The Fabulous 00s: Never Let Chess or Bridge Bums Near Vast Amounts of Cash

Watch Out for Games Playing Bums with Twinkly Gazes and Large Piles of Cash Sitting Nearby

As reported 3/14/08, the massive brokerage firm Bear Stearns is facing liquidity problems (i.e. death) in its unfortunate sub-prime mortgage forays and has been bailed out by the Federal Reserve in an arrangement with JP Morgan to provide short-term financing.

Author’s postscript 3/18/08: Bear Stearns indeed failed and sold itself to JP Morgan for a paltry $2 per share. (PPS: the sordid tale is not over, JPM increased the bargain to $10/share to mask the thievery a little bit). Bridge bum Jimmy Cayne made out like a bandit, shelling out $25.8M for a private apartment (no mortgage necessary!) shortly before the death throes.  Chess players should be allowed to crash on one of his sofas (note the plural – multiple chess bums on multiple sofas) – to demonstrate chess and bridge kinship. Many thousands of shareholders and employees with Bear 401K’s were ruined faster than you can say “3 No Trump.” It’s time for torches and pitchforks! What was Cayne doing during the collapse? “As investment bank Bear Stearns collapsed, and was sold to JPMorgan Chase for a scant $240 million, its chairman James Cayne played bridge at a tournament last week in Detroit over two critical days, like Nero fiddling away as Rome burned. ” This is as unpalatable as a chess match to help a kid win a chess record. To continue with the mirth, ” … ‘I think this is a bridge to a permanent solution,’ Bear Stearns chief executive Alan Schwartz said during a conference call with investors following the announcement of emergency financing from JP Morgan Chase and the Federal Reserve. But it was a different kind of bridge that was on the mind of Jimmy Cayne, the chairman of Bear Stearns. As Bear shares plunged and Wall Street began to speculate that the bank may not exist as an independent entity by the weekend’s end, Cayne was in Detroit, playing in the North American Bridge Championship.” Bridge, get it? Hahahaha. Schwartz is also a very good bridge player, by the way (better go get your silver bullets to defeat these ghoulish gambling vampires). Great stuff. Can’t make this stuff up.
All of this started when the imperious bridge player Warren Spector blew up two major Bear Hedge Funds. What was Jimmy Cayne doing when Spector was imploding? Playing bridge and …. you’ll have to read about it yourself. Here’s a tidbit from the NY Times: “The [Wall Street] Journal article leads with an account of 10 days in July that Mr. Cayne spent at a bridge tournament in Nashville, Tenn., even as two of Bear’s hedge funds were staggering (fellow bridge bum Spector’s funds!! – author’s note) toward what would eventually become twin bankruptcy filings. He was “without a cellphone or an email device” during the trip, the Journal said.” Nice! Hope he won a prize (they award trophies and ego points, there is no cash as far as I know). So we have a bridge player melting down 2 major funds, and his bridge playing supervisor unreachable at a bridge tournament! Looks like a bad run of cards there!Well, Bear Stearns was headed up by a bridge guy, Alan “Ace” Greenberg, for many years so maybe was leading Bear to the discard pile all along: “When the Federal Reserve helped plan a bailout in 1998 of Long Term Capital Management, the hedge fund, Bear Stearns proudly refused to join the effort. Until recent weeks, Alan “Ace” Greenberg, Bear Stearns’s chairman for more than 20 years and a championship bridge player, still regaled its partners over lengthy lunches about gambling with the firm’s money in its wood-paneled dining room.” [a nice quote from the NY Times meriting a snicker.] Need another laugh from the NY Times? Here’s a report on Bear Stearns’ assessment of its mortgage-backed positions: “According to Bear Stearns’s annual report, $29 billion of them were valued using computer models “derived from” or “supported by” some kind of observable market data. The value of the remaining $17 billion is an estimate based on “internally developed models or methodologies utilizing significant inputs that are generally less readily observable.” This statement akin to a poker bluff hoping no investor will “call”! Side note: it’s strange that Spector, the guy who really flushed the toilet on Bear’s value, (Cayne’s right-hand man and Bear co-President at the time), is not mentioned in the NY Times birth-to-death history page. After all, the NY Times reports the blame game: “in the hallways at Bear, there were many to blame: James Dimon, chief executive at JPMorgan, whose stock rose 10 percent as the market cheered him for getting such a bargain; the Federal Reserve of New York for pushing hard for a deal; Warren J. Spector, the former co-president who was responsible for the two hedge funds that collapsed last summer; and finally Mr. Cayne and Mr. Schwartz (CFO), for not having brought additional capital into the firm last year. ” Author’s note: I worked as a consultant for JP Morgan for several years and it was a hoot. Go JP go! 2nd note: I worked at Drexel Burnham Lambert in the 1980s, another firm that blew up due to unethical and in that case, illegal “bets” on junk bonds and what have you. The Fed didn’t rescue “evil” Drexel (we were told to find new jobs several months in advance of the bankruptcy filing), but selling Bear @ $2/share is hardly a rescue to the lifer employees whose pensions were trashed. “An average Bear Stearns employee who had $200,000 in a retirement fund now has just $2,000.” Ouch.   

