The last tycoons: the secret history of Lazard Frères & Co (59 page)

"It's tough to be a first child brought up in a place like Great Neck and not be a little hard-driving," Steve once said. Peter Applebome, a reporter and editor at the
New York Times,
also grew up in Great Neck and described the town, in part, as a "kind of 'Goodbye, Columbus' suburban experience--privileged, insulated, largely Jewish but essentially secular--so familiar as to occasion an almost reflexive rolling of the eyes." After graduating from Great Neck North High School in 1970, Steve moved on to Brown University, from which he graduated in 1974 with honors in economics and received the Harvey A. Baker Fellowship, awarded annually for graduate study abroad to members of the graduating class who have "high scholastic standings; have participated in college activities; and have shown qualities of leadership."

While in college, he devoted himself to the
Brown Daily Herald,
furthering an interest in journalism that had started in high school. When he was a senior at Brown, he served as the editor; he was the chief writer of editorials and the overall leader of the paper. In keeping with the times and the function of the editor of a college newspaper, he was an aggressive and outspoken critic of the university's administration and especially of Donald F. Hornig, Brown's president. Rattner believed Hornig to be isolated and detached from the students and kept a running tally of the number of days since Hornig last met with students in a public forum (674 and counting, as of October 1973). Steve facetiously hoped Hornig wouldn't "surpass Babe Ruth's mark."

Steve's final editorial urged his fellow students not to let "those folks in University Hall and the office building and in all the departmental offices get away with things that they shouldn't get away with. And that's one of the main things we tried to prevent this past year. We blew it occasionally, but we think we came up with more heads than tails...for God's sake let the
Herald
know when your blood boils. You're all we've got, folks." Next to these strident words was a picture of a long-haired, baby-faced Steve Rattner and four of his colleagues, unsmiling and buck naked, strategically holding posters of themselves naked (yes, it's complicated) with the request that students "get involved" by joining the staff of the paper. Steve is sitting, with his poster facedown in front of him, revealing his bare chest. He has long since made his peace with Brown; he has given at least $500,000 to the university's endowment and is now the chairman of the Budget and Finance Committee of the university's Board of Fellows.

From Providence, Steve shot straight to the top of the journalism profession, serving as clerk for the legendary
New York Times
man Scotty Reston--an assignment that has been described as "the most honored job for a young man in journalism, something like beginning a legal career as a Supreme Court clerk." Steve had been planning to use his Harvey A. Baker Fellowship to attend the London School of Economics in September 1974 and then move on to law school. But fate intervened when he applied for a summer job in 1974 at the
Vineyard Gazette,
on Martha's Vineyard, and met on-island with the paper's owners, Mr. and Mrs. James Reston. He got dinged for "not being folksy enough" for the Vineyard, and so lined up a summer job at
Forbes
instead. But in June, Scotty called him up out of the blue and asked whether he wanted to come to Washington to be his clerk at the
New York Times.

One of the great attractions of the apprenticeship with Reston, of course, was the expectation that at its conclusion, the
Times
would proffer a full-time position to the tireless clerk. Steve was a natural at the
Times,
reveling, at all of twenty-three, in his stature as a full reporter on the metro desk of the world's most important newspaper. He hung out with Paul Goldberger, then twenty-five and on his way to being the
Times
's influential architecture critic and a Pulitzer Prize winner. Some of their former
Times
colleagues believe Rattner, for a time, modeled himself after the uber-sophisticated Goldberger, soaking up the latter's savvy knowledge of contemporary art, fancy clothes, and New York culture. "Steve and I were both involved with plenty of women, but somehow we still found lots of time to hang out with each other," Goldberger told
Vanity Fair.
"We used to shop for art together and we spent Saturday wandering down Madison Avenue going to art galleries. He started collecting contemporary prints and at times he bought the same things I had on my walls. People said I gave him a sensibility. Maybe. He gave me a lot of good companionship and a loyal friendship that lasted 20 years."

