Felix G. Rohatyn, a former child refugee from Nazi-occupied France who became a pillar of Wall Street and a trusted government adviser who engineered the rescue of a beleaguered New York City from insolvency in the 1970s, has died . He was 91.
His death was confirmed by his son Nicolas Rohatyn.
Mr. Rohatyn’s journey from war-ravaged Europe to the pinnacle of the illustrious investment house Lazard was a quintessential tale of immigrant success. As one of the world’s pre-eminent financiers, he brokered numerous mergers and acquisitions, leaving his stamp on Avis, Lockheed Martin, Warner Bros., General Electric and other corporations. He counseled innumerable business leaders and politicians.
For nearly two decades, from 1975 to 1993, as chairman of the state-appointed Municipal Assistance Corporation, Mr. Rohatyn had a say, often the final one, over taxes and spending in the nation’s largest city, a degree of influence for an unelected official that rankled some critics.
His efforts to meld private profit with the public good defined him: In the perception of many his name was synonymous with two institutions — the M.A.C., which was hastily created in 1975 to save the city from insolvency, and Lazard (formerly Lazard Frères), the storied investment firm that started as a dry-goods business in New Orleans in 1848.
What distinguished him in both domains were his deft negotiating skills, his access to power and his understanding of it, his management of public perception (and of the journalists who shape it), and his adeptness not only with numbers but also with words. He had a genius for finding solutions that satisfied both political and economic imperatives.
Indeed, Mr. Rohatyn (pronounced ROE-ah-tin) was given the nickname Felix the Fixer (one not always used as a compliment). But he likened his work to that of a surgeon. “I get called when something is broken,” he explained to The Associated Press in 1978. “I’m supposed to operate, fix it up and leave as little blood on the floor as possible.”
Though he reached the heights of success and power on Wall Street, some of his loftiest ambitions were frustrated. President Bill Clinton considered Mr. Rohatyn, a longtime Democratic donor, for Treasury secretary but passed him over, and a Republican-controlled Senate later scuttled a plan to name him vice chairman of the Federal Reserve. Mr. Clinton named him ambassador to France, the country to which he had fled from his native Austria, as something of a consolation prize.
After returning from four years in Paris at the end of 2000, Mr. Rohatyn, a compact man of sober, occasionally stern rectitude, settled into the role of wise eminence. He began writing, often for The New York Review of Books. He denounced the foreign and fiscal policies of President George W. Bush; published a book warning that an aging infrastructure would soon be a national crisis; rejoined Lazard as a senior adviser after the death of Bruce Wasserstein, its chief executive; and wrote a memoir, partly in response to the global financial crisis of 2008.
Brimming with nostalgia for a bygone Wall Street, in which relationships and reputation mattered, and dripping with disdain for its newer incarnation, driven by quantitative models and short-term profits — “an electronic game,” as he put it — the memoir concluded with an admonition:
“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.”
A City in Crisis
Mr. Rohatyn’s knack for cultivating and capitalizing on relationships — and for fixing — was in greatest evidence in the spring of 1975, when Wall Street refused to extend New York City additional short-term credit. For more than 10 years, a period of sluggish economic growth, the municipal work force and budget had grown even as the city’s population and tax base shrank. To cover mounting deficits, the city had relied on short-term financing — a practice originally intended to make up for normal, seasonal cash shortfalls. This led only to steadily higher debt-service payments.
Worse yet, the city had turned to management and accounting gimmicks, like transferring salaries and other operating expenses to its capital budget, which was supposed to be used for long-term infrastructure projects, not day-to-day operating expenses. (Spending on infrastructure had declined to the point where streets and bridges lacked even basic minimum maintenance.)
For a time the city had gotten by on these methods — until the banks, ever more afraid that they would never be repaid, decided that they had had enough. They summarily closed off the city’s access to credit, refusing to market the short-term notes that the city needed to cover its expenses and pay off maturing notes.