Spector Saves His Fortune

Here’s a postscript (3/27/08) guaranteed to get some groans from distraught shareholders: Spector’s sacking let him save his fortune by forcing him to vest options at more than $87/share (a million shares!).  Who hired this guy?

Moral 

Never let a chess or bridge bum near vast amounts of cash, unless the person involved is purely beatific; i.e. GM Ken Rogoff and his leadership role at the World Bank. Here’s the thing: chess and bridge bums have the bad combination of extreme ego-involvement and extreme greed. This is the undoing of any venture that includes a lot of cash and a chess or bridge bum at the helm. We are also seeing this play out at Chrysler that is showing signs of demise (i.e. 2 weeks forced vacation for everyone (!)) – it is captained by a most certainly non-automotive LLC headed by NM Stephen Feinberg.Enjoy the Princeton connection. Spector (well, he only made it a few years before transferring; he did not get his undergrad degree there), the author, and Feinberg all attended that lofty institution. In addition, GM Rogoff at one point was the Charles and Marie Robertson Professor of International Affairs at Princeton University (the Woodrow Wilson School with its very nice fountain) but made the unfortunate early-life decision (maybe he was egged on by ill-informed well-wishers or relatives) to attend the rather downtrodden Yale University in the undesirable location of New Haven, Connecticut (I visited the frigid campus once, stayed on Lake St. a block or two from campus, heard sporadic gunfire, and was told it was normal – gratuitous irrelevant Hanken-style commentary). Another cool factoid: the current dean of the Woodrow Wilson School, Anne-Marie Slaughter, was my classmate. I observe she has changed her hairstyle since undergraduate days (gratuitous out of place Jerry Hanken-style physical comment). But I always laugh thinking of “Sgt. Slaughter from Slaughter!” Music radio promo. Does anyone remember the band Slaughter?

I admit the topic of extreme money and greed is depressing. Need an ‘upper’? Nick Conticello located the 1883-1997 Manhattan Chess Club Champions list!

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The Fabulous 70s: Breakthough Games

Certain games boost a player’s career. Here are 2 examples from 1973 (I started tournaments September, 1972 by winning a Novice Section in Washington, DC – credit to Bobby Fischer and his eponymously named “Fischer Boom”!). I am writing this paragraph on the day Bobby Fischer passed away.

Game 1.

In the first game, be aware I knew no theory at all. I had just studied a Reinfeld book, “Comprehensive Chess Course” which was actually a bunch of Reinfeld paperbacks stuck together into one thick hardcover. The game showed me I had some ability to “make the pieces dance” – cool tactics always captivate Juniors. Let’s see it. At the time I was “B” strength.
NN – M. Ginsburg Offhand Game, May 5, 1973. Quartermadero, CA.

Bird’s Opening.

1. f4 d5 2. e3 c5 3. Be2 Nc6 4. Nf3 g6 5. O-O Bg7 6. d3 Nf6 7. Ne5 Nxe5 8. fxe5 Nd7 9. d4 cxd4 10. exd4 Qb6 11. Kh1 O-O 12. c3? 12. Nc3 is the right move.

