People in the news

Steven Rattner

Former Chief Adviser to the Treasury Department on the Auto Industry (February 2009 to July 2009)

(Chip Somodevilla/
Getty Images)

Why He Matters

Rattner's held many titles: billionaire, fundraiser, fund manager, investment banker, New York Times journalist and Democratic fundraiser and power-player.

In February 2009, Rattner became the top adviser to the Treasury Department for the auto industry and a member of President Barack Obama's Auto Task Force. He helped decide whether General Motors (GM) and Chrysler would receive billions of dollars in further federal aid as they struggled to remain viable in the midst of a global recession.

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Background

At a Glance

Career History: Founder of Quadrangle Group (2000 to 2009); Deputy CEO of Lazard Freres & Co (1997 to 2000); Merger and Acquisition specialist at Lazard (1989 to 1997)
Birthday: July 5, 1952
Hometown: Great Neck, N.Y.
Alma Mater: Brown University, B.A. (economics), 1974

Spouse: Maureen White
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Path to Power

A product of Great Neck, N.Y., Rattner joined his high-school newspaper because of his love of photography. He quickly became the managing editor. For college, Rattner attended Brown University, studying economics, but he continued his journalistic pursuits working for, and eventually running, Brown's daily paper. After graduation, he won a New York Times internship in Washington with columnist James Reston.

Rattner became a rising star at the Times and was hired by the Metro desk before covering energy and then to work in the Washington bureau, all by the age of 24.

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Wall Street

But six years later, Rattner made a surprising move: he quit the Times to work on Wall Street as an investment banker. In an entry-level job at Lehman Brothers, Rattner embarked on his new ambition, analyzing corporate mergers and acquisitions. He stayed at the now-defunct Lehman for two years before heading to Morgan Stanley in 1984. Within two years of leaving the Times, Rattner banked a million dollars a year in salary. Rattner stayed at Morgan until 1989, starting the company's media-investment banking practice.

Lazard Freres & Co.

When Rattner joined Lazard Freres, he quickly became friends with the right people at the private investment firm. He soon became a protege of the company's largest money-maker, Felix G. Rohatyn. The two worked on a number of billion-dollar media deals together. But the firm's culture often created rivalries and, after Vanity Fair profiled Rattner in 1994, Rohatyn turned on Rattner and wanted to fire his apprentice. Rattner stayed, but the firm's two stars began to bicker. In 1996, Rohatyn attacked his former friend through the New York Magazine, saying "Eventually he [Rattner] wants to be Treasury secretary, and he's trying to get it by getting media attention and by social climbing, without doing any public service," Rohatyn charged. "He should do public service, but he doesn't care about anything, not music, not art, not politics. He just wants to get ahead."

The tension boiled over by 1997 when Rohatyn left Lazard to assume the U.S. ambassadorship to France, while Rattner became deputy CEO of the investment bank. It appeared that Rattner would take the top position at Lazard once Lazard owner Michel David-Weill retired. But after it became apparent to Rattner that he would be passed over, he left the firm in 2000 to start his own investment company.

Quadrangle Group

In association with three other former Lazard employees, Rattner opened the doors of the Quadrangle Group in 2000. The fund focused on media firms, while Rattner's CEO connections, experience and knowledge won them stewardship of deals that would otherwise have been unattainable. "In a multibillion-dollar deal, the amount of money Quadrangle can put in is not that useful," said private-equity specialist Thomas H. Lee, who has done business with Rattner, in 2004. "But they understand their industries so well that Quadrangle has become a preferred partner to other private-equity firms."

Rattner's unparalleled knowledge and connections led to media mogul and New York City Mayor Bloomberg's decision in 2008 to allow Quadrangle to manage his multi-billion dollar personal fortune.

The Issues

The U.S. auto industry was reeling in late 2008 and early 2009. GM and Chrysler had already received nearly $25 billion in federal aid in order to stave off total collapse. Amidst a global recession, GM and Chrysler's debt obligations rose to such a point that it became nearly impossible to obtain loans in the private market. They begged the Obama administration for help, and the president told them to outline their plans for long-term viability in February 2009.

Obama also created the President's Auto Task Force, a 14-person group with representatives from the Treasury, Labor, Transportation and Energy departments, among others. However, it was mostly run by senior aides, and Rattner unofficially led the group's daily efforts.

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In March 2009, the task force helped President Obama decide to reject GM and Chrysler's initial plans for future viability. The government instead offered conditions that, if met, could provide the struggling companies with an additional infusion of federal cash.