Steve moved quickly from the metro desk to a coveted role covering energy policy during the oil crisis of the late 1970s, when his reporting from the Middle East impressed his bosses. "I don't know how people get to be so smart, so savvy," the
Times
's former business editor John Lee recalled about Rattner. "He walked in the door and knew what to do." In April 1977, at twenty-four, he won the plum assignment of covering Carter's energy policies in the
Times
's Washington bureau. "Something no one of my age or experience had any right to," Steve recalled. Eventually, he covered economic policy. "He was very bright," said Bill Kovach, the former bureau chief and the founding director and chairman of the Committee of Concerned Journalists. "His ideas were faster than his ability to talk." It was in Washington, not surprisingly, that Steve befriended Arthur Sulzberger Jr., the current chairman of the New York Times Company and its controlling shareholder. The Rattner-Sulzberger clique also included the other twenty-something reporters Jeff Gerth, Phil Taubman, and Judith Miller, whom Rattner dated for much of the time he was in Washington.

Together, Rattner, Miller, and Sulzberger and his wife, Gail, rented a house, the Blue Goose, on Maryland's Eastern Shore, sealing their lifelong friendship. "There is no one outside my family to whom I'm closer than Steve Rattner," Sulzberger has said. When Rattner was a
Times
reporter, he referred so regularly to Arthur's father, Arthur Ochs Sulzberger, by his nickname, Punch, that Joe Laitin, a spokesman for the Carter Treasury Department, asked Rattner if he was indeed a member of the family. Rattner's response: "No, but you're not the first person to ask me that." Sulzberger junior, nicknamed "Pinch," is regularly quoted about Rattner and is one of his firmest public champions. "What I like about Steve is his mind," he said once. "It is always a challenge to keep up with him." They take vacations together, "something tough and invigorating," such as scuba diving in the Cayman Islands or hiking the Appalachian Trail. Almost every New Year's Eve, the Sulzbergers and Rattners celebrate together. The two are so close, in fact, that Sulzberger, for a time, regularly faces questions about whether Rattner would one day join the New York Times Company in some partnership role. So far, both parties deny the likelihood of this happening.

Steve also developed close ties with many of the younger Carter administration officials, as often happens between reporters and their sources. This kind of relationship is a sensitive one, comprising daily calibrations of where lines should be drawn and how thickly. These decisions are immensely personal, reflecting the values, morality, and character of each party as much as anything. There are no written rules or laws, only constant judgments. Some reporters choose to be aloof, drawing the line at social interaction. Others choose a more intimate path, believing a complete understanding of the personal and the professional will provide rare insight and access. There is no right answer.

But a reporter's power to influence is substantial, as can be the consequences of choices made, or not. For an ambitious young man in his mid-twenties, this can be extremely heady--but complicated--stuff. Steve clearly understood the power he possessed and the choices that had to be made. He wrote about it for the Brown alumni magazine in 1980. "For my part, I have tried to walk something of a middle line, although frequently wondering whether my friendship with people working in government on issues similar to those I report on compromises me," he wrote. "I have particularly avoided friendships with officials with a leadership role on issues I cover." But he certainly cut it close. He shared a house on Martha's Vineyard with Ralph Schlosstein, who was then working for Stuart Eizenstat, Carter's chief domestic policy adviser. He was also friendly with Walter Shapiro, a Carter speechwriter, and with Josh Gotbaum, who held many positions in Democratic administrations and who later, for a time, was Rattner's partner at Lazard. He was friendly with Jeffrey Garten, who worked for Secretary of State Cyrus Vance.