12…f6! 13. exf6 Nxf6 14. Bd3 Bg4 Too advanced for me was 14…e5! 15. Nd2 (15. dxe5?? Ng4 wins for black) 15…Ng4 with a huge plus.

15. Qc2 Ne4 I adorned my scorepad with a “!” here but 15…e5! is again also strong. The text is fine too.

16. Re1 Nf2+ 17. Kg1

Position after 17. Kg1. What’s the crazy kid gonna do?

17…Bxd4? I gave this one “!!” but in fact it is too crazy and it should only draw. It is a cool move, though. The right moves are the cold-blooded 17…Rac8 18. Qd2 e5! or the immediate 17…e5 again, in both cases winning easily.

18. cxd4 Qxd4 19. Be3? Really quite amazingly, the ignoring move 19. Bxg6! draws for white. The text runs into my planned refutation and it all comes up roses for black.

19…Qxd3 20. Qc7

Position after 20. Qc7. This time, I get it right.

20…Nh3+! I gave it a “!” on my scorepad and it is nice. White gets overloaded.

21. gxh3 Rf1+! Very nice. I gave it “!!”. White has no chance to breathe.

22. Rxf1 Qxe3+ 23. Rf2 Rf8 24. Qg3 Qe1+ 25. Kg2 Bxh3+! The final overloading shot. I once again awarded it “!!”. I must have really liked this game (I reconstructed it after the fact into my first scorepad). 26. Kxh3 Rxf2 27. Nd2 Qe6+ 28. Kh4 Qf6+ 29. Qg5 Rxh2+ 30. Kg4 h5+ 0-1

The entire game, played poolside, must have taken only about 20 minutes but it was very enjoyable (at least for the player with the black pieces). I don’t know how strong NN was.

Let’s see the second game, actually more important: the first time I managed to beat a USCF expert. It occurred in a DC Chess League (DCCL) game, June 1, 1973.

Game 2.

Mark Ginsburg (1692, JCC “A”) – Kent Goulding (2023, “Toadgrabbers”).

Sicilian Defense, Dragon, Classical. 6/1/73.

The Toadgrabbers were the perennial league powerhouse. This 1973 edition featured strong players Mark Diesen, Allan Savage, and Richard Delaune. Our team was crushed in this match, but I had a happy ending on my board. Interestingly, my opponent Kent went on to become a world-class backgammon talent, authoring books (such as Backgammon with the Champions) and playing in many top-level matches. He also seems to have played some poker.

His brother, Phil “Flippy” Goulding, was my contemporary at Pyle Junior High School (that’s when I played in my first tournament) and subsequently at Walt Whitman HS. We would play Bethesda-Chevy-Chase (BCC HS) – they had future IM Steve Odendahl – many mirthful HS matchups. I also played in some tournament bridge events with Flippy and I heard a rumor that later on in life, Flippy captured the OTB Texas State Chess Championship. Future World Junior Champ Mark Diesen was a HS over in the other direction, Potomac HS. As far as I know, Mark Diesen and Flippy now both reside in Texas.

1. e4 c5 2. Nf3 g6 3. d4 cxd4 4. Nxd4 Nc6 5. Nc3 Bg7 6. Be3 Nf6

It’s a Dragon and I know zero theory. What to do? The Classical Variation!

7. Be2 d6 8. f4 O-O 9. O-O Bd7 10. Kh1 Qc8 11. Rc1 I couldn’t think of anything else to do.

11…Ng4 12. Bg1 At the time, I was sort of proud of this “nestled” bishop and the fact my 10th had vacated the g1 nestle point. Today, of course, all this is ho-hum. Black is fine.

12…Nxd4 13. Bxd4 e5 14. Nd5!? Re8 15. fxe5 dxe5 16. Bc3 h5 17. Bb4 Qd8 18. Bc4 I’m just sort of flailing around. My opponent is tempted into winning an exchange, but I get the material back.

