CNBCfix review: Felix Rohatyn
has nary a hint of hostility for
the takeover business in Dealings
Posted: Saturday, September 18, 2010
The problem with Felix Rohatyn is that he's a diplomat.
That it took until the end of his career to make it official is quite à propos.
In Dealings: A Political and Financial Life, to be released in November 2010 by Simon & Schuster, Rohatyn spurns opinion, analysis and cutting commentary in favor of expanded résumé.
The theme is someone who went about his business, aiming to succeed, not remarkably driven to do any job in particular, yet somehow business just came raining down on him his entire adult life.
Unsure what to do with a physics degree, he accepted his stepfather's offer to arrange an interview at Lazard. He took a job there and felt good about that, until Samuel Bronfman told him he was going nowhere and should ditch the foreign exchange desk and move to the firm's dealmaking department, which he did, leading to a decades-long front-row seat in several of history's biggest corporate deals and the near-bankruptcy of New York City in 1975.
In those and all other situations Rohatyn describes, he is a drafted participant. Someone approaches him about making a deal or joining a board, someone asks him to help out New York City, someone tells him he'd be a good ambassador. Usually he ends up taking on the assignment, sometimes with partial regret, putting in all the long hours for weeks or months or even years, and after much fruitless arm-twisting, handwringing and many sleepless nights, eventually, somehow, it all works out.
There is one tiny exception to this pattern, when Rohatyn writes of initiating a play for the Fed's vice chairman post far along in his career, telling Laura Tyson about his interest if Alan Blinder were to retire. But even that conversation, according to Rohatyn, occurred only after Tyson pulled him aside to ask him for some nominees for an existing Fed vacancy.
If someone is going to write about prominent events without (much) opining on them, then the real value would be in revelations about what really happened. This type of content is minimal at best and is a serious disappointment with Dealings, because the major events chronicled by Rohatyn are already well-known and exhaustively reported. Rohatyn's stories usually involve remarkable detail about what time of day a person called him, what he was doing at the time, the restaurant where he met the caller, the small talk they made, and the food they ate. After that the color mostly disappears, and the story proceeds down a path of near-cliché, usually one stubborn but important individual holding out until the end and then finally changing his mind. Persistence seems to be Rohatyn's strongest weapon.
Rohatyn is an effective, straightforward writer, but he is not a wordsmith. This relatively concise work is bogged down by repeated descriptions and irrelevant details. One example is the first paragraph of Chapter 19, which used 54 words, many of them useless, to describe how he noticed a New York Times headline on RJR Nabisco. In his paragraph description of Meyer's death, he uses a couple sentences to repeat staggeringly obvious information about how important Meyer was to his career. Bob Strauss, Martin Davis and Marty Lipton are other figures introduced and re-introduced and re-introduced. The book — seen in advance galleys text for reviewers — not only needs trimming, but a large number of names are misspelled, in particular a horribly bungled abbreviation of the Securities Investor Protection Corporation.
Rohatyn (left) is a name many people, generally those who read financial press or indulge in politics, have seen from time to time but maybe can't exactly place. When people think of the RJR Nabisco LBO, for example, Rohatyn is not the first person who comes to mind. It must be expected that his primary audience for Dealings is people who were involved with Lazard, people active in political and Wall Street circles, and avid readers of the financial press. That audience will not dislike the book but is quite capable of handling something deeper.
By taking a biographical approach, Rohatyn passes up an opportunity for a more aggressive but extremely relevant work — a comparison of today's Wall Street and government bailout issues with those of the '70s.
Rohatyn's descriptions of the New York City near-bankruptcy of 1975 and the 1970 solvency problems of several NYSE member firms suggest several conclusions he doesn't quite go far enough to make. One is that "Too big to fail" has always been a part of life whether we realized it or not. Another is that entities' own obfuscation of their financial problems is likely the biggest obstacle to solving them.
