bridge stadium.
Barclays Capital has not been immune to fears about its own balance sheet. Its losses from complex debt securities have been less severe than rivals, but analysts have questioned its policy of not using market prices to value its portfolio of private equity loans. Rivals admit the Lehman deal – at $1.75bn (€1.2bn, £950m) for the bank’s US operations, head office and data centres – is a coup, even as questions remain about whether his team can absorb 10,000 new staff. Mr Diamond is unapologetic. “We’re in a consolidating world where there will be three or four or five bulge bracket firms. If we were sitting here watching Bank of America and Merrill Lynch and others merge, you’d have to question whether it was OK to sit on your hands.”
Although there had been rumours he would ditch Barclays for a career in Republican politics – he hosted a fundraising dinner in London for John McCain – the challenge of absorbing Lehman will staunch the speculation. Mr Diamond may not have deliberately sought “glory” for Barclays, but if he can make the Lehman deal a success, he has a chance to shape the future of investment banking on Wall Street as much as he has in his adopted home.
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