Felix Rohatyn has led one incredible life. Born in Vienna, he fled Nazi-occupied France to the U.S. in 1940 at the age of 12. After graduating from Middlebury College (he was hardly a destitute refugee), he went to work for the legendary Andre Meyer at Lazard Freres in New York. He developed clients in the '50s and '60s like Harold Geneen at ITT and Steve Ross at what became Time Warner. He helped rescue Wall Street in the back-office crisis of the late '60s, then played an instrumental role in saving New York City from bankruptcy in the '70s. He was a key banker in the RJR Nabisco leveraged buyout. He served as ambassador to France during the Clinton administration. He was friends with, well, nearly everyone. In his spare time, he regularly opined on economic and fiscal matters for The New York Times and New York Review of Books. And all the while he maintained one of the great rainmaking practices on Wall Street.
Now Rohatyn has written his memoirs, "Dealings: A Political and Financial Life." It's a fairly thin book, particularly considering the density and length of his career, and it has real charm. If his acknowledgments are any clue, he actually wrote it himself, a rare achievement these days. He opens with a bang, offering an anecdote of meeting, then getting a job with, French torch singer Edith Piaf on a ship sailing to New York from France in 1947. Piaf needed help with her English; Rohatyn, still in college (he was apparently a mediocre physics major), spoke fluent French and English. And off he goes. Rohatyn's New York life has a charmed quality. His father, a brewer in France, knows Meyer and gets him a job in foreign exchange at Lazard. He happens to be having breakfast at the Bronfman's one weekend (he's friends with a Bronfman daughter) when the patriarch of the clan and founder of Seagrams, Sam Bronfman, suddenly rounds on him and tells him he should be an investment banker. Meyer grudgingly agrees, then cuts his salary. Many of these anecdotes have the sheen of tales told many times; but they foreshadow what's both good and bad about this book. This is a life by anecdote, linked, sometimes sparingly, sometimes preachily, with commentary.
Indeed, as charming and readable as it is, this is less a retelling of the past than an active shaping of it. Not that Rohatyn is twisting the truth, at least in any obvious way. Rather, it's what he tells you and what he leaves out. Throughout, he describes himself as trying to live up to an image of an investment banker passed on by Meyer, the brilliant and autocratic Frenchman who dominated Lazard after the war. Such a banker was distinguished by clear thinking, fair-mindedness and a willingness to submerge self-interest in the client's interests. (This was an ideal Meyer himself occasionally failed to always live up to, see Cary Reich's "Financier: The Biography of Andre Meyer.") Such a banker was, above all else, discrete; reputation was everything. And discretion defines this book. Large chunks of Rohatyn's life go missing. He mentions one wife, then some children, then another wife, but leaves out the connecting tissue. He describes the death of Meyer, and its effect on him, and the maneuvering around the ascension of Michel David-Weill at Lazard. But then David-Weill disappears. Rohatyn never mentions his struggles with Steven Rattner in the late '90s, though he offhandedly passes on that the firm was getting too big and too complicated for his taste. Instead, he simply says he was losing interest in banking after half a century.
Perhaps the largest omission occurs even before meeting Piaf. While he mentions Nazi-occupied France, Rohatyn says almost nothing about his own experience. We're left to wonder. He was a child; the family was breaking up; their lives were threatened. He flees to New York, a city he comes to love above all others. Tell us more, Felix. Throughout, he is reflective but hardly introspective. He is always moving on.
That self-image, that ideal, of the investment banker as the soul of discretion and as a figure of unimpeachable reputation and moral discipline, shapes this book, as it undoubtedly shaped him. There are many things to be said about the way Wall Street has evolved over the past, say, 50 years, but discretion and a sense of limits isn't one of them. And Rohatyn himself, for all his soul searching and remarkable public service, found himself involved with any number of transactions and situations that, in retrospect, helped shape the "new" ethos of Wall Street. He learned the business in the '50s from Meyer. But he established his reputation as a rainmaker by advising clients that shattered the old restraints on M&A, most controversially, the mastermind of the conglomerate, Harold Geneen at ITT. Geneen was not alone, but he was arguably the greatest of the conglomerate builders; and Rohatyn not only executed many of his deals, but also sat on ITT's board. Rohatyn has great respect for Geneen's business genius and rejects some of the wilder charges about him (some of which, like ITT's involvement in Chile and the death of Salvador Allende, scorched Rohatyn). But even if that's the case, did the conglomerate make real business sense beyond a kind of pyramiding of deals in a favorable climate? If Geneen was a genius, how many geniuses were available to succeed him? And didn't Geneen's construction of a dealmaking machine at ITT help shatter an earlier regime in which mergers were difficult, personal, friendly and relatively rare?