Rohatyn's credentials as the architect of New York City's 1975 rescue will likely be considered precedent in how governments might view the present situations in states such as California and Illinois should they deteriorate. Rohatyn is not interested in speculating on those prospects (he devotes 19% of the pages to the New York City crisis), but a blueprint can be inferred from his book: Municipal layoffs, wage cuts, select tax hikes, investments from union pension funds into newly issued bonds, and finally, after enough pain has been deemed administered, the federal government will take care of whatever's left. But before it can happen, all kinds of refusals from the many different parties involved and months of frustration.
What is clear is that any entity responsible for distributing large amounts of money ("large," understandably, is a relative term) is a link in the economic chain. While people of more entrenched political views — conservative and liberal — tend to abhor bailouts, their philosophical incentives are massively outweighed by the concerns of the organizations closest to the troubled entities. Gerald Ford will tell the National Press Club he'll reject legislation to bail out New York City, and then the argument is made that not only will NYC go bankrupt, so will New York state, which will shock world financial markets and sink the dollar and plunge the U.S. into an economic tailspin, and then Gerald Ford will sign the emergency seasonal financing that puts NYC over the hump.
In the process, precedents are set and the umbrella of government control/protection expands. The 1970 solvency crisis among Wall Street firms led to the SIPC. People who once voted down TARP now must accept it as the model for handling the next overleveraged banking crisis.
The Wall Street crisis of 2008 further demonstrated that the government is the nation's banker, but specific concerns about moral hazard are likely overblown. Fortunately as we've seen, the incentives for getting into solvency trouble are at best indirect. AIG, Bear Stearns, General Motors, New York City and Hayden Stone may have reached crisis level through greed/recklessness/incompetence/general economic conditions, but presumably none of them and their employees were pleased with what happened. Preventing bailouts seems a futile endeavor on the part of government; the best we can do is recognize from time to time they will occur and be glad it's not more often.
While Rohatyn makes clear there were different angles to the 1970 Wall Street crisis vs. the New York City near-bankruptcy, maybe the worst problem with each, as in 2008, was the inclination of the culprits to sugarcoat the situation. Rohatyn's efforts to stop the bleeding follow a similar path; first the deficit is believed to be a very high but not astronomical number, then after lining up commitments to address it, we learn the deficit is bigger than thought, requiring a greater commitment that is much more difficult to achieve.
Along the way, the holdouts, whether they be Jack Golsen or Albert Shanker, gradually fall into line until the last one, of uncanny stubbornness, after rejecting repeated pleadings, eventually accepts that he can't bring down the whole deal.
It is notable that the book's title, Dealings: A Political and Financial Life, should list "Political" before "Financial." Rohatyn's business is not about the numbers, but the relationships.
If one were to define Rohatyn's skill, based on this book, it would be an ability to get along with rich, powerful, driven, sometimes ego-maniacal people — and the willingness to say "no" to many of their equally powerful rivals. More than once, Rohatyn writes of fending off suitors disliked by his clients, including Steve Wynn and William Agee. He has no problem with a firm "no" but admits serious discomfort at the decision by Thornton Bradshaw and Marty Lipton to use salacious tabloid headlines against Agee, though he concedes it worked.
But while he occasionally plays the heavy, he has little interest in burning anyone in these pages, save possibly for Pamela Harriman, who died in 1997. Even then, his description of her apparent backstab is straightforward and free of opinion.
Rohatyn includes these descriptions of some of the people he runs across. None of the descriptions amounts to headline material by any stretch:
Michael Ovitz: Crafty but dubious matchmaker.
Lew Wasserman: Awe-inspiring Hollywood giant.
Ross Perot: Hardworking, reasonable, conscientious, bit of an ego.
Hugh Carey: In a little over his head.
Abe Beame: Way in over his head.
Jack Welch: Brilliant, energetic, keen sense of value.
David Geffen: Detached, not particularly disciplined in business dealings.
Vernon Jordan: One of the most wonderful guys anyone could ever know.
Jesse Helms: Not as bad as you might think.
If Rohatyn has significantly pondered the value of his occupation, he has chosen to exclude many of his conclusions from this book. He gives simple definitions of takeovers and buyouts, and he tends to write off the worst situations as greed run amok, a horribly inadequate analysis.