Just before Memorial Day, at the suggestion of the longtime Democratic kingmaker Robert S. Strauss, Mr. Rohatyn was summoned from Lazard to the Midtown Manhattan offices of Gov. Hugh L. Carey. A crash was imminent, he was told. The shortfall was $3 billion: $900 million was due in June, and two installments of $1 billion each were due in July and August.
Mr. Carey named Mr. Rohatyn and three others to an advisory panel, which quickly determined that the city needed a financing vehicle that would be a creature of the state, not the city. It would be assured of revenues and have the political credibility to turn to Wall Street for cash. It would be governed by a nine-member board, with only four of the seats filled at the recommendation of the mayor, Abraham D. Beame. And it would have first call on city sales taxes and stock-transfer taxes, giving it the power to turn them into state revenues and thus shelter them from creditors in the event of a city bankruptcy.
Meanwhile, the news kept getting worse. The city disclosed that it had $2.5 billion more in short-term housing notes coming due. It later emerged that the city’s annual deficit had risen to $1.5 billion a year — about three times the official estimate — on a budget of around $12 billion.
Mr. Rohatyn brokered a $900 million emergency plan to stave off a bankruptcy projected for June 18. It included a $100 million loan from banks; an agreement by the banks to extend for another year $280 million in notes coming due immediately; and a $200 million advance by the state against further education payments.
Over raucous objections by municipal unions, Mr. Carey signed the legislation, setting up what became popularly known as “Big MAC” on June 10. By then the city was living hand-to-mouth. Mr. Rohatyn helped orchestrate a combination of bank loans and loan extensions, bond sales, wage deferrals, union investments and advance payments in state aid to get the city through July and August. But the market for M.A.C. bonds shriveled. Default loomed once again.
“It was like climbing sand dunes — a grueling and ultimately futile exercise,” Mr. Rohatyn later recalled. “Something had to change.”
That something was the city’s control over its affairs. At Mr. Rohatyn’s direction, Albany set up the Emergency Financial Control Board, with Mr. Rohatyn as a member. It would set the amount of revenues available to the city, control all borrowing and labor contracts, and ensure that the city stuck to its fiscal plan each quarter.
A Presidential No
The unions agreed to cut the city’s payroll by 50,000 workers, on top of the 14,000 layoffs already announced — a total reduction of some 20 percent. The M.A.C., with Mr. Rohatyn now installed as chairman, devised what ended up being a $6.6 billion rescue package. It included a three-year “moratorium” on repayment of short-term notes, hefty investment from union pension funds, and federal loan guarantees.
President Gerald R. Ford, who had portrayed New York, not inaccurately, as an emblem of mismanagement, refused to go along with the loan guarantees, saying that a municipal bankruptcy would be temporary and tolerable. The Daily News trumpeted that veto threat with the memorably economical headline “Ford to City: Drop Dead.”
Only after the Fed’s chairman, Arthur F. Burns, returned from a meeting with European leaders and warned Mr. Ford of the threat to global financial markets did the White House agree to the loan guarantees.
Mr. Rohatyn was hailed for standing up to Mayor Beame and for his ability to reach agreement with bankers and union leaders alike. But the turmoil — a strike by sanitation workers, a wave of police layoffs, increases in transit fares, the imposition of tuition fees for the first time at the City University of New York and, above all, the loss of city autonomy, however temporary — redounded for decades.
The crisis did not abate until 1978, when Mr. Rohatyn devised a four-year financing package, which exchanged short-term high-interest loans for equivalent amounts of lower-interest M.A.C. bonds. Under a new mayor, Edward I. Koch, the city balanced its budget in 1980. It re-entered the municipal bond market in 1981, and by 1985 the M.A.C. had stopped selling new bonds; the final M.A.C. bonds were not paid off until 2008.