Despite his defense of Geneen and ITT, Rohatyn does admit that in those days he was young and fascinated by the people and the deals. He didn't recognize, he admits, how things were changing in the '60s. This is fair. Who sees the future? But Rohatyn tells several stories that suggest, but only explores superficially, the historical complexities and his own role in them. In the '60s, he's invited to join the board of the New York Stock Exchange. This is a great honor; he's still relatively young, and Lazard is not a big trading or brokerage house. Rohatyn says he was surprised, but he never discusses how that occurred (at that period his youth may have helped, plus he was obviously very smart and had big clients; he did have to seek Meyer's permission, which he does whenever he makes big move). He recounts the day Donaldson, Lufkin & Jenrette announced that it was going public, which was against the rules of the NYSE. In hindsight, he recognizes what a seminal moment it was; it's the first real change that will sweep away "the antediluvian" Wall Street and sweep in the new, competitive, technologically sophisticated Street. A vitriolic debate broke out on the NYSE board of governors:
"It was not too difficult to pick the objectively correct side of the showdown, or so it would seem nearly forty years later. Nevertheless, at the time I opposed DLJ's petition. ... How can I justify this narrow position? I can't. All I can offer up in the way of logic is that I exhibited a prideful conservatism of someone who had just been granted membership in an exclusive club. With my appointment, I became another of the insiders eager to preserve our historic and fraternal practices, regardless of how outdated -- wrongheaded, really -- these rules and traditions were."
Rohatyn is being honest. He admits he later changed his mind and supported reforms -- and of course he was a key figure in saving Wall Street from its own debilities a few years later -- but that phrase, "prideful conservatism," rings out. Prideful conservatism was in many ways the self-image of the Meyer investment banker. Prideful conservatism was a perspective on the world Rohatyn would take with him as the changes he first opposed, then supported, created a powerful new finance he would soon have qualms about. He recognizes the failures of the past but fears the future. He is shocked when Morgan Stanley rips up "the unwritten 'social contract' " by making a hostile bid for International Nickel in 1975. He does not like hostile deals, but he recognizes how "a new breed of combative, successful, high-profile investment bankers" and lawyers had arrived that "would make celebrated, hard-driving deals, and fortunes for themselves and their firms." He does not see how Geneen and the conglomerateurs paved the way for this new kind of dealmaking; nor does he acknowledge how changes that had to be made at the NYSE ushered in an ambiguous new era of greater conflict, competition and compensation.
The deluge crashed upon him with the RJR Nabisco leveraged buyout. After a lengthy recounting of his own involvement in the RJR Nabisco LBO, Rohatyn argues that within the excesses of that deal was "a defining moment in my own evolving thoughts on American business ... the raging avarice of the 1980s was a pernicious force that would undermine the marketplace. I am a capitalist and I believe in making a profit. ... The bottom line was no longer simply the bottom line -- the ultimate cost of the profit had to be considered."
This is not to suggest that Rohatyn, whose activities on behalf of Wall Street in the late '60s and New York in the mid-'70s were heroic, is wrong about these practices or unjust in his characterizations. It is to suggest how complex the undercurrents are. By the time RJR occurred, Rohatyn occupied a unique place in investment banking. He had his choice of clients; and his experience meant that he could practice banking with a sense of prideful conservatism, though he remained politically a liberal Democrat. But he was that rarest of cases; and for all the excesses of the moment, his nostalgia for the past is palpable. He could argue against hostile deals, LBOs, transactional banking, speculation. He could argue for stakeholder, as opposed to shareholder, governance. He could argue against greed. But in some quarters, these sermons elicited mutters about hypocrisy and self-righteousness; and in a dichotomy that still persists, he stood increasingly on the side of "entrenched" managers, his clients, over shareholders. He was a special case. Even at Lazard, he never took a real management position -- he wanted to deal with clients and engage in public policy and service -- but, as the anecdote about the change in regime from Meyer to David-Weill suggests, he had a huge say in what took place there: He had power without responsibility, a sweet deal made possible by his immense ability and client list.
Rohatyn concludes the book with an epilogue written after the fall of Lehman Brothers. His ambassadorship over, he had moved his small office into Lehman after being offered space by Dick Fuld. He seemed to have been as shocked as the rest of us by Lehman's sudden demise. He uses the episode for more soul searching, reminding us again that he had warned about excesses and offering up one more coda for investment-banking-as-it-should-be:
"The financial services industry is at a turning point. If it is going to help companies and investors during a decade when doubts continue to undermine the marketplace, if it is going to help businesses to provide jobs and services -- then I believe, it needs to return to the values and practices that were first instilled in me by Andre Meyer. Investment banking is not a business; it is a personal service where bankers work hand in hand with their clients. And it is a service that must not simply be about making bigger and bigger deals that reap rewards for only a small group of executives. It should aim to create new partnerships that result in strong, more innovative companies able to provide new jobs and better services. These are the fundamental beliefs that guided me in the past. And they will once again guide me in the future."
Worthy sentiments. But how? The real question that hangs over investment banking -- all of Wall Street really -- is how can you turn back the clock? Is there a prideful conservatism of a past that is worth recreating? How do you take great size, great compensation, great risk and stuff them back into their box? There are, as always, signs that some of what Rohatyn seeks exists in the marketplace, notably in the rise of boutiques that, like Lazard, are not driven by trading, aren't massively capitalized and that still can offer unconflicted, sensible, even wise advice (and there are lawyers who approach that ideal as well). But for all their dynamism, Wall Street remains dominated by the big banks, with their massive financing capabilities and enormous trading desks -- and that's not including private equity and hedge funds. The world, whether we like it or not, is driven by performance, which operates globally; and for all the greed and excess, lots of wealth has been spread around. True, at the top of the profession, ultra-senior advisers like Rohatyn and Meyer -- true consiglieres to CEOs -- will continue to exist and to thrive. But the rest of the world will sadly stagger on in its messy, greedy way down in the valley. The trouble is, while every day is a turning point of some sort, you can rarely go back, even in a memoir. - Robert Teitelman
Robert Teitelman is editor in chief of The Deal.