In an Uncertain World (43 page)

CHAPTER ELEVEN

Politics and Business

STEPPING DOWN AS Treasury Secretary was a process that needed to be managed. Though the global economic crisis was on the wane by the spring of 1999 and the impeachment battle was over, there was still much to be concerned about—both in relation to the world I was leaving behind and the one I was thinking of going back to.

Having Larry Summers as my designated successor took care of the biggest problem. More than any other single person, Larry had driven the substance of the U.S. policy response to the Asia crisis. Many people both inside and outside the administration recognized the intellectual leadership he had provided. But Larry wasn't just a rigorous and insightful thinker. As a manager, he had come a long way. I was comfortable with his readiness for the job and his capacity to deal with others in the administration, Congress, the business community, and the financial markets.

I remember once being in the chief of staff's office and being handed a sheet of budget numbers. Larry and I both went to work on them, circling some, scribbling question marks next to others, making rough calculations in the margins. Larry said to me afterward that people react to sheets of figures in two ways. Some people look at them, take them as a given, and go on from there. Others look at numbers and start to question them, looking for inconsistencies, asking what they mean and what stories they tell, wondering about the relationships between them. Larry and I shared that kind of disposition, not just toward numbers but toward all sorts of supposed certainties. As different as we were in many ways, we shared a cast of mind that made us highly compatible as colleagues.

I was confident about the rest of the economic team I'd be leaving behind as well. Gene Sperling was now in my old job at the NEC. Gene had developed over the years a great seriousness of purpose around the issues we faced: fiscal discipline, trade liberalization, engaging with economic crises internationally, and the whole set of issues concerning education and the inner cities. In the second term, Gene put together highly substantive, effective processes around such issues as Social Security reform and the emerging budget surplus.

And that was emblematic of a larger point. First under the strong leadership of Laura Tyson—who was insightful and always told the President what she thought—and then of Gene, the NEC had remained at the center of economic policy making for six and a half years, providing an honest-broker process for almost all economic issues, which augured well for the future. Responses to international financial crises were handled differently, with Treasury in the lead, but even there the NEC and NSC brought the relevant cabinet agencies and White House staff together to consider the large policy choices. A simple vignette illustrates how well this vision of President-elect Bill Clinton had worked out. At one point in the second term, there was some internal disagreement over how to respond to strong pressure for increased barriers to steel imports. Madeleine Albright and I were so strongly opposed to increasing barriers that we wanted to send a joint memo to the President. On the other hand, Gene and I agreed that could undermine the NEC process and would give the President only one point of view. So, instead, Gene ran an expedited NEC process, submitted a memo to the President with the arguments on both sides, and attached memos from the cabinet members who wished to express their views themselves. By taking good process seriously, the President was given the material to make a fully informed decision, in the context of a fair process that best promoted buy-in.

As to my departure, my most immediate concern was how to handle it. I was leaving because I felt ready to go after six and a half years and I didn't want anyone to think it was because of differences of opinion inside the administration or problems of some other sort. Market participants needed to be comfortable with my successor and the economic team. A particular concern was one Gene had raised with me: some people might interpret my departure as meaning that Clinton was essentially done with economic policy—either because there were no major issues still facing us or because the President couldn't do anything politically with a Republican Congress during his last year and a half in office. I was also anxious to avoid becoming a lame duck during the period between my announcement and my departure—which I'd seen happen repeatedly in corporate settings, when a CEO announces his resignation in advance of actually stepping down. Part of the challenge was to figure out ways to talk publicly about my departure that met these various needs.

In a high-level business job, stepping down can create many problems that have to be managed, but a cabinet-level departure in Washington is even more complicated, with possible ramifications one wouldn't face in the private sector. I thought about my departure as yet another process that needed to be managed thoughtfully. To create a seamless transition, I needed a savvy adviser. So I asked Tom Donilon, a former assistant secretary of state and a political pro I'd known since the Mondale campaign, to come over to talk to me in confidence about my announcement and how to manage what was likely to be a five- or six-week period between it and Larry's Senate confirmation. Talking to Tom, I made pages and pages of notes about what I was going to say internally, what I was going to say externally, whom I was going to speak to, when I was going to speak to them, what the hard questions would be, and so forth. I tried to anticipate every difficulty.

The first thing Tom told me was to quit worrying about the lame-duck issue. “This kind of departure is different,” he told me. “Until you leave, you are Secretary of the Treasury. You won't be a lame duck, because the outside world will continue to view you as having the authority of that position until the day you step down.” In fact, I was more concerned about my informal role sitting around the NEC table or the chief of staff's table, where your influence doesn't depend merely on the authority vested in your office. But here, too, Tom felt I wasn't going to have a problem, possibly because I had been in the administration since the beginning, had a well-established role in fact as well as in title, and retained the authority of my cabinet position until I left. And Donilon was right. In this and all other respects, my departure and Larry's assumption of the job went as smoothly as I could have hoped.

The other major issue I faced was what to do next. To help myself think through the issues, I took a yellow pad and began to write down questions for myself: What do I want to be doing with my time after I leave? Do I care about being in the financial world again? About remaining involved in public policy? About being involved in Democratic politics? About making money?