On March 31, 2009, the government gave GM 60 days to submit a new plan. The government would assure the company stayed afloat, but GM was ordered to fire its longtime CEO, Rick Wagoner. After consultation with other task force members, as well as senior Obama aides Timothy Geithner and Larry Summers, Rattner informed Wagoner that he would need to resign. Wagoner did, and the company's chief financial officer, Fritz Henderson, assumed the CEO position.

As the two-month deadline approached for GM, it was apparent that the company would need to file for bankruptcy. On June 1, 2009, the Detroit icon filed for bankruptcy protection in the U.S. Southern District of New York. The Treasury provided $30 billion of extra financing for 60 percent ownership in the company. The restructuring plan included cutting GM's 47 U.S. factories down to 33 by 2012.

The Mortgage Crisis

Over the course of 2007 to 2008, as the rash of subprime mortgages defaults began to worsen and credit markets tightened, Rattner wrote a few op-eds laying out his views on the financial turmoil.

As early as June 2007, Rattner had already penned a piece for the Wall Street Journal titled "The Coming Credit Meltdown" in which he explained that the spread between high-risk loans and the amount of interest they earned had reached levels closer to the "risk-free" rate from U.S. treasuries.

That meant investors were getting less compensation for riskier bets than ever in history. But credit was so widely available that investors and lenders continued to fuel the problem. "And just as the unwinding of the subprime market occurred at a time of economic prosperity, the high-yield market could readily unravel before the next recession," wrote Rattner. "With the balance sheets of many leveraged buyouts strung taut, a mild breeze could topple a few, causing the value of many leveraged loans to tumble as shaken lenders reconsider their folly."

At the time, Rattner wasn't sure what the fallout would be of all the mispriced borrowing. "The bigger -- and harder -- question is whether the correction will trigger the economic equivalent of a multi-car crash, in which the initial losses incur large enough damages to sufficiently slow spending enough to bring on recession, much like what happened during the telecom meltdown a half-dozen years ago," wrote Rattner. "But we have little choice but to sit back and watch this car accident happen."

In March 2008, as it became clearer that mortgage defaults could cause more serious problems to the economy at-large, Rattner advocated offering lenders incentives to allow struggling homeowners to modify their loans.

And in September 2008, after the Bush administration announced the federal bailout of Fannie Mae and Freddie Mac, Rattner called the strategy a "superbly crafted rescue plan."

He also supported the notion of creating a new government entity to provide liquidity to the mortgage market, which would allow Fannie and Freddie to "begin an orderly liquidation, selling off their portfolios as market conditions permitted and allowing their guarantees of securitized debt to roll off as the underlying mortgages were paid off or refinanced."

New York Attorney General Probe

In April 2009, New York AG Andrew Cuomo and the SEC began investigating whether Quadrangle obtained a $100 million investment from the New York state pension fund through illegal dealings.

According to the SEC complaint, David Loglisci, a former official at the New York's comptroller office who's accused of taking kickbacks from companies that wanted to manage part of the $122 billion New York state pension fund, met with a unnamed senior executive at Quadrangle to discuss a DVD distribution deal for "Chooch," a 2004 movie produced by Loglisci that grossed a little more than $31,000 in box-office sales.

In January 2005, shortly after the meeting, a Quadrangle affiliate, GT Brands purchased the DVD rights for more than $88,000. Three weeks later, the Quadrangle executive learned from Loglisci that the state's retirement fund would make a $100 million investment in a Quadrangle fund.

No allegations have been filed against Quadrangle or Rattner, and the investigation continues.

The Network

Rattner boasts a star-studded list of friends, developed throughout his years as a journalist, investment banker and Democratic fundraiser.

New York City Mayor Michael Bloomberg (I) trusts Rattner's former company Quadrangle Group with his multi-billion dollar fortune. In 2005, Rattner helped Bloomberg's fundraising efforts in New York City, heading the Democrats for Bloomberg fundraising committee. Rattner also contributed to fundraising efforts for Democratic presidential candidates Al Gore (D), John F. Kerry (D-Mass.), Hillary Rodham Clinton (D) and Obama.

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Campaign Contributions

Rattner is known as a big Democratic campaign player along with his wife, Maureen White, the former chief DNC fundraiser. The Rattners reportedly helped then-Sen. Hillary Rodham Clinton (D-N.Y.) raise $2 million for the 2008 Democratic presidential primary. When Clinton dropped out of that race, Rattner became a bundler for Obama, raising at least $100,000 for his 2008 presidential effort.

From 1993 to 2000, while Rattner worked at Lazard, he donated over $256,000 to various candidates and political committees. He donated $4,500 of that money to Republican candidates, including $3,500 to ex-South Carolina Governor Mark Sanford (S.C.) when he was running for the U.S. House seat he held from 1994 to 2000.

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Additional Resources