Dealings

Dealings: A Political and Financial Life, by Felix G Rohatyn, Simon & Schuster RRP$27, 304 pages

If you are over 65 and have spent more than one hour with the American investment banker Felix Rohatyn since the second world war, you probably feature in his book. Indeed, its natural audience is a couple of hundred of Rohatyn’s closest friends, whose dealings with him are recounted fondly and in crisp detail. From his post at Lazard Frères, Rohatyn was a banker and adviser to financial and political leaders for nearly five decades.

We join him hobnobbing at a party where President Richard Nixon corners us to discuss problems in the markets. Then we’re at the Hotel Carlyle with “Bunny” Lasker, chair of the New York Stock Exchange, negotiating with Ross Perot. Now we’re off to a wood-panelled office with the pea-green suited Bernie Cornfeld, later found to be a fraudster, and his twin tower white-booted blonde assistants. We jet to see Michael Milken, the junk bond king, at a party in Malibu, and later have lunch at the Four Seasons with Milken’s co-conspirator, Ivan Boesky.

We emerge from the offices of New York governor Hugh Carey to elbow with entertainment stars. Look, there’s Frank Sinatra – he needs some business advice. So does Lew Wasserman, “Mr Hollywood”. We have dinner at Elaine’s with writer Gail Sheehy and swap stories there with Woody Allen.

We say hello to Steve Wynn, our casino-owning neighbour in Sun Valley. We invite Jack Welch, head of General Electric, to discuss a merger with RCA at our Fifth Avenue apartment. We help David Geffen buy a few music and film companies. And we are at the centre of two of the most important deals of the century: the 1970s restructuring of New York City’s $6bn debt and the mega-merger of RJ Reynolds Tobacco Company and Nabisco in 1985. Even non-business readers will enjoy the first-class flight through these chummy dealings.

But when finance gets more complex during the 1990s, Rohatyn’s tone shifts and we become distant observers. His friend President Clinton asks Rohatyn if he’ll take over the World Bank (answer: no thanks). He covets the ambassadorship to France, and gets support from then-ambassador Pamela Harriman, as they finish a bottle of wine. Harriman later dies, and Rohatyn’s senator friends help him sail through confirmation hearings. He moves to Paris in 1997, and returns three years later as a market critic, denouncing traders who trade leveraged derivatives “with people they never met”.

In autumn 2006, Rohatyn makes a bad decision. He meets up with his friend Richard Fuld, head of Lehman Brothers. It is the height of the subprime mortgage craze, and Lehman is leading a business Rohatyn abhors. Yet Rohatyn joins Lehman as a senior adviser to Fuld. He has a ringside seat during the financial crisis, through Lehman’s bankruptcy in September 2008. But now the crisp details are gone. We watch from a distance; Rohatyn loses his ability – or his will – to show us his world. You wonder what he might have seen at Lehman, and why he chose not to write about it.

Rohatyn offers one lesson: “Investment banking is not a business; it is a personal service where bankers work hand in hand with their clients.” Bankers shouldn’t bet against their clients, or take adverse positions using swaps. They shouldn’t be enemies. They should be friends.

But Rohatyn’s friendships did not save Lehman. The memoir closes with him sitting “in stunned silence at the breakfast table, unable to do much more than look out my apartment windows and gaze at the wide, leafy canopy of Central Park’s trees stretching into the distance”. He asks his staff to find some cartons and start packing. The ride has come to a crashing halt.

Frank Partnoy is professor of law at the University of San Diego and author of ‘The Match King: Ivar Kreuger and the Financial Scandal of the Century’ (Profile)