Rohatyn’s values a distant prospect on Wall Street

October 29, 2010

Felix Rohatyn would, as the dustjacket of his new memoir notes, belong in any investment banking Hall of Fame. Yet the Lazard Freres old-timer, financial savior of New York and U.S. ambassador to Paris reveals surprisingly little of himself in the book—but he does exhibit a relatively unobtrusive ego, a love of dealmaking and strong distaste for the greed of the 1980s and 2000s.

According to the 82-year-old eminence grise the financial industry is at a turning point. To be of use to companies, investors and society, it needs a return to the principles and practices he learned under the legendary Andre Meyer at Lazard starting in 1949. In Rohatyn’s world— heavily populated with the great and good of finance and politics over more than half a century—that means recognizing that “investment banking is not a business; it is a personal service where bankers work hand in hand with their clients.”

That is what Rohatyn evidently enjoyed for most of a life that begins, for the purposes of the memoir, with a stroke of luck that allows his Jewish family to pass a German checkpoint on the way to Marseilles in 1940 and make their escape, to Brazil and eventually to New York. He is quick throughout the narrative to acknowledge his good fortune; reading between the lines, that probably understates the extent to which he made his own luck through hard work.

A large part of his success stemmed from becoming a trusted adviser to dealmaking corporate chieftains. Among these was Harold Geneen, the ambitious chairman of the conglomerate ITT. The story of Rohatyn helping Geneen do a string of acquisitions—culminating in a struggle with political enemies, especially over the purchase of Hartford Fire Insurance—is one of the book’s most memorable passages.

But it’s also where Rohatyn comes off as defensive. It dismayed him that politicians in Washington would convene hearings simply because they would be reported in the press. And he claims initially not to have suspected that he would be roasted by a congressional committee and the media over an attempt to get antitrust officials off ITT’s back.

For a man involved at the time with political candidates and already several years into the convoluted ITT-Hartford deal, such naivete seems improbable. He may well have believed he had nothing to hide, but that has never guaranteed an easy passage in Washington.

The brush with scandal was, it seems, the result of doing what Rohatyn enjoyed most: beyond providing advice, he often took upon himself the role of go-between. That hints at an ego less inflated than many on Wall Street, as does his stated lack of interest in running Lazard—despite, he says, Meyer’s wish that he should do so.

The veteran banker found his nearly two-decade involvement in saving New York City from the brink of bankruptcy, starting in the mid-1970s, his most rewarding professional experience. It shows. The tales of late-night negotiations and commiserations with Hugh Carey, the New York governor, and others—often centered on Elaine’s, an Upper East Side celebrity hangout—are some of the most human in the book.
Meanwhile, Rohatyn’s earlier time on the New York Stock Exchange’s “crisis committee” starting in 1970 foreshadows the recent financial meltdown. In an all-too-familiar scenario, financial firms had been disguising the scantiness of their capital, and regulators had been turning blind eyes. Brokerages started failing, and—of course—initial efforts to assess the scale of the problem dramatically understated it.

There is material to comfort officials like Treasury Secretary Hank Paulson and New York Federal Reserve President Tim Geithner who faced tough decisions in 2008, too. Rohatyn says he learned that, in a crisis, those responsible have to act early, even though information available at the time is probably both inadequate and wrong.

The occasional nuggets of dealmaking wisdom are, however, rather bland. For instance, Rohatyn concludes from an unhappy sale of MCA to Japan’s Matsushita that financial considerations have to be balanced with cultural ones if a merger is to be successful.

But perhaps this is not surprising. While he enjoyed making deals happen, “Felix the Fixer” as he was at times dubbed (though he disliked the moniker) comes across as much more interested in dealmakers than in deals per se. He clearly admired Meyer, Geneen and others including General Electric’s Jack Welch; on the other hand, Rohatyn’s one meeting with notorious arbitrageur Ivan Boesky—at New York’s Four Seasons, still the temple of the power lunch—elicits the nearest the restrained writer gets to vitriol.

The focus on relationships over deals is, of course, in keeping with the philosophy Rohatyn learned from Meyer. The ingrained values date from a time of relatively small, private investment banking partnerships, where the partners’ money was the firms’ capital.

As the author recognizes, those days are gone. But he was still horrified by the naked personal greed on display in the famous buyout of RJR Nabisco in the late 1980s, and its eventual transference to Wall Street as a whole in the ensuing decades.

A believer that government has to temper the animal spirits of capitalism, Rohatyn may be glad that regulators are, once again, on the case. Sadly, though he might wish it, a parallel re-emergence of old-school values to offset the “greed is good” mentality on Wall Street seems a more distant prospect.


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The focus on relationships over deals is, of course, in keeping with the philosophy Rohatyn learned from Meyer. The ingrained values date from a time of relatively small, private investment banking partnerships, where the partners’ money

Posted by hgwhuld | Report as abusive

In 2009 our small business needed cash to take advantage of an opportunity created by the recession. Bank of America had a formula and no interest in discussing our business or its potential. Commerce Bank (St. Louis) wanted to discuss our business in detail. We made the loan with Commerce and 2010 sales are up about 3X versus 2009. Mr. Rohatyn’s view of investment banking has direct relevance to market recovery.

Posted by worthington | Report as abusive

Some perspective needs to be added here from another old-timer.

Apart from the old days of the private partnerships, “relationships” are an overlooked context of dealmaking. Relationships are part of the ethical context of the deal, as well as the game theory perspective of know your opposition. This context is overlooked today when everyone sees deals solely as technology and numbers. Certainly that’s important, but many times the goals, worldview and psychology of the participants [Dick Fuld, anyone?] can be big drivers of the outcome.

You’re a little harsh on the Congressional hearing aspect also. It really was different. There wasn’t 24/7 news coverage. So most hearings limited [but not eliminated] adversarial/headline moments, and were informational, if biased from the presenters and questioners. Most hearings were much more restrained and not as constantly nasty as we see today. Points were made, and disagreements noted, without the constant personal destruction.

Felix was working in a very different culture than the psychology of the business/government world today.

Posted by Laocoon | Report as abusive

What set Felix apart from Andre Meyer was that the latter really was greedy, for power of the Svengali type as much as for lucre, while Felix relished the intellectual and psychological challenges implicit in deal-making.

Posted by midasw | Report as abusive