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Where’s Walter?

WRISTON: Walter Wriston, Citibank, and the Rise and Fall of American Financial Supremacy By Phillip L. Zweig. Crown Publishers, 952 …

WRISTON: Walter Wriston, Citibank, and the Rise and Fall of American Financial Supremacy By Phillip L. Zweig. Crown Publishers, 952 pp., $40.

When enough time passes for historians to gain their treasured “perspective,” Walter Wriston, CEO of Citibank from 1967 to 1984, likely will take a place in the pantheon of America‘s greatest financial innovators. Like Hamilton two centuries ago and Morgan 100 years later, Wriston fundamentally altered and energized the U.S. financial system. Wriston’s is a story of smarts, vision, dogged determination, risk taking, and executive ability. He won many battles, lost a few, and changed the world.

Such are the ingredients of a great business biography. But that biography remains to be written. In “Wriston: Walter Wriston, Citibank, and the Rise and Fall of American Financial Supremacy,” author and Business Week editor Phillip Zweig merely assembles the ingredients and piles them on the table. Zweig started out to write a short biography of Wriston in two years, but the project took seven, he says, and grew into a massive history of the financial-services industry since 1945 that nevertheless skims over securities, financial futures, and other derivatives markets. The result is neither a well-told story nor scholarship. It is more a compilation of anecdotes, information, and occasional insights that better biographers and scholars someday may find useful. To make matters worse, there is no table of contents to help readers sort through the reams of information. Chapter titles (such as “Banking on the Moon”) come into focus only after reading the chapters, if then.

The book is supposedly about Wriston, but the former CEO merely wanders in and out of its 952 pages, while Zweig indulges himself in publishing just about everything he uncovered in seven years of research and interviewing. He could have told the essential Wriston story in half the space-or less. The story is there, but it is muted by all the other material and does not come across as the compelling tale it really is.

Banking is a business that manages risk. But it hardly seemed that way when Walter Wriston, age 26, reported for work at Citibank in 1946. New Deal reforms tried to remove risk by regulating and cartelizing banking. World War II turned banks into government bond funds. Wriston and Citibank changed that by developing syndicated loans, loans for U.S. companies expanding internationally, and innovative lending based on projected cash flows instead of traditional hard-asset values. Moving up quickly, Wriston oversaw Citibank’s pioneering international expansion and introduced the negotiable CD, which overcame the constraint of the traditional deposit base on bank expansion.

In 1967, after becoming CEO, he pushed for a one-bank holding company that broadened Citibank’s fee-based financial services, funded by selling holding-company commercial paper not subject to interest rate ceilings imposed by U.S. bank regulators. With the help of John Reed, later his successor as CEO, Wriston introduced the information technologies that underlie modern banking operations, and he moved into consumer-oriented banking, including ATMs and credit cards. Wriston also declared war on America‘s archaic banking regulations and has lived to see most of them scrapped. Other Wriston-sponsored innovations include syndicated Eurocurrency loans, floating-rate notes, and asset securitization.

Of course, Wriston also encountered numerous setbacks while at Citibank. The biggest resulted from the bank’s headlong rush into petrodollar recycling in the 1970s, which was followed by the Third-World debt crisis of the 1980s.

Petrodollar recycling was widely considered a success through the 1970s,but it unravelled in the early ’80s, when anti-inflation monetary policies sent interest rates through the roof and cut the values of borrowing countries’ export commodities. Wriston argued throughout this cycle that “countries don’t go bankrupt.” This was taken by his critics to indicate a seeming unawareness of past Third-World debt defaults. But in a sense, Wriston was right. Pan Am and many other companies did go bankrupt, but Poland, Argentina, Brazil, and Mexico continue to make payments on their revamped and rescheduled debts.

In Wriston’s years at the helm, Citibank never quite booked $1 billion of annual profit, though it came close. Now it is booking $3 billion to $4 billion on the base he built. Citibank is far from the world’s largest bank it was in Wriston’s time, but it is the most global, and it makes the most money. One would hardly guess that from Zweig’s elliptical and too-long account of the Wriston era and legacy. His weak bottom line: “Wriston was a good banker, but not the best.” Apparently, the best bankers are not the ones who are most innovative and have the largest impact on their trade.

Richard Sylla is the Henry Kaufman Professor of the History of Financial Institutions and Markets and Professor of Economics at New York University’s Stern School of Business.

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