Investors who bought the bonds made healthy returns, and, starting in 1983, the M.A.C. threw off healthy surpluses, which Mr. Rohatyn used tactically to guide policy from behind the scenes. Calmly pointing out to mayors and union leaders that he thought they were spending money unwisely, he made their receipt of the surplus funds conditional on their cutting expenses. He also used the surpluses to set aside billions for schools, transit, low- and middle-income housing, and the hiring of police officers in response to the crack cocaine epidemic.
It was an unprecedented exercise of private power at City Hall, and it prompted Mr. Koch, both a friend and a foe, to ask, “Who elected Felix mayor?”
Mr. Rohatyn was so stung by attacks from organized labor that in 1990, during another, less severe downturn in the city’s fortunes, he announced his resignation. Wall Street shuddered, and Gov. Mario M. Cuomo persuaded him to stay on for three more years.
A Family in Flight
Like the city he helped save, Mr. Rohatyn’s early life was a mixture of luxury and hardship. Born in Vienna on May 29, 1928, Felix George Rohatyn was the only son of Alexander Rohatyn, a Polish Jew, and the former Edith Knoll, the daughter of a prosperous Viennese banker. Alexander managed his father-in-law’s breweries in Austria, Romania and Yugoslavia until 1934, when the rising Nazi menace prompted the family to uproot itself to France.
Mr. Rohatyn’s parents were divorced a few years later. His mother remarried, and in 1942, with France under Vichy control, she decided to flee once again.
Mr. Rohatyn would recall that their escape was nearly disrupted at a German checkpoint: The soldier posted there, momentarily distracted when he reached into his pocket for a cigarette, waved their car forward but stopped the following one.
They had taken little with them. His mother had directed her son to empty toothpaste tubes and fill them with dozens of gold coins; their Polish cook had helped them tie mattresses to the top of their car.
“We had been well off, but that was all we got out,” Mr. Rohatyn wrote. “Ever since, I’ve had the feeling that the only permanent wealth is what you carry around in your head.”
Reunited with Felix’s stepfather, who had escaped from a Nazi internment camp in Brittany, Edith traveled to the United States by way of Casablanca, Morocco; Lisbon; and Rio de Janeiro. (They were aided by Brazil’s ambassador to France, Luis Martins de Souza Dantas, who helped some 400 Jews, including Felix, reach safety.)
Resettled in Manhattan, Felix attended McBurney School, where he perfected his English, and then Middlebury College in Vermont, where he majored in physics.
While in college, Felix returned to France to get reacquainted with his father and try his hand at the brewery; for six months he cleaned out fermentation vats, worked in a bottling plant and loaded trucks. (On his way back to the United States, he met the singer Édith Piaf; after he graduated, in 1949, he tutored her in English, for $5 an hour, in a Park Avenue apartment she shared with other nightclub singers.)
It was through a friend of his stepfather’s that Mr. Rohatyn met André Meyer, a mercurial French financier who controlled Lazard. Mr. Meyer would become his mentor and guide. After a training period in Europe, Mr. Rohatyn devoted himself to the practice of buying securities in one currency and selling them in another. He left Lazard after the Army drafted him in 1950; he was an infantry sergeant in Germany. Discharged in 1953, he rejoined Lazard two years later.
He would stay there for the next 40 years, becoming a partner in 1960. Encouraged to move into corporate finance and mergers on the advice of Samuel Bronfman, who acquired Seagram, the Canadian distiller, Mr. Rohatyn became so adept at deal-making that Mr. Meyer would later say of him, “He is better than the teacher.”
Mr. Rohatyn compared deal-making to a puzzle that required “not simply diligence and strategy but at times an iron will.” He brokered the acquisition of Avis, the rental car company, for about $5 million; Lazard turned the company around and quadrupled its investment in five years. He helped Steve Ross gain control of the Warner Bros. film studio — now part of AT&T. He engineered the merger of the Loews Corporation with the Lorillard tobacco fortune.
