Finance: Department Store of Investment

Nearly everybody in the U.S. who shops in big retail chain stores, goes to the movies or flies by airline, sooner or later encounters the handiwork of that prestigious Manhattan partnership, Lehman Bros. The 116-year-old firm not only provides much of the money that finances these and other U.S. industries, but has spread out to become a diversified department-store of high finance. This week Lehman (pronounced Leeman) will reach across the Atlantic Ocean: as co-managers with London’s N.M. Rothschild & Sons of a consortium of 68 international banking concerns, Lehman will put on sale the first $27.5 million of bonds to finance a $138 million, 300-mile transalpine oil pipeline. The issue is expected to become the largest corporate bond offering in European history.

Such fiscal flexibility is only what the financial community has come to expect of Lehman. In the principal business of investment banking—raising funds from the public through new corporate stock and bond issues—Lehman runs second (behind First Boston Corp.) with $1.7 billion of underwriting last year. Lehman partners and associates sit on the boards of more than 100 big U.S. corporations, including General Motors, RCA, Pan American Airways, Tidewater Oil, American Express and United Fruit. Altogether, Lehman Bros, guides or controls the investment of $2 billion of other people’s money—more than any of its rivals.

No Youth Movement. Despite their adventurous outlook, all of the top men in Lehman’s baroquely ornamented eleven-story headquarters at No. 1 William Street, a discreet short block away from Manhattan’s Wall Street, are well past today’s popular business retirement age. The presiding patriarch, Robert (“Bobby”) Lehman, spare and spry at 73, controls the major part of the firm’s capital, operates out of a jewel-box-sized office with just enough wall space for six small paintings from his $100 million private collection.* Though he concentrates on picking promising youthful talent, Lehman’s outstanding recent personnel acquisition is General Lucius Clay, 68, who joined the firm after he reached the mandatory retirement age as chairman of Continental Can Co. three years ago. The two leading senior partners besides Lehman and Clay: Monroe Gutman, 80, a professorial market analyst who runs much of Lehman’s investment portfolio, and Paul Mazur, 73, who gave the firm its reputation as the front-running U.S. investment banker for the retailing industry with such clients as Macy’s, Gimbels, the May Co. and Federated Department Stores.

Lehman’s 25 other partners—many of them still in their 30s or early 40s—also serve as management consultants, economic forecasters and raisers of venture capital. Last year the firm arranged $604 million worth of corporate mergers, sold $946 million of securities by privately placed financing, and marketed $1 billion in municipal bonds. Top Lehmanites gather daily in what must be one of the New World’s most Old World corporate dining rooms, savor epicurean food prepared by a former chef of Le Pavilion restaurant. There they discuss ice-breaking new ways of investing—and making—money. Explains Bobby Lehman: “Investment banking is applying money to ideas and ideas to money, with the seasoning of imagination. In business, nothing happens until the two are mixed.”

A Rich Mix. In the mixing process, Lehman’s partners have enriched both their clients and their firm. When Charles (“Tex”) Thornton and several associates quit Hughes Aircraft in 1953 to acquire Litton Industries, Lehman raised $1,500,000 for them. In return, the firm got 75,000 shares of Litton stock—for 100 to $1 a share. Last week, after three splits and seven stock dividends, each of those 75,000 shares was worth $737—though the firm has by now sold some of them. Lehman has also enhanced its growth and prestige by creating two of the largest U.S. investment trusts: Lehman Corp. (assets: $441 million) and the One William Street Fund (assets: $247.5 million). Beyond these, Lehman Bros, operates an Investment Advisory Service for blue-chip clients (minimum account: $500,000), who pay a minimum of $2,500 for its advice. The service has grown rapidly into the largest (more than $1 billion) run by any investment house.

Bundles for Space. Despite their belief that today’s trend toward more government financing of vast new ventures will accelerate, the men of the house of Lehman contend that private banking faces more opportunities than problems. Power needs will triple in 25 years. Railroads and their terminals need reorganizing to handle both high-and low-speed trains. There will be satellites, undersea dwellings, passenger travel through space. All will require investment capital in the giant bundles that investment bankers collect. While nothing is so constant as change, the Lehmans feel certain of one thing: nobody is likely to devise a substitute for money.

* Yale Graduate Lehman last week gave New York University, of which he is a trustee, $1,000,000 to endow a professorship and five student fellowships in the fine arts.