18…Qh4 19. h3 Nf2+ 20. Rxf2 Qxf2 21. Nc7

Position after 21. Nc7. Black has a strange defense here.

21…Bc6 A curious computer defense here is 21… Bh6! 22. Qf1 Qf4 23. Rd1 Qxf1+ 24. Rxf1 Bf4! with a level game. The text is also OK; maybe white is a tiny bit better.

22. Nxa8 Bxe4 23. Qf1! Thanks to the counterattack on f7, White is fine.

23…Qxf1+ 24. Rxf1 Rxa8 25. Rxf7 Kh8 26. Bd3 Bd5 27. Rd7 Bc6 28. Re7!? A very odd “winning attempt” that unexpectedly succeeds. Retreats are a simple draw.

28…Bf8 White is OK after losing the exchange, but it certainly should not be anything for me.

29. Bxg6 Bxe7 30. Bxe7

Position after 30. Bxe7. Black is fine but he has to be accurate.

30…e4?! Black starts to go wrong. If memory serves, he was in time trouble (Time Control 50 moves in 2 hours). He had the surprising and instructive 30… h4! with the idea 31. Bxh4 Kg7! 32. Bd3 Rh8 33. Bf2 Rxh3+! and he stands better. This isn’t forced, but in the game black doesn’t get any kind of play. After 30…h4! his rook gets active in all lines. The problem with the text is that white can easily deal with the passed center pawn, and black’s rook doesn’t have entry points.

31. Bxh5 Kg7 32. Bc5 b6 33. Be3 Rf8 34. Be2 White’s bishops have reached nice blockading squares.

34…Kg6? Black should play 34… Kf6 35. g4 Ke5; that’s where the king belongs. It will be tough for white to win that position. For example, 36. Kg2 b5 37. c3 a5 38. a3 b4!? with some counterplay. White is a bit better, but it will be a tough slog.

35. g4 Rh8 Now black has very little play.

36. Kg2 Bd5? Necessary was 36…b5. The text is the last straw.

37. c4! White’s advantage has reached decisive proportions.

37…Be6 38. Kg3 Rc8 39. b3 b5 40. c5! Sealing things up. Black is helpless.

40…Bd5 41. Bxb5 Rc7 42. Kf4 Rf7+? Losing material but it was lost anyway.

43. Ke5 Ba8 44. Be8 Kg7 45. Bxf7 Kxf7 46. Kd6 1-0

 

I was really shocked that I won this game. Beating an Expert! This milestone helped me realize that even (oooh!) Masters might be fallible. Soon I would be feasing on the likes of John Meyer , Robert Eberlein, and other locals such as Duncan Thompson, but that would take two years or more.

 

Postscript: My First Tournament

 

My First Tournament was the 8-round Swiss, September 1972 Novice Section at the Ramada Inn, Thomas Circle, Washington, DC. I managed to win it! Here are two games.

 

 

Mark Ginsburg (UNR) – Moses Ma (1288) Round 4, Alekhine’s Defense

Ah, to be unrated again!   Even though I knew no theory, I was able to get “OK” positions in most openings.

1. e4 Nf6 2. e5 Nd5 3. d4 d6 4. c4 Nb6 5. Nf3 Nc6 6. exd6 cxd6 7. Bd3 e5 8. d5 Nb4 9. Be2 Bf5 10. Na3 Qe7 11. Be3 e4 12. Nd4 Bg6 13. Ndb5 Nd3+ 14. Bxd3 exd3 15. O-O Qd8 16. f4 Be4 17. Re1 g6??  This miscue ends the game.

18. Bd4 Rg8 19. Rxe4+ Kd7 20. Qxd3 a6 21. Qe3 Nxc4 22. Nxc4 axb5 23. Nb6+ Kc7 24. Rc1+ Kb8 25. Re8 Qxe8 26. Qxe8+ Ka7 27. Qxa8# 1-0

I include this bad game just for historical interest – my opponent certainly went on to make societal headines: Moses Ma went on to become “Dr. Ma”, a very well known Information Technology consultant and head of a large consulting company, MMG Partners. Very amusingly, he also made big headlines in the 1980s when his MIT squad was busted in a tournament bridge cheating scandal. His team was using hand signals to relay their cards – the gory details are here. The hand signals were much too fidgety and they were caught on camera. Ooops! At the time, it was the most “shocking” etc. etc. scandal, but I had a good laugh due to the sheer ineptitude of the cheaters. I have it on good authority that the MIT Dean, when contacted for comment, said “A card game? Who cares!” and hung up the phone.

