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The Great Debate

Steven Cohen: The Gilded Age revisited

By Patricia Beard
November 13, 2013

There he is in all his tarnished glory: Steven A. Cohen, arguably the most famous, and infamous, hedge fund manager in the United States. Maybe the world.

He lives in a 35,000-square foot Greenwich, Connecticut, mansion with an indoor skating rink, golf course and everything an exclusive school might offer. His New York City duplex in Bloomberg Tower is for sale at $115 million. He’s staying in a $23.4 million Greenwich Village maisonette, while his $38.8 million 8,250 square-foot house nearby is being renovated. Last summer he bought an East Hampton beach house for $60 million. He has another place there — 10 bedrooms and a spa — but it isn’t close enough to the water.

Cohen’s extensive art collection could fill a private museum. It includes Jeff Koons’ enormous yellow balloon dog sculpture and Pablo Picasso’s “Le Rêve.” Damien Hirst’s dead shark, preserved in formaldehyde, hangs from the ceiling in Cohen’s office. This may or may not be an intentional symbol of his methods of operation.

Though he is selling some of his art this week, Cohen is unlikely to have a tag sale — even after the $1.8 billion settlement he made this month with the SEC on behalf of his hedge fund, SAC Capital Advisors, which admitted to insider trading. He is enjoined from managing other people’s money — forever. But with a more than $7 billion fortune left, Cohen can set up a family office to invest the remainder.

One Gilded Age gives way to another, the money goes round and round, and the more things change, the more they stay the same.

Or, as James Hazen Hyde, the Gilded Age Francophile heir to the majority shares of the Equitable Life Assurance Society, might have said, “Plus ça change, plus c’est la même chose.”

Hyde, who inherited his Equitable shares at age 23 in 1889, served as the company’s vice-chairman and chairman of the investment committee. The $400 million fund, the equivalent of about $25 billion today, was one of the few sources of uncommitted capital at the time. Financial and railroad barons twice Hyde’s age, and with incalculable experience, wanted to control its investments.

Hyde, like Cohen, attracted attention by spending too much money too publicly, and was caught in an insider-trading scandal. Just as serious, in an era when there was no government safety net for widows and orphans and life insurance companies were considered a “sacred trust,” Hyde was accused of spending Equitable money as if it were his own.

The pudgy and by all accounts brilliant and aggressive Cohen, who works seven days a week, and the socialite Hyde actually have much in common. Cohen was punished for the business practices of his fund, but his addiction to conspicuous consumption was the same trip wire that tumbled Hyde.

Each was guilty of ungoverned excess, spending great swaths of money that no one could fail to notice. They were both, at best, careless about insider trading — unregulated in 1905, and illegal in 2013. Cohen and Hyde each attracted so much publicity that their behavior was a factor in the establishment of legal sanctions imposed on the industries they represented.  Hedge fund managers like Cohen were among the targets of the Dodd-Frank Act, the most comprehensive financial system reform since the New Deal.

The Equitable scandal of 1905 led to New York State’s Armstrong Investigation, which examined not only Equitable, but all the other major insurance companies. The result: a string of regulations that limited the connection between Wall Street and the insurers.

Unlike Cohen, who made his own money, Hyde inherited his control of Equitable as a young Harvard graduate. Before the crisis brought him down, he was one of the most dramatic dandies of the Gilded Age. He was 6’4”, when the average height of a man was 5’9”, he wore shoes with red heels and a flowing cape, and drove his colossal collection of four-in-hand coaches all over town. The modern equivalent would be a fleet of Grand Prix race cars.

Hyde and Alfred Vanderbilt famously waged a New York-to- Philadelphia round-trip race in a four-in-hand that involved 72 horses sent with their grooms in 12 railroad cars to way stations along the route. The duo just managed to beat the prior record.

Hyde’s country residence was a Long Island mansion on 400 acres. His dining room could seat 100 and the footmen were chosen for their matched height. A staff of 80 maintained his stables of horses. He owned his own railroad car — the contemporary version of a private jet — and trains stopped, and waited, at his local station so he could hitch it on, while ordinary passengers looked at their watches and fumed.

Hyde was 28 in 1905 when he gave one of the most famous balls of the Gilded Age. He was accused of spending $200,000 of Equitable money to pay for what became known as The Hyde Ball. (It actually cost roughly $50,000, which came out of his own pocket.)

Intoxicated by what he could do with his fortune, Hyde invited 600 guests to an 18th century-themed fancy-dress extravaganza held on two floors of Sherry’s hotel, society’s watering hole. He hired the Metropolitan Opera orchestra to play the dance music, and engaged Réjane, the most famous actress in France after Sarah Bernhardt, to appear in a play written for the occasion. The performance was in French, making the point that France was Hyde’s spiritual home.