One would think someone so immersed in buyout culture would have a more precise opinion of what works and what doesn't. There is no analysis about what makes a company too big or why some companies might be too small. Not surprisingly, he writes of a disdain for hostile takeovers. In several places he refers to the impact on employees and communities. But if layoffs are deemed necessary, then was the business functioning efficiently anyway?
Rohatyn's first big success was turning around Avis in the early 1960s. He concludes that he learned 2 big lessons about dealmaking, and note the order: 1) it's not just about profit, but personal relationships; and 2) the company must deliver. As would be expected of someone in his position, Rohatyn believes success stems from talented people working together, not sharks preying on the hiccups they find in corporate financial statements.
Yet Rohatyn spends much of the book praising an empire-builder, Harold Geneen of ITT, whose acquisitions as listed by Rohatyn (Avis, Rayonnier, Scotts Seed, Continental Baking, Hartford Fire Insurance) don't sound particularly synergistic. He also praises Steve Ross and Jack Welch, while suggesting James Ling's LTV was foolishly buying companies for the sake of buying them. To Rohatyn, there will always be mistakes in the realm of dealmaking, but the only pure offense seems to be greed.
Rohatyn heaps praise on at least 3 individuals: Lazard legend André Meyer, Geneen and Ross. All 3 helped deliver or shape in some respect the career he would have. His references to Meyer are almost disappointingly juvenile; nearly every time he is asked to join a board or a project, he writes of assuming whether Meyer will approve and usually being wrong. The corporate world is a massive clash between deference and initiative, and Rohatyn was clearly most comfortable with establishing the former before embarking on the latter.
Dealings might be considered similar to Ace Greenberg's Rise and Fall of Bear Stearns, in which a Wall Street legend explains how he got to the top. The difference is that Greenberg devotes a majority of his book to correcting what he believes is Jimmy Cayne's revisionist history. Rohatyn has no such agenda, except in limited instances of rebutting long-forgotten negative headlines he received over a few Washington situations.
A significant amount of the book goes toward defending Rohatyn's role in ITT's acquisition of Hartford Fire Insurance. This merits attention because it caused Rohatyn the most embarrassment of his professional life — a deal he helped initiate ultimately receiving antitrust approval under a cloud of innuendo that ITT had fixed it with the Nixon administration.
Rohatyn casts himself as a small player in the controversy who made mistakes of political naïveté — including testifying to Congress at one point without a lawyer — and was wrongly painted as a fixer. He singles out the abuse his family received as a result of his presence in headlines. He concludes, based on the release of the Watergate tapes, that the administration's approval of the deal was set before his fateful meeting with Richard Kleindienst. His protestations come across as sincere, but one wonders, as this case has long faded from public memory, whether they are needed.
Always it must be asked, what is not in this book. Rohatyn writes very sparingly of his personal life. His 2nd wife, Elizabeth, receives greater mention late in the Paris years, but remarkably little is said to even indicate a first wife, which various Internet sources reveal to be Jeannette Streit. Clearly Rohatyn views this turf as off-limits for this particular book. (The New York Post wrote in 2007 about a book examining Rohatyn's social life.) He also reveals how Dick Fuld recruited him about 2 years before Lehman's demise but essentially does not take up the particulars of the firm's downfall. Also noteworthy, aside from his very early years on the job, there are no passages about his salary and/or fees. How much did he generally get paid? Did he make a fortune from his involvement in RJR Nabisco or ITT-Hartford? We can only assume.
In his descriptions, Rohatyn is laudably modest. He opens with an account of his family's Holocaust-era escape from France and the extraordinary luck they encountered at a guard post. He suggests if not for this fluke, he never would've made it. He also writes humbly of being drafted by the Army and serving in Germany and the pride in realizing what it meant to be an American. While he notes from time to time that politics were always a big part of his life, he is clearly, as some pundits would say, far more inclined to be a uniter than a divider. He notes 3 accomplishments while ambassador to France: the French Regional and American Museum Exchange, establishing seven American Presence Posts to facilitate trade, and the French American Business Council.
Likely the most disappointing part of the book is the Epilogue, where Rohatyn credits himself (as seemingly everyone does these days) for denouncing leveraged derivatives as far back as 2005, blaming bad government policy and of course corporate greed. He also refers to mortgage securities as the "stepchildren" of junk bonds, interesting terminology for someone who writes on the opening pages, in fact, of being a stepchild.
