Wasserstein began the day confronted by the recent passing, at age 50, of Lazard's popular co-chairman of investment banking, Michael Biondi, who worked with him at Credit Suisse First Boston, then at Wasserstein Perella (Wasserstein's boutique investment bank), and finally at Lazard. (Biondi was Wasserstein's "good cop," says a colleague.) And Wasserstein is still grieving—but refuses to discuss this publicly—over his sister Wendy, the Pulitzer Prize-winning playwright, who passed away in 2006. (Wasserstein is now raising her only child, a daughter, in his Fifth Avenue duplex.) Two years ago, stricken with pneumonia, he was out of the office for several weeks and out of contact with his lieutenants. Rumors of his ill health still swirl around the investment-banking community, conveyed with the kind of relish that used to accompany news of his downfall. With Wasserstein now indisputably entrenched as a financial power, it is as if his enemies sense that disease is the only thing that can bring him down.

Wasserstein dismisses the notion that he is a relic, that his skill set was more appropriate for '80s boardroom wars. "That's wishful thinking by my competitors. All that signifies is that people don't understand what is going on," he says. "That's more sour-grapy." As he talks, he rubs his face, which bends and gives like a sack of sand.

The proof of his relevance, he delights in saying, is his success at Lazard. Through good luck, shrewd management, and clever marketing, the firm is now thriving, while nearly every day, the write-down woes of yet another Wall Street firm overburdened by level-three assets and securitized subprime mortgages is a Page One story. Lazard's bigger competitors, those who also proffer sage advice to corporate America, make most of their money by trading with their own accounts. The five major independent investment banks—Goldman Sachs, Lehman Brothers, Merrill Lynch, Bear Stearns, and Morgan Stanley—made 45 percent of their revenue in 2006 by trading with their own accounts. This year, that strategy has backfired spectacularly, forcing Citigroup, UBS, and Merrill Lynch to sell substantial stakes to foreign investors. J.P. Morgan Chase, Bear Stearns, and Bank of America took multibillion-dollar write-downs as their house accounts, overloaded with collateralized debt obligations, have turned into drags on their business. Lazard has been notable among the major Wall Street players in that it has emerged unsullied from the mortgage meltdown.

Wasserstein takes much pleasure in pointing out that a banker with one eye on his trading screen—watching for how much he's making for his own pool—might give conflicted advice to his bank's big clients. How can a large firm be trusted with an entire deal when it may be buying or selling a company's debt or securities to boost its own kitty? Goldman Sachs weathered the recent slump by making money for its house account, but almost every other Wall Street bank stumbled, and a string of shareholder lawsuits can't be far behind.