Flash back to January 1977. Jimmy Carter had just been sworn in as the 39th president, and just like today the U.S. was facing some daunting economic problems. It fell to young Ralph Schlosstein, a deputy assistant secretary of the Treasury — now president and CEO of Evercore Partners — to keep the lights on in New York City.
Two years earlier the Big Apple had literally run out of money. It was surviving on a series of short-term loans from the federal government while the Carter administration figured out how to fix the problem. “One of my responsibilities was to run the loan guarantee program,” making sure that the city got its funds, says Schlosstein.
It took more than a year of negotiations among federal, state and city officials to settle upon a solution to New York’s fiscal dilemma. Eventually, the U.S. government agreed to back the city’s debt, enabling it to raise money from the public markets.
Almost as soon as a solution was found to New York’s problems, Chrysler Corp. came calling. The Detroit-based carmaker’s then-CEO, Lee Iacocca, told the Carter administration that his company was in real trouble and needed a rescue. By then, Schlosstein had moved to the White House as associate director of the domestic policy staff. His former boss at Treasury, assistant secretary Roger Altman, now Evercore’s co-founder and chairman, ended up doing much of the work on the Chrysler bailout.
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“The Chrysler bankruptcy was modeled on the New York City bankruptcy,” says Schlosstein. “They were mirror images of each other. Like New York, the Chrysler bailout used loan guarantees in the private sector.” Both situations were resolved out of court, avoiding the kind of government-aided Chapter 11 cleanup that General Motors Corp. and Chrysler would go through some 30 years later.
“Nobody likes bailouts,” says Schlosstein. “However, there are times when both governmental entities and very important private entities get into liquidity problems, when they can’t finance themselves, and when that happens, you have to make a critical judgment: Are the entities viable over the long run? If they are, then there can be a discussion about whether it makes sense to do something.”
Following Carter’s loss to Ronald Reagan in the 1980 presidential election, Altman and Schlosstein left Washington for Wall Street, both joining Lehman Brothers. It wasn’t the end of Altman’s association with Chrysler, however. He became the company’s investment banker and helped with its 1983 initial public offering. Schlosstein went on to create Lehman’s interest rate swap business and head its mortgage and savings institutions group.
The two bankers’ paths diverged further in 1987, when Altman joined the emerging banking and private equity firm Blackstone Group as head of its mergers and acquisitions advisory business. The next year Schlosstein helped co-found money management firm BlackRock.
Both men remained actively involved in Democratic politics. Altman went back for a second stint at Treasury during the Clinton administration. Schlosstein was an early supporter of President Obama. Though they are dismissive of the suggestion that Evercore’s Washington ties help the firm win business, they agree that their insider status can help them as advisers.
“We are fortunate enough to be able to talk to some of the decision makers, and that gives us an understanding of their thinking,” says Altman.
The longtime friends reunited last year when Schlosstein joined Evercore, replacing the bank’s co-founder Austin Beutner, who had retired as CEO in 2008 after being seriously injured in a mountain-biking accident. This January the mayor of Los Angeles tapped a recovered Beutner to be that city’s first deputy mayor and chief executive for economic and business policy. It seems Evercore bankers can’t ever shake the public policy bug.