ITT Brings a Blot
Mr. Rohatyn’s penchant for deal-making could attract controversy. In the 1960s, he helped the ITT Corporation, which had started as a telephone concern, assemble one of the first modern corporate conglomerates, starting with the $420 million purchase of Jennings Radio, a small high-tech company in Silicon Valley.
ITT’s growth prompted an antitrust investigation by the Justice Department. It was settled, but then a leaked memo from an ITT lobbyist suggested that the company had offered $400,000 in contributions to the 1972 Republican National Convention in return for the Nixon administration’s agreeing to settle the case. (ITT denied the accusations, which were never proved.)
There were also allegations that ITT had tried unsuccessfully in 1970 to block the election of Salvador Allende Gossens as president of Chile. A Marxist, Mr. Allende nationalized an ITT subsidiary; in 1973, he was overthrown by the military and killed.
ITT’s chief executive, Harold S. Geneen, maintained that the company’s $350,000 payment for “supporting the democratic, anti‐Communist cause” in Chile had been legal and that it had not been used to support violence, but Mr. Rohatyn’s reputation for probity suffered. On the advice of his friend Katharine Graham, the publisher of The Washington Post, he resigned from ITT’s board. In the meantime, he had faced withering questioning while testifying before Congress and endured negative coverage in the news media, notably by the investigative columnist Jack Anderson.
Mr. Rohatyn later described his shepherding New York City toward financial stability as a way to make up for the ITT embarrassment.
He had earlier gained crisis-management experience as a member of the board of governors of the New York Stock Exchange. In 1970, after a string of corporate failures, the old-line investment house McDonnell went under, and Wall Street seized up. The exchange’s chairman, Bernard J. Lasker, asked Mr. Rohatyn to lead a “crisis committee.”
The panel, among other things, revised the exchange’s archaic capital rules. Banks were supposed to have a ratio of debt to capital no higher than 20 to 1, but the definition of capital was vague and overly broad. Mr. Rohatyn helped arrange the rescues of the banks Hayden Stone (by a group of Oklahoma investors) and Goodbody (by Merrill Lynch, with the exchange providing indemnifications for potential liabilities).
By the mid-1970s, when Mr. Rohatyn was most in the headlines, the world of gentlemen’s agreements he had mastered had begun to give way. The unwritten ban on hostile takeovers was upended when Morgan Stanley made an uninvited bid for the battery manufacturer International Nickel.
In the 1980s, corporate raiders like Michael Milken exploited the use of so-called junk bonds to achieve the leverage to take over and break up much larger companies. Traders like Ivan Boesky mastered the strategy of “risk arbitrage,” now commonly used by hedge funds, to bet on corporate takeovers. (Both men went to prison for securities violations.)
Even Lazard, one of the most lucrative of the old-shoe firms, felt the ground shifting. Mr. Rohatyn wrote:
“In time the profitable, low-risk, non-capital-intensive advisory business of the firm would be subsidizing the high-risk, capital-intensive trading activities. And this discrepancy in our internal balance sheet would lead to tension within the firm.”
The tension was no doubt one reason Mr. Rohatyn rebuffed pleas by his mentor, Mr. Meyer, to take over Lazard. Mr. Rohatyn, who wanted to maintain his role in public life, instead advised Mr. Meyer to name as his successor Michel David-Weill. Mr. Weill would eventually reunite the three branches of Lazard, in New York, London and Paris.
Mr. Rohatyn remained the company’s leading rainmaker. Lazard represented RJR Nabisco when it was acquired in 1989 by the private equity firm KKR for $25 billion — the largest leveraged buyout to that point. The next year, he helped broker the merger of the entertainment giant MCA with Matsushita, the Japanese electrical concern (which was itself later sold to Seagram). He worked on the merger of Warner Communications with Time Inc.; the purchase of The Limited, the clothing retailer, by the company that operated Bergdorf Goodman and Neiman Marcus; and the acquisition by Viacom of Paramount Communications.
