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Peter G. Peterson's Billion Dollar Legacy by Esmé E. Deprez

Peter G. Peterson's Billion Dollar Legacy by Esmé E. Deprez

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Published by esmedeprez
Billion Dollar Legacy, Esmé E. Deprez, The Elevator, Issue XIII Summer 2009.
Billion Dollar Legacy, Esmé E. Deprez, The Elevator, Issue XIII Summer 2009.

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Published by: esmedeprez on Jul 06, 2009
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Private equity // Luxury // PhiLanthroPy
Peterson’s$1bn Legacy
PerLa grouP
Middle eastern turnkeyservice provider willlaunch the region's firsttaxi jet serviceBlackstone'sfounder takes onnew challenges
PuLLing the trigger
are investors gettingBack into the gaMe?
What Works ina recession?
exploring Businessesthat thrive whileothers failalso insidethis editiongetaway of getawayswhere life goes ontoys for the affluentwatch industry outlookwealth ManageMentsolar energyonline gaMing
9 771662 864002
issue xiii - suMMer 2009
CHF 12.00 • eur 7.50 • gbp 6.00
 
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He tackled Wall Street and Washington – now this inancier-turned-philanthropist is on a questto save America’s errant economy 
billionDollarleGacy
words:esMé e. deprez
“Kurt Vonnegut and Joseph Hellerwere at a wealthy hedge und manager’spalace out in the Hamptons,” Petersonrecounts, when Vonnegut turned toHeller and asked, “Joe, doesn’t it bother you that this guy makes more in a day than you ever made rom the worldwidesales o Catch-22?” Heller rejected theassumption and replied instead, “No,because I have something he doesn’thave.”“What the hell could you have thathe doesn’t have?” asked Vonnegut.“I know the meaning o enough.”“That kind o clicked with me,”Peterson says in a low and tempered voice, his calm demeanor accompaniedby a rm sense o gravity maniestedin a urrowed brow. His ace is tanand weathered with deep dimples thatbounce as he moves his mouth, andrimless eyeglasses sit atop a slightly bulbous nose. Always impeccably dressed, his striped silk tie complementsa matching handkerchie tucked in thepocket o his dark navy suit and a crispshirt peeks out at the wrists just enoughto catch a glimpse o gold cu links.America, meanwhile, does not knowthe meaning o “enough,” Peterson says.Ater the 2007 initial public oeringo Blackstone, the private equity powerhouse he co-ounded in 1985with Stephen A. Schwarzman, Forbesdeclared Peterson the 147th richestperson in America with a net worth o $2.8 billion. He has since committed$1 billion o his $1.8 billion windall toendow a new eponymous oundation.Its mission is to make things click orgovernment ocials and the Americanpublic as well, “beore it’s too late.”The irony, o course, in Petersontelling this anecdote, is that he may be all three characters in one. Like Vonnegut, he’s bothered by theostentation o his Wall Street peerswho he thinks don’t realize the value o a dollar, and like Heller, he ruminatesconstantly about the lessons o “enough”that his Greek immigrant upbringinginstilled in him at a young age. Heis also, however, like the hedge undmanager, a billionaire who has mademost o his money in private equity romleveraged buyouts (i.e. other people’smoney) with a palace o his own at thebeachront playground o Manhattan’swealthy. This may complicate hismission.Friends and amily rave thatPeterson is the best person to consultwhen aced with any sort o problem.Ever since he was young, he refects,“I wasn’t content to simply know whatI knew, or thought I knew. I wanted towrite about it, speak about it, even teachothers.” When amed New York gossipcolumnist and close riend Liz Smithsigned a $1 million book contract in thelate 1990s and told Peterson she had nosavings to speak o, he immediately setabout instructing her on her nances.“He actively interered in my lie to keepme rom doing something with thismoney,” she says. “He was determinedto keep me rom fittering it away.”Now it’s the American public andederal government Peterson is address-ing. Along with David Walker, ormerComptroller General o the U.S. andhead o the Government Accountability Oce, he established the Peter G.Peterson Foundation last July to raiseawareness about a looming $56 trilliondecit that they say, let untouched, willleave the country in ruin.A prominent xture among businessexecutives on Wall Street and policy makers in Washington or decades,Peterson served as commerce secretary under Richard Nixon and as chairmanand CEO o Lehman Brothers in the1970s. Since “retiring” last Decemberater 23 years as chairman o Blackstone(no one who knows him actually believes that he will slow down untilhe really does not have a choice), hecan now nally commit ull time tothe oundation, the culmination o alielong passion and last great attempt toshape the world. The New York Timescalls him “one o a growing numbero philanthropists whose oundationsare spending increasing amounts andraising their voices to infuence publicpolicy—a marked shit rom theirtraditional position.”Peterson is to the ederalgovernment’s check book what AlGore is to climate change: a crusaderriding on his reputation, contacts andpersonal wealth to tackle a long-termproblem that is politically complicatedat best and hopelessly quixotic at worst.At a time when so many Americansare struggling to pay their bills, andpopulist sentiment against greedand corruption rises with each bank bailout and executive compensationplan, many question how a Wall Streetbillionaire can lecture the country onspending. “The headline o this is thatit’s sel-serving and hypocritical,” says Je Faux, ounder o the EconomicPolicy Institute, a liberal think tank in Washington.As he discusses in his new memoir,The Education o an AmericanDreamer, the June release o whichcoincided with his 83rd birthday,Peterson attributes much o his successover the years to luck. But with thisnext phase that may be beginning tochange. He pledged to give away somuch money when the economy andthe country were in a much dierentstate. The oundation’s inaugurationlast summer was the subject o much publicity but has since beenovershadowed by lawmakers scramblingto revive the American nancial systemwith ederal spending diving deeper intothe red each day. Is Peterson’s scoldingon scal responsibility needed morethan ever, or, as Robert Frank o The Wall Street Journal puts it, “is he simply worried about dried up lawns just beorethe hurricane hits?”Ater nearly hal a century as asel-dened “addicted workaholic,”Peterson’s announcement to retire romBlackstone at its 2007 public oeringwas a dening moment. Shortly ater,“the phones seemed to stop ringing.”He had also recently stepped down aschairman o the Council on ForeignRelations—quite literally, in act, when
On a spring morning,sitting back in a black leather chair in thespacious 48th looroices o his newoundation overlookingFith Avenue, PeterG. Peterson recites ananecdote he likes to use –a lot – to demonstrate thephilosophy he says he’slived by since growing upin the Great Depression.
 