Let’s fast forward to the last round. I have 6.5 points out of 7, and my opponent Ziegler has 6. He needs to win!

Ziegler – M. Ginsburg, Round 8. September 3, 1972.

 

 

Let’s see this nervous battle royale featuring the usual last round items of jitters, blunders, and incredible saves.

1. d4 Nf6 2. b3?! e6 3. Bb2 Bb4+ 4. c3 Be7 5. e3 b6 6. Qf3 Nc6 7. e4 Bb7 8. Bd3 e5?! 9. d5 Nb8 10. Nh3 Ba6 11. c4 Bb4+? 12. Nc3 d6 13. O-O Bc8 14. a3 Bxc3 15. Bxc3 Bxh3 16. Qxh3 Qd7 17. Qg3 Qg4 18. Qxg4 Nxg4 19. f3 Nf6 20. f4 Nbd7 21. b4 O-O 22. f5 Nh5 23. Bd2 h6 24. g4 Nhf6 25. g5 hxg5 26. Bxg5 Ne8?? Passive but playable is something like 26… a5 27. Kg2 Nh7 28. Bd2 Nhf6 29. Kf3 Kh7 30. Rg1 Rh8 31. h4 Kg8 32. Bg5 and the game toddles on.

27. Be7 Ooops! Oh no! Not to worry, I play on.

27…Ndf6 28. Rf3 g6 29. Kh1 Kg7 30. Bxf8+ Kxf8 31. fxg6 fxg6 32. Bc2 Kg7 33. Raf1 b5? It was losing anyways but this is crazy.

34. cxb5 Rd8 35. h4 Nh5 36. Rg1? The infilatration with 36. Rf7+ is simplest.

36… Nf4 37. Rfg3 Nf6 38. Rc3 Rd7 39. Re1 Kh6 40. Bd1 Rh7 41. Kh2 Ne8 42. Kg3 Kg7 43. Rh1 g5 44. h5 Kh6 45. Kf2 Nf6 46. Ke3 Inaccurate. Stronger is 46. Rc4.

46…N6xd5+? What the heck is this? Another crazy sacrifice from the kid. Last round nerves? Black had 46… Ng2+! 47. Kd3 Nf4+ 48. Kc2 Nxe4 49. Rc6 Rf7 50. Re1 Nf6 51. Ra6 g4 with some counterplay. This is the best black’s being doing in some time.

47. exd5 Nxd5+ 48. Kd2 Nxc3 49. Kxc3 d5 50. Rf1 The computer has white up by more than 4 points. It’s looking grim for my drawing hopes.

50…g4 51. Bxg4 Rg7 52. Rf6+ Kg5 53. Rg6+ Rxg6 54. hxg6 Kxg6 55. Bf3 d4+ 56. Kd3 Kf5 57. Bd5 Kf4 58. Be4 Kg4 59. Kc4 Kf4 60. Kd5 Ke3 61. Kxe5 d3 62. Bxd3 Kxd3 63. Kd5 Kc3 64. Kc6 Kc4 65. Kxc7?? The nice shot 65. b6!! wins. For example, 65…cxb6 (65…axb6 66. Kxc7 b5 67. Kc6) 66. b5 Kb3 67. Kb7 Ka4 68. Kxa7 Ka5 69. a4 and wins. Very good. The text draws!

65…Kxb5 66. Kb7 a5 1/2-1/2

And I win first place, a happy ending! I received $100, which in 1972 was a lot of money! I immediately bought a beautiful pearl-handled cap gun for $5 at the local Woolworth.

Not a good finale for Mr. Ziegler, who threw his pen.

