Felix Rohatyn's View Of The Financial Crisis
ROBERT SIEGEL, host:
The investment banker Felix Rohatyn has been thinking about what happens to the international financial system after the dust settles from the current credit crisis. Mr. Rohatyn was a key player in getting New York City through its brush with bankruptcy in the 1970s. He's a former governor of the New York Stock Exchange. He was President Bill Clinton's ambassador to France. Mr. Rohatyn, first, to those days back in the 1970s when bankers and politicians tried to keep New York City afloat. Any lessons contained in that experience for what's happening nowadays?
Ambassador FELIX ROHATYN (Investment Banker; Former US Ambassador to France): Well, certainly, it's a big argument for transparency, and you can apply that nationally in terms of how very ignorant we all were as to the status of the banks, as to the status of the regulatory system. Certainly, I learned during the New York crisis, that if I had a choice of leveling with people and making them nervous or downplaying things and then later on catching the problem, I would do much better by immediately disclosing what I knew.
SIEGEL: But that's after you're in an acknowledged crisis.
Ambassador ROHATYN: Yes.
SIEGEL: A lot of people, before it comes to that, would find it much easier not to be a doomsayer.
Mr. ROHATYN: No. Well, I think you do have to avoid, if possible, being a doomsayer because then everybody's morale collapses, and you create different problems.
SIEGEL: The financial sector has been regulated for most of the last century. Was the problem that regulation didn't keep up with the industry it was regulating or that regulation was cut back too much or were we deregulating?
Mr. ROHATYN: I think that a number of things happened. The first one being probably the entry, on a large scale, of computers and information technology. The possibility to make a great deal of money relatively easily by manipulating numbers became too strong for a lot of people to resist.
SIEGEL: But the loss of the personal relationship, I'm thinking bigger than the homeowner and the mortgage lender and the local bank, the scene of the trading room full of scores of people at computer terminals watching banks make loans, that's a very efficient flow of capital. It's a scene of very efficient flow of capital. If I read you right, something is lost in that process.
Mr. ROHATYN: I'm not sure it's so efficient, but it is also, in some ways, is sort of - it has a tendency to drag you over the edge. Now, I speak of ignorance because, a, I don't know how - I don't have a computer.
SIEGEL: I'm looking at your desk. I don't see the screen or the keyboard.
Mr. ROHATYN: I don't have a screen. I don't ever - I have never operated, as far as this way, in the market, if you will. But the whole market mechanism and its evolution is something that, I'm kind of of the Buffett School. You know, if I see a derivative, I run the other way.
SIEGEL: School is doing pretty well this year at the Buffett School.
Mr. ROHATYN: He's doing well.
SIEGEL: Let's say we get through this credit crisis without some calamitous, worldwide economic crisis and the worst we have is a bad recession. Is there indication for some new round of Bretton Woods, Dumbarton Oaks revisited, some rethinking of how the nation, of how the great economies of the world inter react?
Mr. ROHATYN: I think it's a necessity and include people like the Chinese, the Russians, the Brazilians, the South Koreans, and these people ought to be at the table.
SIEGEL: But the systems that we've known, the systems that were set up after the Second World War, were built around the assumption that we, the United States, were a major creditor nation. Today, at that table, we're a big debtor. Doesn't that inevitably change the influence the United States has over the way other countries' economies deal with us?
Mr. ROHATYN: Well, yes. But I think that's happening. I think our influence is not ruined because we're still in many, many ways the most powerful country in the world. But our ability to almost unilaterally determine what course of action we follow, whether it's for a financial problem or for a military problem, is not what it used to be.
SIEGEL: Your own personal experience is having been born in Europe, having been a refugee leaving Europe, coming to the United States, returning to Europe as a US diplomat. Yours is an international story. Is the United States sufficiently internationalist in outlook to be ready for a global regime of the world economy in which we're not guaranteed to be Mr. Big at the table all the time setting the rules?
Mr. ROHATYN: Well, I don't know that we're ready for it. But that's where we're going.
SIEGEL: Mr. Rohatyn, thank you very much for talking with us.
Mr. ROHATYN: Thank you.
SIEGEL: That's investment banker Felix Rohatyn. He is 80 years old, and he now runs Rohatyn & Associates in New York City.
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