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he stumbled o the stage and tore therotator cu in his right shoulder (“Ithink you’re taking stepping down alittle too seriously,” a riend joked later).The injury landed him on the operatingtable, where he would return less thantwo years later with a broken hand.As the nancial crisis started totake hold throughout the country, a liecrisis—and legacy crisis, perhaps—took shape as well. Restless nightsand melancholic laments to riendsevolved into depression, because “atmy age,” he says, “when you’re goingthrough these kinds o transitions it’s very dicult.” And so he reverted back to two o his avorite pastimes to curehimsel: psychotherapy sessions and hisreputation as a decit hawk.“I had an image o what it mightbe like on my deathbed to have all thismoney that I don’t need and being very concerned about the uture and nothaving done anything,” Peterson says.“And I thought that was unacceptable.”He thought o the old adage his ormerproessor at the University o Chicago,George Stigler, once told him: when you don’t have a choice, you don’t havea problem. As Peterson saw it, he hadno alternative—he had to spend thatmoney. “What am I going to do, sit outon the beach and count my dollars? Play gol every day o my lie? I didn’t think the typical retirement lie was or me.”Peterson looked to ellowbillionaires and realized that “virtually all the ones I really admired were majorphilanthropists.” So, he writes, likeMichael Bloomberg, George Soros,Eli Broad and his role model DavidRockeeller, “I decided that was whatI wanted to do.” He and his wiewould soon become the third mostgenerous American philanthropistsin 2008, according to The Chronicleo Philanthropy. Beneciaries besidesthe new oundation included thePeterson Institute or InternationalEconomics (another creation o his),Sesame Workshop and the New York-Presbyterian Hospital. Years o harping about scaldiscipline and generational inequity had already made Peterson a targetamong riends. They mock his relentlesscrusade and the plethora o op-eds andarticles it has produced or the New York Review o Books, Times Sunday Magazine and Atlantic Monthly. He’swritten ve books that point out hulking yet somehow unseen nancial crises,including most recently Gray Dawn:How the Coming Age Wave WillTransorm America - and the World in1999 and Running on Empty: How theDemocratic and Republican PartiesAre Bankrupting Our Future and WhatAmericans Can Do About It in 2004.“Once you put it down, you won’t beable to pick it up,” joked Ted Sorenson,President Kennedy’s speechwriterabout one. Leslie H. Gelb, a riend andcolleague at the Council on ForeignRelations, recently ried that while ittook him 15 years to write one book inthe time it took Peterson to write ve, “itwas easy since [Peterson’s] were all thesame book with new covers.”Peterson needed his new oundationto be dierent.Back in 2007, Peterson satalongside riends Paul Volcker, WarrenBuett and Bob Kerrey on a panelsponsored by the Concord Coalition, anorganization that advocates or scally responsible public policy that Petersonhelped ound in 1992, as David Walkeraccepted the Concord Coalition’s“Economic Patriot Award.” Walker wasComptroller General o the UnitedStates and head o the GovernmentAccountability Oce since PresidentClinton had appointed him in 1998. Headvocated many o the same policiesabout which Peterson was passionate onhis “Fiscal Wake-Up Tour,” a series o Coalition-sponsored visits to cities andcollege campuses nationwide to bringattention to the ederal government’sgrowing budget decits. Petersonrecruited him relentlessly or weeks, Walker says, until “he convinced methat I would probably have a betterchance o accomplishing my nalobjective