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Peter G. Peterson: Why we must be tough-minded about public policy

Published by The New York Sun on 2005-01-26

If there is an American Establishment -- and there is -- its chairman most certainly would be Peter G. Peterson of Kearney, Nebraska, Chicago, Washington, D.C., London and, of course, Manhattan. He is quite possibly the most distinguished and accomplished investment banker in the world, enormously wealthy by his own acknowledgment, a writer of best-sellers, and a sartorial doyen. He is also a very nice man.

It was natural for an interviewer, therefore, to begin a conversation with Mr. Peterson yesterday with a question about the Establishment. So how does it feel to be widely regarded as a man of great influence in the private sector and public life?

"The question of influence is something that I'd rather leave to others to decide," he said. "But one might argue that the phrase 'American Establishment' is an oxymoron," he said. "Many years ago, it would have been relatively easy for a traditional small group of people with a nexus to business, public policy, foreign policy and public service -- people like John J. McCloy, David Rockefeller and Douglas Dillon -- to transcend political parties and partisanship and construct forward-looking plans in the national interest and quietly persuade the public to accept them."

"But today's business leaders are running truly global and competitive enterprises," Mr. Peterson said. "They are constantly traveling. They have less time and energy to devote to the public good."

"Another reason they're less involved in the public good has to do with the increasingly partisan environment in Washington, and the increasingly gotcha mode of the media -- where if one sticks one's head out and takes a position on a controversial issue, it becomes something of a turkey shoot," he said. "So there's understandable concern in the business community that there might be recrimination for taking strong positions -- even if they happen to be for the public good."

"In the old days, the real Establishment worked in very quiet ways," Mr. Peterson continued. "Today, especially in foreign policy and public policy matters, it's become a much more noisy process. While I'm all for openness and transparency, I'm not all sure that making noise for the sake of making noise is all that beneficial for the public good."

"The public good" is a recurring theme in the lunch conversation, just as it's been in Mr. Peterson's career after graduation from Northwestern University and graduate work at the University of Chicago, where he was mentored by Milton Friedman and George Schultz, and even offered an academic position: a stint as an advertising copy writer; then upwardly mobile to becoming CEO of Bell and Howell, when Charles Percy was a mentor; secretary of commerce under President Richard M. Nixon; chairman and CEO of Lehman Brothers and later, Lehman Brothers, Kuhn, Loeb; and senior chairman and co-founder of the Blackstone Group, a Park Avenue investment bank.

He attributes that recurring theme to his upbringing in Kearney, Nebraska, as a son of Greek immigrants, George and Venetia Peterson. It's striking how often during a conversation he recalls the "special gift" his parents bequeathed, an abiding love for America and a driving work ethic.

"My father was a dishwasher, he worked on a caboose, he often slept in a caboose," Mr. Peterson said. "Then he started the inevitable Greek restaurant, which he kept open for 25 years straight, not even closing for Christmas or Thanksgiving. His enduring dream was to 'buy' his two sons the best education that money could buy.

"And he always told us that the only 'American' saying he knew was, 'God bless America. He always tried to imbue us with the idea of what a great privilege it was to be an American."

That idea has certainly characterized Mr. Peterson's many endeavors in public life. He has never been a jingoistic American but rather an internationalist. For example, he revived the sluggish -- but extremely prestigious -- Council on Foreign Relations by formidable contributions that enabled the institution to expand its physical facilities as well as programs. Along with the Council former president, Leslie H. Gelb, Mr. Peterson created a "term membership" program to encourage young Americans to explore foreign policy issues more intensively.

And now, he told The New York Sun yesterday, he wants the Council to have its own "major building" in Washington, where there are almost as many members of the Council as in New York (the total national membership is about 3,000).

"If the Council's board agrees, then I recognize that I'm going to have to be one of the leaders in that effort, both financially and personally," Mr. Peterson said, with a chuckle.

If indeed he endows a building for the Council in Washington, it would be his second such philanthropic contribution. Some months ago, Mr. Peterson was an honored participant at the opening of the Washington headquarters of the Institute for International Economics, an event attended by many luminaries of the American Establishment, including the head of the Federal Reserve, Alan Greenspan.

"I enjoy giving money away," Mr. Peterson said, "I enjoy philanthropy. But I don't do handouts. I tend to get deeply involved, passionately involved, in my philanthropic engagements. I need to get personal satisfaction from my philanthropy. I have more money than I ever thought I'd have, and I get a huge kick from giving away money. "

Thus, at the Council on Foreign Relations, he is a ubiquitous presence at meetings and seminars, frequently chairing them, or introducing guests -- including world leaders for whom the Council's Park Avenue headquarters is a "must" stop -- with witty remarks that neatly encapsulate the subject's politics, record and reputation without necessarily drawing attention to ungainly career components.

Thus, Mr. Peterson chairs the Institute for International Economics -- whose executive head is Fred C. Bergsten, the economist -- where seminal research is conducted on public policy issues and global finance.

Thus, Mr. Peterson is active in the Concord Coalition, whose co-founders include former Senator Warren Redman. He describes the bipartisan coalition as a "crusade for generational responsibility."

Thus, Mr. Peterson -- who private art collection is dazzling -- is a trustee of the Museum of Modern Art. Thus, Mr. Peterson supports educational causes -- particularly for the intellectual and cultural growth of preschoolers -- with his wife, Joan Ganz Cooney, who created Children's Television Workshop in 1967 and is the celebrated originator of Sesame Street.