Rohatyn stays on very safe ground in Dealings. There is no chance this book will get him in hot water with anyone; no risk at all of being dumped on the Washington-Wall Street social circuit, which will likely appreciate his discretion as much as always.
Dealings: A Political and Financial Life, by Felix Rohatyn (2010)
Featuring: Felix Rohatyn, Elizabeth Fly Rohatyn, Luiz Martins de Souza Dantas, Getulio Dornelles Vargas, Lazard Freres, Edith Piaf, André Meyer, Walter Fried, David-Weill family, President Lyndon Johnson, Jean Monnet, Gianni Agnelli, Eugene Black, David Rockefeller, General Lucius Clay, David Sarnoff, Bill Paley, Lehman Brothers, Kuhn Loeb, Dillon Read, Goldman Sachs, Samuel Montagu, Les Fils Dreyfus, Franklin Roosevelt, Edwin Herzog, Billie Sol Estes, Phyllis Lambert, Samuel Bronfman, Edgar Bronfman, Charles Bronfman, Howard Kniffen, Steve Ross, Eddie Rosenthal, Kinney National, Buck Domaine, Donald Petrie, Robert A. Townsend, Howard Clark, American Express, Bill Bernbach, Doyle Dane Bernbach, Frank Sawyer, Avis, Hertz, Harold Geneen, ITT, James Ling, LTV, Fidel Castro, Jack Franklin, Hewlett-Packard, Eitel-McCullough, Ampex, Arthur Rock, Jennings Radio, Hartford Fire Insurance, Mediobanca, Emanuel Celler, John McCone, Eugene R. Black, Brook Club, Richard McLaren, Richard Kleindienst, Edmund Muskie, Jack Anderson, Dita Beard, President Richard Nixon, John Mitchell, Bob Wilson, Bob Haldeman, Brit Hume, Ted Kennedy, Phil Hart, John Tunney, Simon Rifkind, Paul Weiss Rifkind and Garrison, Salvador Allende, Eduardo Frei, Augusto Pinochet, Frank Church, Henry Kissinger, Nicholas Von Hoffman, Katharine Graham, John Ehrlichman, Alan Cohen, Allan Ecker, Arthur Liman, Warner-Seven Arts, Jack Warner, Frank Sinatra, Ahmet Ertegun, Eliot Heyman, Alan Hirschfeld, Charles Allen, Mickey Rudin, Carroll Rosenbloom, Morris "Mac" Schwebel, Lou Chesler, Meyer Lansky, Commonwealth United, A. Bruce Rozet, Bernie Cornfeld, Robert Vesco, Ted Ashley, Bennett Cerf, Blind Faith, Eric Clapton, Bob Pittman, Tisch, Ira Haupt & Company, Dan Lufkin, Donaldson Lufkin Jenrette, Credit Suisse First Boston, Pickard, Martin Luther King, John F. Kennedy, John Cunningham, Bernard J. Bunny Lasker, Ralph DeNunzio, Kidder Peabody, Steve Pitt, Sol Litt, Bill Casey, Irving Pollack, Stanley Sporkin, Hayden Stone, Cogan Berlind Weill Levitt, Sandy Weill, Arthur Levitt, Jack Golsen, Larry Hertzog, Goodbody, Jim Hogle, Peter Flanagan, Martha Mitchell, Don Regan, Francis I. du Pont & Co., Edmund du Pont, Glore Forgan, Bob Haack, Ross Perot, Mort Meyerson, Clarence "Kelly" Johnson, Bill Clements, Roger Tamraz, Tri-Star, President Herbert Hoover, Bob Strauss, Hugh Carey, Abe Beame, President Gerald Ford, Henry "Scoop" Jackson, David Burke, Robert Wagner, Nelson Rockefeller, Mudge Rose, Charlie Sanford, Howard Stein, Richard Shinn, Donald Smiley, "Felix the Fixer," Peter Goldmark, Judah Gribetz, Bill Simon, Ron Nessen, James Cavanagh, Victor