"Pete and I worked together for 35 years," Blackstone CEO Schwarzman said Tuesday in a phone interview. "He was a great partner. We both had no idea when we started Blackstone in 1985 that the firm would grow to this scale and importance. The firm was his pride and joy."
Like other Wall Street figures such as Felix Rohatyn and David Rockefeller, Mr. Peterson bridged finance and public policy throughout his business career. He was chairman of the Council on Foreign Relations for two decades and co-founded the Concord Coalition, a non-partisan advocacy group, to sound the alarm about mounting government deficits.
"Pete Peterson was one of the great patriots and philanthropists of our time, and he was a great friend whom I deeply admired," Michael Bloomberg, the founder and majority owner of Bloomberg News parent Bloomberg LP, said in a statement. "He brought people of different backgrounds together to tackle some of the toughest challenges facing our country, and he was often a lonely voice for fiscal responsibility, when others were kicking the can down the road."
Mr. Peterson's career pivoted on two partnerships — one that failed, one that flourished.
The first was his legendary battle with Lewis Glucksman at the helm of Lehman. Mr. Peterson joined the firm in 1973, after his stint in Nixon's Cabinet, as vice chairman focusing on investment banking. He said Lehman deserved its reputation as a "dog-eat-dog world in which the traders and the investment bankers, among others, eyed each other with unalloyed suspicion."
Within two months, he was elevated to chairman and CEO and began dealing with millions of dollars in losses suffered by the firm's government bond trading business, part of Mr. Glucksman's domain.
Mr. Peterson oversaw a companywide restructuring that included layoffs, eliminating non-core businesses and raising capital. In 1977, Lehman merged with Kuhn, Loeb & Co., a New York investment bank.
"I never worked so hard in my life to save an institution," Mr. Peterson said in a 2009 interview with Charlie Rose on PBS.
In 1983, Mr. Peterson agreed to share his CEO title with Mr. Glucksman, a partner since 1966 who had risen through the trading side. Within weeks, Mr. Glucksman was agitating to hold the top job by himself. Mr. Peterson chose to leave rather than fight.
Mr. 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 Mr. 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 Mr. 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 Mr. Rose. "How could I have imagined that little Blackstone, with four people, could have developed into what it did?"