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Felix the Fixer is Dead

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Via Economic Policy Journal

Felix Rohatyn

Felix Rohatyn has died at his home in Manhattan. He was 91.

The Washington Post informs:

He socialized for decades at the nexus of financial and political power, counting leaders such as French President François Mitterrand and U.S. Secretary of State Henry Kissinger as friends. His ambition to serve as treasury secretary in a Democratic administration was never fulfilled, but in 1997 Mr. Rohatyn succeeded socialite and Democratic Party fundraiser Pamela Harriman as President Bill Clinton’s ambassador to France.

“[He] was widely credited with saving New York City from bankruptcy in 1975,” the Post adds.

Of course, what he saved was NYC debt, much of which was connected to Wall Street bankers. His method of “saving” the debt: Arranging for a federal bailout.

He was, in fact, the ultimate crony-statist from the bad side of Wall Street.

Murray Rothbard had a great take on Rohatyn when he was at the height of his crony statist dealmaking, his public-private partnerships and his promotion of government bailouts.

Key snippets:

With liberalism on the defensive, the “corporate liberal” – the well-connected big businessman – is one of the most effective members of the club. Most businessmen have conservative instincts. Though willing to go along with what is now euphemistically called “the partnership of government and industry” – and grateful for the power and boodle that come along with it – they are obscurely uncomfortable moving too far from their own free enterprise rhetoric. The “cognitive dissonance” becomes a bit disquieting. 

What’s needed is a corporate spokesman who embraces the government-business partnership with enthusiasm and joy – a kind of Big-Businessman-as-Philosopher. When such a champion emerges, Mr. and Ms. America, keep a sharp eye on your wallets – you are about to be fleeced… as every “in” person now knows, there is only one man for the job – Felix Rohatyn.

Rohatyn first came into the public eye in the spring of 1973, when Business Week, adept at spotting likely comers, put the unknown financial whiz on its cover. Our hero, then forty-four, was already a leading partner in the extremely powerful international banking firm of Lazard Frères. Not only that; he was the handpicked protégé and “son” of Lazard’s legendary octogenarian guru and senior partner, André Meyer. Rohatyn, a demon negotiator and behind-the-scenes manipulator, was touted by BW as “dynamic,” “remarkable,” and a merger man supreme.

Some ordinary liberals, inexpert in the ways of their corporate liberal comrades, see an anomaly in Felix’s ITT [corporate deal making] record and his rise as a leading liberal Democrat in New York City. Not so; Felix is simply more consistent than others in applying the government-business partnership concept. Corporate liberalism is nothing if not fundamentally bipartisan. At the same time that he was fixing things for ITT, Rohatyn became a good friend of Dorothy Schiff – of the international banking family of Kuhn, Loeb – who was then owner of the major organ of New York liberalism, the New York Post. He also became a fund raiser for good gray Senator Edmund Muskie.

Felix Rohatyn’s next big leap into the limelight came with his role as the savior of New York City’s finances. In 1975, as the city’s government was sliding toward bankruptcy, Felix set up and became chairman of Big MAC (the Municipal Assistance Corporation), which managed to engineer partial default and dub it a mere “stretchout” from short-term debt into long-term municipal bonds. In addition to the compulsory stretchout, the main idea of this New York State-run outfit was to put the rather shaky credit and prestige of the state squarely behind the collapsing credit of the city…

As organizer and chairman of Big MAC, Rohatyn managed to induce the reluctant Ford administration to kick in the requisite massive aid to save his financial package. His success there seems to have completed the flowering of Felix as an economic philosopher on a grand national scale. For if some federal aid could save the bankers, municipal officials, and bondholders of New York, why couldn’t still more federal aid produce more such good deeds? Rohatyn had discovered the soul-satisfying humanitarian expansiveness of post-New Deal liberalism.

Given his record, we could have predicted to a tee what stand Felix would take on the Chrysler bail-out question. Writing in the New York Times on January 13, 1980, Rohatyn explained that the Chrysler bail-out – the federal rescue of a corporation not tied in with defense contracts as was Lockheed – had set an unshakable precedent: Every large-scale business must now be a candidate for federal rescue. Any refusal to bail out a large corporation henceforth and forevermore would be unjust discrimination; moreover, such refusal would involve terrible “dangers to the economy” and “untold human suffering” (not least, of course, among the big stockholders of some future Chrysler). Felix also had the gall to say that the bankruptcy of a large corporation would cost the taxpayers a lot of money, a fascinating inversion of the obvious fact that it is the federal rescue of inefficient and insolvent corporations that will cost the taxpayer – and the consumer, because it perpetuates the inefficient use of resources – all too dear.

One turns with justified alarm to Rohatyn’s geopolitical ideas. Predictably, he calls upon us to learn before it is too late, from the examples of Germany and Japan, that we must have continued, pervasive “partnership of business and labor in government.”

Furthermore, the Middle East, “vital to our security and our economy,” must be secured; the Third World must be aided and brought to its senses; and the United States must greatly beef up its air force and conventional arms, in which we are “dangerously deficient” compared to the Soviet Union. In particular, “we must have an adequate conscripted army with low pay” and everyone except the halt and the lame must be drafted. The low pay scale, of course, should not extend into the upper ranks; there, we need a “highly professional, highly paid cadre of officers and non-coms.” One reason the conscript army may be needed, in Rohatyn’s view, is that oil-rich Mexico doesn’t seem to have quite the proper deferential attitude toward the United States.

Felix knows that his plan will be greeted with “cries of elitism” and of a “new establishment”; he is prepared to live with these quibbles because any other course of action would be “infinitely worse.”

RW

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