Peterson oversaw a companywide restructuring that included layoffs, eliminating noncore businesses and raising capital. “Back From the Brink Comes Lehman Bros.,” Business Week declared in a 1975 cover story that said the firm, under Peterson, “is a happier as well as a more profitable institution.” In 1977, Lehman merged with Kuhn, Loeb & Co., a New York investment bank.

Sharing Power
“I never worked so hard in my life to save an institution,” Peterson said in a 2009 interview with Charlie Rose on PBS.

In 1983, Peterson agreed to share his CEO title with Glucksman, a partner since 1966 who had risen through the trading side. Within weeks, Glucksman was agitating to hold the top job by himself. Peterson chose to leave rather than fight.

“Glucksman thought Peterson was self-centered, haughty, uncaring,” Ken Auletta wrote in his 1985 book, “Greed and Glory on Wall Street: The Fall of the House of Lehman.”

Glucksman, who died in 2006, told Auletta: “Pete was a guy totally obsessed with the world hearing the name Pete Peterson.”

Firm’s ‘Rudder’
Peterson, according to Auletta, “rightly believed it was he who set the strategic framework for the firm’s success and who acted as rudder for Glucksman, an opinion shared by many partners.”

Glucksman’s short, unhappy tenure as sole CEO ended with the 1984 sale of Lehman for about $375 million to Shearson/American Express Inc. What could have been merely a moral victory for Peterson was also a windfall, since he had insisted in his departure agreement that he would receive a portion of the proceeds if Lehman were sold within three years.

More importantly, leaving Lehman freed Peterson to focus on what interested him most, owning and running companies.

“I had a few million dollars, but that’s all I had at the time,” he told Rose. “How could I have imagined that little Blackstone, with four people, could have developed into what it did?”

Starting Blackstone
He and Schwarzman, who had collaborated on deals at Lehman, created Blackstone in 1985 by each writing a check for $200,000. Peterson, then 59, became chairman. Schwarzman, then 38, became CEO. Roger Altman, who would later serve in the Treasury Department under President Bill Clinton, filled out the management committee as vice chairman.