A Taste for Politics
Mr. Rohatyn liked to quote Mr. Meyer: “Public service is like having a young mistress. You should be careful. It’s tempting.” His political acumen, however, did not quite match his financial and managerial skill.
Mr. Rohatyn backed Edmund S. Muskie in 1972 and Henry M. Jackson in 1976 for the Democratic presidential nomination. He upbraided President Jimmy Carter for not delivering more aid to the city. He urged Mr. Cuomo to seek the Democratic presidential nomination in 1992; after the governor declined, he backed the independent presidential candidacy of the businessman H. Ross Perot. In the 1970s, Mr. Perot had taken over a troubled investment house in a deal that Mr. Rohatyn helped arrange.
That support for Mr. Perot — who lost to Mr. Clinton — probably helped dash Mr. Rohatyn’s highest aspirations, to become Treasury secretary. After the Senate blocked his appointment to the Fed, Mr. Rohatyn even had to fight to succeed Pamela Harriman as ambassador to France. (The position had been dangled before Frank Wisner, a career diplomat who had helped found the C.I.A., and Mr. Clinton’s chief of staff, Erskine B. Bowles, had tried to persuade Mr. Rohatyn to go to Tokyo instead.)
Mr. Rohatyn’s years in France were largely uneventful; he fostered a friendship with President François Mitterrand, promoted museum exchanges and helped create the French-American Business Council.
Mr. Rohatyn married Jeannette Streit in 1956, and they had three sons, Pierre, Nicolas and Michael. The marriage ended in divorce; she died in 2012. In 1979 he married the former Elizabeth Fly, whose two earlier marriages had ended in divorce. Ms. Rohatyn, a longtime supporter of education and the arts, died in October 2016.
In 2009, at 80, he turned his attention to the nation’s aging infrastructure, warning in a book, “Bold Endeavors: How Our Government Built America, and Why It Must Rebuild Now,” that only major investments in public works could avert an even more costly crisis later on.
The next year he published his memoir, “Dealings: A Political and Financial Life.” And in 2012, following Hurricane Sandy, Gov. Andrew M. Cuomo named him co-chairman of a commission entrusted with finding ways to improve the resilience of the state’s infrastructure in the face of natural disasters and other emergencies.
In 2016, Mr. Rohatyn and his wife, a former chairwoman of the New York Public Library, announced that they had given the New-York Historical Society a collection of his letters, documents and other papers related to the New York City fiscal crisis and his business career.
A fixture in philanthropic circles — an annual Easter egg hunt on the lawn of his Southampton home on Long Island was a high point on the city’s social calendar — Mr. Rohatyn professed ambivalence about high society, frequently reminding his fellow wealthy that their social obligations meant more than attending gala events.
Mr. Rohatyn often said that the legacy of the fiscal crisis should be “balanced-budget liberalism”; he advocated a modern-day version of the Reconstruction Finance Corporation, President Franklin D. Roosevelt’s Depression-era lending entity, to help rebuild cities.
He deplored the layoffs and instability set off by some of the very corporate marriages he had arranged, and called for a new partnership between business and labor. As early as 1982, in a commencement address at his alma mater, Middlebury, Mr. Rohatyn warned: “Maybe for the first time in history, the United States is faced with doubts about its destiny. In less than 25 years, we have gone from the American Century to the American crisis.”
In a 2007 history of Lazard, William D. Cohan, the closest Mr. Rohatyn had to a biographer, wrote: “For much of the Reagan era, Felix predicted the decline and fall of American society at the very moment American economic and political power was reaching its zenith worldwide.”
But by 2010, with the economy in its worst rut and inequality rising toward its highest level since the Depression, what once seemed preachy now looked prophetic.
“The basic test of a functioning democracy is its ability to create new wealth and see to its fair distribution,” Mr. Rohatyn said in 1982. “When a democratic society does not meet the test of fairness — when, as in the present state, no attempt seems to be made at fairness — freedom is in jeopardy.”
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