Gotbaum, Walter Wriston, Barry Feinstein, Harold Melnick, Tom Flynn, Arthur Young, Pat Patterson, MAC, Bill Ellinghaus, John DeLury, Clay Felker, Elaine's, Elaine Kauffman, Gail Sheehy, Jack Newfield, John Zuccotti, Steve Berger, William Proxmire, Richard Lugar, Albert Shanker, Jack Bigel, Bill Seidman, John Heimann, Richard Ravitch, George Gould, Woody Allen, Arthur Burns, Giscard d'Estaing, Helmut Schmidt, Jimmy Carter, Ed Koch, Rudolph Giuliani, Michel David-Weill, David David-Weill, Pierre David-Weill, Drexel Burnham Lambert, Charles Bludhorn, Bob Greenhill, Bruce Wasserstein, Jim Glanville, Marty Siegel, Joseph Flom, Martin Lipton, Michael Milken, William McGowan, Ted Turner, Ivan Boesky, Tom Mullarkey, Merv Adelson, Lorimar, Barbara Walters, Lew Wasserman, Edie Wasserman, Peter Jaquith, Rand Araskog, Bill Hewlett, Ira Harris, Ross Johnson, RJR Nabisco, Charles Hugel, Peter Atkins, Skadden Arps, Shearson Lehman Hutton, Martin Davis, Paramount, Bill Anderson, NCR, John Macomber, Celanese, Vernon Jordan, Juanita Kreps, John Medlin, Wachovia, LBO, Henry Kravis, Jerome Kohlberg, George Roberts, Forstmann Little, Ted Forstmann, Tony Forstmann, Brian Little, Bob Lovejoy, Luis Rinaldini, Josh Gotbaum, Fritz Hobbs, Pritzker family, First Boston, Jim Robinson, Peter Cohen, Morgan Stanley, John Gutfreund, Salomon Brothers, Carolyne Roehm, Susan Gutfreund, Linda Robinson, Pete Peterson, Alan Greenspan, John Grenious, James Maher, Richard Beattie, Fritz Hobbs, Sidney Sheinberg, Howard Baker, Saul Steinberg, Disney, Bass family, Michael Eisner, Frank Wells, Thornton Bradshaw, MCA, RCA, Eli Jacobs, Bendix, William Agee, Mary Cunningham, Allied Signal, Ed Hennessy, Bob Frederick, Grant Tinker, NBC, Matsushita, General Electric, Jack Welch, Bill Paley, Mike Carpenter, John Petty, Bob Cizik, John Weinberg, Bob Wright, Michael Ovitz, Mort Janklow, Creative Artists, Rupert Murdoch, Akio Morita, Akio Tanii, Herb Allen, Giancarlo Parretti, Steve Wynn, Merv Adelson, Masahiko Hirata, Keiya Toyonaga, David Geffen, Mario Cuomo, Roger Altman, Lew Preston, President Bill Clinton, Patsy Preston, Laura Tyson, Alan Blinder, Mack McLarty, Bob Rubin, Leon Panetta, Pamela Harriman, Randolph Churchill, Averell Harriman, Aly Khan, Gianni Agnelli, Elie De Rothschild, Edouard Balladur, Jacques Chirac, Francois Mitterand, Jean Riboud, President Ronald Reagan, Evan Galbraith, Jacques Attali, Frank Wisner, Strobe Talbott, Peter Tarnoff, Sandy Berger, Richard Holbrooke, Erskine Bowles, Tom Foley, Sandy Berger, Lloyd Cutler, Jesse Helms, Chris Dodd, Princess Diana, Dr. Paul Marks, Bob Pearson, Bill Barrett, John Bryan, Dr. Richard Brettell, Madeleine Albright, George W. Bush, Glass-Steagall, Warren Buffett, Paul Krugman, Richard Fuld, Warren Rudman, Kenneth Jacobs, Antonio Weiss, Howard Blum, Alice Mayhew, Lynn Nesbit, Roger Labrie, Victoria Meyer, Liz Davies, Alexandra Truitt, Marie Noelle-Knowlton, Julia Prosser, Simon & Schuster