The diversion, however, was unlikely to have been the center of attention — even for bilingual guests. The costumes were the real entertainment. Among the most elaborate was Edith Gould’s white satin dress embroidered with pearls, its long pale green satin train further embroidered with gold and emeralds and lined in ermine. Two broad emerald-studded gold straps held up the heavy train. Draped and pinned with pearls, diamonds and more emeralds, Gould rivaled a jewelry store.

The famous architect Whitney Warren, who designed Grand Central Terminal with his partner, orchestrated the party décor. Hyde’s plan was to replicate in miniature the gardens of Versailles, designed in the 17th century by the great French landscape architect André Le Nôtre.

The erudite Hyde, well-versed in French history, might have chosen a more felicitous model. Nicolas Fouquet, young Louis XIV’s minister of finance, had hired Le Nôtre to create the gardens in his magnificent chateau, Vaux-le-Vicomte, to which he invited the king for a great ball in 1661. The party, like Hyde’s, featured a play, in his case, a premiere by Moliére.

It was said that, kings included, the fête was only rivaled by one other in French history. Louis, already suspicious of the source of Fouquet’s wealth, had him arrested. Fouquet stood trial for three-years, and then imprisoned for life.

Hyde surely knew about Fouquet’s fate, but since he hadn’t dipped into the Equitable’s treasury, he assumed he was immune from criticism. His ball, Hyde believed, was a major cultural event.

Fouquet’s coat of arms bore a Latin motto that could be roughly translated as “What heights will he not scale?”

Both Cohen and Hyde could have adopted the same crest. Though unlike Fouquet, neither would have featured a red squirrel standing on its hind legs. (The word for squirrel in the dialect of Fouquet’s region was foucquet.)

After the ball, it only took three months for such plutocrats as railroad magnate and former Hyde mentor Edward Henry Harriman; steel tycoon Henry Clay Frick; and financier Jacob Schiff of Kuhn, Loeb & Co. — all of whom wanted to pry the Equitable’s fund from Hyde — to bring him down. They forced him out of Equitable, and he sold his shares at the 50 percent discount of $2 million. As Hyde’s opponents vied to seize control of the company, the press gleefully trumpeted every detail. The fight was the subject of 115 articles in the New York Times alone.

Like Fouquet, it could be that both Hyde and Cohen flew too close to the sun — in Fouquet’s case, the “Sun King” — and the wax that fastened the feathers to their wings began to melt. Yet, unlike Icarus, who crashed to the ground, they remained rich — Hyde in contented exile in Paris, where he had always wanted to live; and Cohen, presumably, in his many residences.

Mark Twain summed up the behavior that characterized both periods of excess in the novel he co-wrote in 1873 titled The Gilded Age: A Tale of Today. “The gilt of affluence” he commented, marked “the new ethics of greed.”

If the current Gilded Age had a motto, it might well be “From the pinnacle of success, there is no place to go but down.”

 

PHOTO (TOP):  James Hazen Hyde (L), the Equitable heir, 1904. LIBRARY OF CONGRESS/A. Chickering. Hedge fund manager Steven A. Cohen (R), founder and chairman of SAC Capital Advisers, in Las Vegas, Nevada, May 11, 2011. REUTERS/Steve Marcus

PHOTO (INSERT 1): James Hazen Hyde. WIKIPEDIA COMMONS

PHOTO (INSERT 2): The Orangerie of the Palace of Versailles. WIKIPEDIA COMMONS 

 

 

 

 

Comments
5 comments so far | RSS Comments RSS

This needs better copy editing – “in a era,” “more in common that it might seem”…

Posted by Telemachus1 | Report as abusive
 

> SAC Capital Advisors, which admitted to insider trading
Jail for the executives and confiscation of assets is the only medicine for rampant wall street corruption. There is no wallstreet credibility in a system designed to screw those who do not have insider information.

Posted by UScitizentoo | Report as abusive
 

These are crimes against humanity. People struggle their whole lives to
pay bills ,invest their savings and these movers and shakers laugh at us
and play by only ONE rule ,anything that works. They are very smart,
pay others millions while they make billions , they protect them , they
keep no written records but communicate their wishes via culture without
leaving any evidence. They are 10 times smarter than the so called
regulators and build a wall around themselves . Things get hot, they pay
money but maintain their lifestyle to a big degree. But they destroyed
confidence in the markets and investing and this actually causes other
investors REAL lifestyle changes and real heart attacks and huge
amounts of stress. Judges that allow these settlements without jail
time are a big part of the problem.

Posted by william117 | Report as abusive
 

Greed and the grandiose sense of entitlement! So very deadly, so many victims! The grandiosity is evidence of the systems major delusional symptomology of rampant mental illness.

Posted by 2Borknot2B | Report as abusive
 

I shed no tears for Little Stevie Wonder.

Posted by Dan_Silagi | Report as abusive
 

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