Steve quickly grasped the power his position gave him to influence policy and to influence careers. He walked a tightrope here as well, but generally in favor of his distinguishing characteristic of cozying up to important people. He wrote approvingly of Robert Strauss, the ultimate Washington insider and dear friend of Felix's, that he "has always been careful, as he collects friends, not to collect them indiscriminately." His 1980
New York Times Magazine
cover story on G. William Miller, Carter's Treasury secretary, described "Bill Miller" as "businesslike as his dark suit, white shirt and striped tie. Poise and self-confidence are key components of that executive image, as is a strong measure of personal control." For his part, Felix attributed to Miller a good measure of the blame for the failure of his Textron-Lockheed rescue deal when Miller was CEO of Textron. A profile of George Shultz, Nixon's Treasury secretary and Reagan's secretary of state, included the softball "The lack of force in Mr. Shultz's manner belies an abundance of force in Mr. Schultz's ideas." Just as he had aspired to be the overzealous college newspaper editor, Steve naturally sought to be influential as a Washington reporter for the
New York Times.
"The thing I loved about reporting was the actual impact on events," he once said. "Helping inform intelligent opinion, affect administrators' judgment of things." Which, when he did, "made me feel it's all worthwhile."

In a move of questionable judgment, though, Steve risked throwing away his growing influence at the
Times
when he flirted dangerously with the all-important line between reporters and their sources. The Council of Economic Advisers was central to Rattner's economics beat, as was its chairman Charles Schultze. Over time, Steve developed a high regard for Schultze, a very high regard. In 1979, he applied for the position as special assistant to Schultze. The job was not dissimilar to that of being Scotty Reston's clerk. It entailed working on economic reports, handling the press, and managing the staff of the council. It's "the world's best job in economic policy if you're not a big enough shot to be a principal," according to Susan Irving, who got the job instead of Rattner.

The
Times
never knew that Steve had attempted to cross the line from reporter to source, and so there were no repercussions for him or for the paper. The incident behind him, Rattner kept reporting on the Carter administration's economic policy and continued to write glowingly of Schultze. He described a series of lectures Schultze gave at Harvard as "a modern classic, the
Das Kapital
of the regulatory reform movement."

In the spring of 1981, Steve got promoted to be a foreign correspondent, as the rookie in the three-man
Times
London bureau. The Schultze matter proved, among other things, though, that Rattner was getting antsy at the
Times.
In truth, Steve had been considering the switch to investment banking for some time but held off in favor of moving to London, reasoning that he could always be a banker but the chance to report for the
Times
from London was once in a lifetime.

Helping him to make this decision was his friend Arthur junior, who had been a foreign correspondent for the Associated Press for two years, in London, in the 1970s. Pinch also shared with Steve some names of people to look up while in London, one of whom was Maureen White--his future wife--who was working for a Japanese TV agency. (They didn't hit it off at first; Sulzberger had to reintroduce them when they all had returned to New York City. They were married in June 1986 at the Lotos Club on East Sixty-sixth Street.) Of his time in London, the consensus seemed to be that Rattner's reporting from there was less inspired than it had been in Washington, in direct proportion to his distance from the nerve center of American power. He worked with another
Times
legend, R. W. "Johnny" Apple Jr., the bureau chief, covering the Falklands War and reveling in the older man's insatiable appetites. "Steve and I talked about architecture," recalled Apple. "He did up his flat in London in a modern style very successfully. London is not a late town, and we were working late hours, because of the timing in Argentina, and we'd end up at 12 at night, and to unwind we'd go to Joe Allen's in Covent Garden to eat and drink double margaritas on the rocks, which Rattner christened 'Depth Charges.'"

One of Steve's best
Times
articles, in which he compared the productivity of a Ford plant in Germany with one in England, ended up in the Business section, an ocean away from the
Times
's front page, to which Rattner had grown accustomed. But he also has conceded, in a rare moment of self-doubt, that his skills as a writer were limited. "I once watched Apple write a cover story for the
Times Magazine
in four to five hours with a glass of vodka next to his computer," he told
Vanity Fair.
"Johnny was so talented. I was only the palest imitation. The story in London was more of a writing story than a reporting story. It was my belief that the great correspondents were great writers, and I always thought I was, at best, an ordinary writer." There was also the matter of making money and accommodating his soaring ambitions. Some believe Rattner's move to banking was a prescient acknowledgment that the world was changing quickly; others believe he was motivated by a desire to get rich. Steve said his decision was simply a matter of calculating his best option. "I wasn't going to go into the clergy," he said.