These kinds of continuing -- and intensive -- involvements elicit expressions of admiration from those who've worked with Mr. Peterson or who've had an opportunity to observe him closely.

"He's a relentless crusader," says Diane Sawyer of ABC News.

"Pete is a living trifecta," Richard N. Haass, president of the Council on Foreign Relations, said yesterday. "He's been successful in government, finance and the nonprofit world. He's had a great impact on all three.

"But as successful as he's been in government and finance," Mr. Haass continued, "it's possible that his biggest and most lasting impact will be on the nonprofit world. Here at the Council, Pete has been generous with his time, advice and resources -- it's really impossible to ask more of anyone."

Mr. Haass told The Sun that he benefited from Mr. Peterson's presence when, in 2003, he became president of the Council -- which was formed in 1921 -- because the chairman "offered continuity."

"He was instrumental in the success of the previous decade, and for someone like me it was a real advantage to enter an institution with a chairman like peter," Mr. Haass, whose previous job was in the Bush Administration as director of policy planning at the State Department, said. "It was fortuitous that Pete stayed on a chairman."

That Mr. Peterson should be dogged about ensuring the continued success of the Council doesn't come as a surprise to people who've observed his career. When Diane Sawyer calls him a "relentless crusader," she's echoing what the late George W. Ball, the investment banker and former deputy secretary of defense, said about him -- that Mr. Peterson was "relentlessly analytical."

How so?

"Being 'relentlessly analytical' isn't necessarily a virtue," he said. "Some people make decisions intuitively and quickly. I tend to think a bit, look into the background of an issue, the risks, and the alternatives. Then I act."

Action doesn't need to be laced with aggression, he said. "I'm at an age now where it's not necessary to be in an aggressive and competitive mode. Some people have even characterized me avuncular."

He attributes part of his "generally relaxed" demeanor to the fact that much of the day-to-day operations at the Blackstone Group are supervised by Stephen A. Schwarzman, the co-founder, chairman and CEO. He speaks warmly of Mr. Schwarzman, who's also the chairman of the Kennedy Center in Washington.

"Steve is extremely able," Mr. Peterson said. "That leaves with the time for my passion for public policy issues."

Mr. Schwarzman called The Sun from Washington to note that he'd been working with Mr. Peterson for 31 years and that the latter had "an acutely strategic sense of opportunities, and is a great judge of potential in people."

Avuncular and polite Mr. Peterson may be, but no one can say that he's not tough minded. Back at Lehman, he had some bruising internal battles, in a "political and financial situation" that he says was essentially one where the company -- "despite a great tradition" -- was bankrupt and where his own capital had been invested.

"There's a difference between being tough minded and being tough to get along with," Mr. Peterson said, in what could be a homily to executives as well as young professionals everywhere. "I'm tough minded. I have always prided myself on being direct. I believe in saying what you honestly feel, but you should say it as nicely as you can."

He's especially tough minded on public policy issues, Mr. Peterson said. "I'm tough minded about what I think the reality is in public policy, I don't fudge at the edge of what some call constructive ambiguity. I'm very unambiguous and tough about the problems that America faces."

That explains why he speaks out forcefully on issues such as the nation's deteriorating educational standards, the growing current-deficit, the question of an aging population, and what he calls "the big one," Medicare, which he said was five times bigger than Social Security as a funding liability for the nation.

"The Social Security problem is relatively easy to solve," Mr. Peterson said. "But we don't even discuss Medicare. I'm a republican, but I do not hesitate in speaking out my mind on the fact that my party has permitted discretionary spending to grow beyond the size of the economy. There's hardly a tax cut my party doesn't seem to like -- just like there's hardly an entitlement program that Democrats don't like."

"We've accumulated $500,000 worth of debt for every American," he said. "There's a debate about whether there's going to be a hard landing for the economy or a soft landing -- but it's a landing we seem to be talking about. No one talks about take-off. Our national savings rate used to be 8% or 9% barely a decade ago. It's now down to 0.2%. The CEO of American Express told me that his cardholders average $8,000 in card debt. This is in a country where the median income is $40,000. What the mentality here? There's this preoccupation with pleasure -- I want it all, and I want it now. This country has become the world's biggest spender and borrower. Why? Why this indifference to our future?"

Some of his concerns are captured in a recent best-seller that Mr. Peterson wrote, "Running on Empty: How the Democratic and Republican Parties Are Bankrupting Our Future -- and What Americans Can Do About It." He said that some of his thoughts did not exactly endear him to policymakers in Washington. "

The conversation turned back to the American Establishment.

"For whatever reason, many in the business community don't seem to see that there's a critical connection between their getting involved more vigorously in public policy issues and their self interest," Mr. Peterson said. "We need to get young people to be more informed and be concerned about issues such as Medicare and deficit and the national debt. Business -- the Establishment -- certainly has a role to play in all this."

The conversation also turned back to what he learned from his parents.

"They taught me that the greatest obligation any generation has is to bequeath the next generation a world where they did the best they could," he said. "My parents' generation could be proud. I worry about the world that we're leaving our children. I have five children and nine grandchildren. What kind of a world are they getting from us?"

And that, as much as anything that Peter Peterson said, seemed to sum up where he was at. It seemed like an appropriate moment to end the lunch.

Pranay Gupte,
Senior Writer and Global-Affairs Columnist


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