 

Chess, Bridge, Wall Street, and Huge Amounts of Money

I chanced upon this New York Times article today.  Turns out a top Bear Stearns executive, Warren Spector, was ousted due to the subprime mortgage mess and the collapse of two major Bear Stearns hedge funds.  That name was familiar to me.  When… where…?  Suddenly I remembered.

The year was 1979 and I was playing in an intramural bridge tournament.  One of my opponents was the very same Warren Spector, a former “King of Bridge” (a high school player with the most yearly “Master Points”.)   At this point we were both classmates at Princeton, but as I read in some other Internet bio article, he recently donated so much money to St John College (Annapolis MD) they built a dorm in his name.  He must have transferred there, since he graduated in 1981.

I am “declarer” in the hand and I start running my trumps in desperation.  Spector makes what seems to me to be a terrible discard, letting me take the rest of the tricks when he threw away an honor card.  He mutters, “You just executed a guard squeeze and didn’t even know it!”  He gave the impression of haughty imperiousness. But he was right.  I didn’t know a guard squeeze (a complicated bridge ‘endgame’ maneuver) from shinola; I was just running my trumps and from my perspective, he had made an elementary blunder. This is a typical injustice of strategic games; it happens in chess too. An opponent stumbles into a resource that draws or wins for him, having seen nothing.

Returning to the impression of imperiousness, that’s what they said in the Bear Stearns ouster article too!  “Mr. Spector is a cool, aloof man who has the casual confidence of one who achieved significant professional success at a young age.”   They say also, “[he is] a smooth and at times imperious man with a wide-ranging intellect.”  A leopard does not change his spots, but he acquires plenty of them!  Witness this mind-boggling Spector compensation report from the Forbes bio sheet:

Cash Compensation (FY November 2006) Salary $250,000 Bonus $16,194,430 Latest FY other long-term comp. $18,847,625 Total CASH $35,292,055 Stock Options (FY November 2006) Number of options Market value unexercised 510,607 $46,257,839 unexercisable 247,372 $9,892,364 Total OPTIONS 757,979 $56,150,203

Not a bad combined compensation package for this imperious card player.  There was a strange (or maybe not so strange, a good example of narrow-focused nepotism?) bridge link amongst all the top Bear Stearns executives:  “Ace” Greenberg, the CEO Jimmy Cayne, and Spector are all very good players.  An analogy in a game more familiar to us would be GM Patrick Wolff working for Clarium Capital, an investment fund captained by a chess player, Peter Thiel, the famous founder of PayPal.  Another one is the famous surge by Bankers Trust into chess in the early 1990s that hired Norman Weinstein and Max Dlugy as traders. Let’s hope the chess connection trumps (get it?  hahaha) the “deck of cards” which might “topple” at any time. Abusing a tired metaphor!

Conclusion?   There might be more lucrative things to do than chess or bridge.  Still doubting?  Ask Stephen Feinberg, another classmate at Princeton!  If memory serves, he was either a high expert or low master at his USCF peak. His investment fund Cerberus is always in the news, gobbling up companies left and right. 

MG Addendum 6/29/08:  Currently Cerberus LLC is running Chrysler (a car company) into the ground.  Poor Chrysler is not long for this world.

In a weird coincidence, both he and I worked at some point for the toppled titan Drexel Burnham Lambert (felled by the misdeeds of junk bond king Michael Milkin).  Stephen’s compensation is not public but estimated to be at least $50M/year.   Do you think Feinberg and perhaps the newly “disgraced” Spector might be convinced to run a chess tournament?  The “intensely private” Feinberg might cough up a few bucks (as might Spector) if we name it after them. Note: there’s something to be said for running PRIVATE companies. No embarrassing inspection of one’s net worth on public web pages.

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So we reach the Caissic Crisis: who will approach this titanic duo to organize the first $10 million Open prize fund tournament? All the spokesperson needs to do beforehand is think of how it benefits the interests of Spector and Feinberg. There has to be an angle! Maybe play the Princeton card.  Or we could play the Harley card. Both Stephen and I enjoy riding Fat Boys, Sportsters, Dyna Glides, what have you.