During my six and a half years in Washington, I had remained focused on markets, but from the outside. I was concerned that despite the many years I'd spent on Wall Street, I might have lost some of the feel for markets that comes from working in New York. To answer the question of what to do next, I needed to wander around Wall Street a bit and speak to people more candidly than was possible as Treasury Secretary. The financial environment had clearly changed since 1992 and, before I could make an informed decision about my own future, I needed to have a better sense of what was going on. I also had to decide where to put my personal assets. During my time in Washington, my assets had been in a blind trust. A friend who served in the Nixon administration told me that he had lost half of his net worth under such an arrangement. Not wanting to lose what I had and not being able to play any role in choosing investments or even in protecting myself if I became uneasy about the market, I had directed my trustee to invest very conservatively. But now that I could be personally involved in the markets again, I faced the question of whether I should invest more aggressively. In many ways, my career and personal financial issues were linked. Only by reimmersing myself in the financial world in New York and fleshing out my view of markets could I determine whether I wanted to participate in them at any level.

Back in New York during the summer of 1999, I set up shop at the Council on Foreign Relations, which had offered to take me in during my transition out of government. I spent the next several months in a garretlike office with a view over the backs of East Side town houses. Using that pleasant attic space as my temporary base, I visited with all sorts of people I'd known over the years—from hedge fund managers, private equity fund investors, and investment and commercial bankers to Henry Kissinger and Warren Buffett. I took copious notes about people's views on the economic outlook, the geopolitical outlook, the state of markets, the changing structure of the financial sector, and my own job options and personal financial issues.

The first decision I made was to become chairman of a national not-for-profit organization called the Local Initiatives Support Corporation, whose work I had developed tremendous respect for when I was at Treasury. I knew I wanted to stay involved with issues relating to the inner cities, and LISC, which provides funding and technical assistance for urban and rural community development, seemed a great opportunity for doing that. I also returned to the boards of Mt. Sinai Hospital Medical Center, which I'd had to resign from in late 1992 when I had first joined the Clinton administration.

Beyond that, I knew I wanted to stay active in public policy issues, but I didn't quite know how. Now that I'd left Washington, how could I continue to be sufficiently well informed as to remain relevant? Would anybody care what I had to say now that I was an ex–government official with no power? When I put that question to him just before I left Washington, Bob Strauss answered me with characteristic candor:

“You're a grape now, and you're going to become a raisin,” he said. “The only question is how long it takes.” It struck me that grapes can also become fine wines, but I had the feeling that Bob would quickly have ridiculed that notion.

   

MY FORMER GOLDMAN SACHS colleague Steve Friedman told me there were two basic career models for someone in my position: I could put together a menu of different involvements I wanted to have. Or I could have one central job, as I had at Goldman Sachs, with various additional involvements on the outside.

As I continued talking to people and making notes, the second model seemed to suit me better. I decided that I wanted to go back into the financial world. At some level, perhaps I was just returning to familiar ground. I liked that world and could apply what I knew best most effectively there. But working in the financial sector would also give me an opportunity to stay current, to have the knowledge and insight that come from being engaged. That would help provide a basis for my involvement with the public policy issues I cared about and make my efforts to contribute to them more valuable. I wasn't pressed financially, but I am also a reasonably commercial person, and I felt that I wanted something that would be financially rewarding. And finally, for whatever reason, I actually find the management issues of large organizations interesting. (Most of my friends view this as a personality problem that I should try to work out in some other way.)

But some of my other job criteria complicated the picture. I was extremely cognizant of the difference between being the deputy and being the Secretary, of having great responsibility within an organization as opposed to having the ultimate responsibility. I'd had the ultimate responsibility both at Goldman Sachs and at Treasury, and I didn't want that again. I was at a stage in my life where I wanted to try to live a little differently, with more time and focus for my family, fishing, reading, and whatever I might care about or find interesting. So I wasn't going to be a CEO.

But I did want to be part of the central management structure wherever I went. A colleague who had left the Clinton administration and taken a very attractive, highly paid position at a financial firm had a big influence on my thinking. He visited me at Treasury and said, “I've got a terrific job, but I'm never going to be in the inner management. And if you're not in the inner management, it lacks something. You don't feel like you're a central part of the place.” When he said that, something clicked with me. People with outsized résumés are often viewed from outside as being importantly involved in a company, when in fact they have no real role in management. From that point on, I added that criterion to my job search.

Having a former Treasury Secretary as a kind of elder statesman—though I didn't think of myself as either elder or a statesman—to provide advice and deal with clients, as Henry Fowler had been hired to do at Goldman Sachs, would probably appeal to almost any financial institution. But creating a role in central management was more of a challenge. Fitting someone like that into the top level of an organization can be awkward. He's not going to be CEO or COO or CFO or have decision-making authority with respect to any of the company's activities. So what does he do and where does he fit in?

What I was really trying to create for myself was some type of
consigliere
position, or to become a minister without portfolio who lends a hand in many areas. At one point, I had been interested in finding an adviser to play this role for me at Treasury—someone who was deeply experienced but had no agenda of his own, who could serve as a sounding board for me and for other people around the department. Now I was looking for that kind of role for myself in a private-sector context. This is a good management idea in theory. Many CEOs would probably benefit greatly from the advice of someone loyal to the institution but without a personal stake in major decisions. But for various reasons, this is almost unheard of in practice. Most executives probably don't want a figure with independent standing within their own organization. And coming in from the outside, such a figure could easily seem threatening to others within a company. There also aren't many people who have had the requisite responsibilities and experiences who would be satisfied simply to provide advice—advice that might well be ignored.