NEW YORK, DEC. 27 -- With just a few days to go before stepping down as one of the top Wall Street advisers to the D.C. government on financial issues, Franklin D. Raines dropped a small bombshell on Mayor-Elect Sharon Pratt Dixon.
"You have inherited a mess," Raines wrote in a blunt Dec. 21 memo accusing his longtime client, the administration of Mayor Marion Barry, among others, of botching the city's finances. He warned Dixon that the District would run out of cash within six months unless drastic action was taken.
The District's dire condition hardly came as a surprise for Raines, a partner at the New York investment banking firm of Lazard Freres & Co. For the last four years, the former White House aide has been urging Barry to yield to financial realities and cut spending -- but the counsel has fallen on deaf ears.
"He didn't want to hear what we were telling him," said Raines, 41. "He didn't want to fire us, but he didn't want to embrace us. It was very strange."
Raines's memo to Dixon was his last act in an 11-year stint at Lazard Freres in which he has played an influential but relatively unheralded role in shaping D.C. financial policy. Tired of spending three or four days a week on airplanes, as his job has required, Raines decided that Monday will be his last day at Lazard Freres and that he will be looking for a new job.
"I sort of did the financial crises of the '80s. I'll let somebody else do the financial crises of the '90s," Raines said in his cramped office at Rockefeller Center, where he took a break from packing files in cardboard boxes for the move.
Although he has not begun job hunting in earnest, Raines should not have much trouble finding a post. His re'sume' features nothing but blue ribbons: two Harvard degrees, undergraduate and law school, both with honors; Rhodes Scholar; assistant director of the White House domestic policy staff under President Carter; and later associate director for economics and government in the Office of Management and Budget.
He said that he would be looking for a job in management, in either the private or public sector, but that he is not interested in working in city government, because it would be too much like what he has been doing. However, Raines, who lives in the well-to-do Forest Hills section of Northwest Washington with his wife and two young daughters, said he would be happy to continue advising Dixon as a private citizen.
Raines wrote the memo to Dixon in his capacity as unpaid chairman of Dixon's Transition Financial Management Committee, but he based it on his experience since 1979 as a partner responsible for municipal finance at Lazard Freres.
He built his practice specializing in advising the District, and other city and state governments, on how to deal with troubled financial situations. During Barry's first two terms, Raines helped the mayor preside over a restructuring of the city's accounting and budgeting system. That earned the District enough confidence on Wall Street to enable it to borrow money by tapping the public credit markets in 1984 for the first time in this century.
Barry "totally revamped the District's finances. He deserves a lot of credit for that," Raines said.
But after winning a third term, Raines said, Barry preferred launching new programs to cutting spending, as Raines felt was necessary.
"That's the tragedy of his last term: He stopped doing what he had done to make his name, which was managing the finances of the city," Raines said. "His personal problems distracted him quite a bit."
Raines said much of his work involved advising "high-profile black mayors" -- notably Barry and Chicago's Harold Washington -- on how to survive financial pressures. "Even though it's said that they're liberals, that they're big spenders, the record is that most of them are managers of fiscal difficulties," Raines said.
Raines predicted that in the 1990s city mayors' budget problems will be different from what they were in the 1980s, that leaders will have to make tough choices about which programs to cut.
Asked whether his experience in the Carter White House had whetted his appetite to return to public service at the national level, Raines expressed enthusiasm for "any of the financial jobs: budget office, Treasury." But his party's difficulties also made him realistic: "I would be interested if any Democrat is ever elected to the White House in my lifetime, but that doesn't seem to be something one ought to plan on."