by coming with him and beingable to do things at the oundation that Icouldn’t do as Comptroller General.” Walker and Peterson warn o “large and growing budget decits,dismal national and personal savingsrates, and a ballooning national debtthat endangers the viability o SocialSecurity, Medicare, and our economy itsel.” A ticker on the let side o theoundation’s website keeps track o a number too big or most o us tocomprehend: $56,400,000,000,000—all those zeros mean trillion—whichequals the “Real National Debt”according to their research team.It is ollowed by another ominousgure, $184,000, the burden o every individual American today. The U.S.government puts the gure closer to$11 trillion but the oundation contendsthat its number accounts or thegovernment’s ununded promises tomilitary pensions, existing debt, SocialSecurity and Medicare benets and thelike. They project that these latter twoentitlement programs represent almost$43 trillion o red ink alone and citestudies showing that both unds willrun out o money long beore Peterson’sgrandchildren reach retirement age.Peterson has been a lielongRepublican, but claries, “I am aRockeeller Republican. And thereare two o us let, David Rockeellerand mysel, I think.” His party has lethim down prooundly, which “at leastused to have a principle called scalconservatism,” he says with a heavy sigh. “I could not have imagined thatwe’d have a Republican administrationthat got rid o spending caps, got rido pay-as-you-go and had endless taxcuts and terric increases in spending.”Peterson’s lectures to George W. Bushon the immorality o providing long-term tax cuts to “genuine at cats” likehimsel at the expense o more pressingentitlement reorm have long allen ondea ears, and he has loudly lambastedthe ormer president’s administrationand Republican Congress or overseeingthe “biggest, most reckless deteriorationo America’s nances in history.”During the 2008 presidentialelections, Peterson supported JohnMcCain, calling him “a true scalconservative.” But, says Michael,one o Peterson’s our sons and theoundation’s vice chairman, “theoundation is strictly nonpartisan andnonideological and Obama’s victory didn’t change our mission in any way. Itthem a strong sense o “enough.” Witha third-grade education and no English,Peterson’s ather opened a successuldiner at which Peterson, the eldestchild, took his rst job at age 8 countingmoney.Peterson was an overachieverthroughout grade school, masteringGreek and the clarinet and receivingonly one “B” ater ailing to draw rogs inhigh school biology. He struggled withhis weight throughout childhood (andwould into adulthood) and his motherorbid him to play contact sports.Classmates labeled him a “sissy.” Buti those years taught him anything, “itwas that I could prevail through sheerobsessive diligence,” he refects. “I couldout-work and out-study almost anybody,and i that’s what it took to conquer asituation, that’s what I would do.”The amily business made enoughmoney to send Peterson to college, andater a brie stint at MIT he went onto graduate summa cum laude with adegree in retailing rom Northwesterninstead. There, he writes, “I ound outthat I was good at what would later becalled multi-tasking, and that I liked it.I was restless in my interests and gotbored doing just one thing. I didn’t knowit at the time, but I was setting a patternI would ollow or the rest o my lie.”
 
In 1948, Peterson married his rstAs stated, the oundation’s goal isto tackle not only the debts and decitsbut also the “challenges weakening theoundation o our uture: out-o-controlenergy consumption, an educationsystem that lags behind other developednations, and a health care ‘system’ thatcosts more and yet leaves more peoplebehind with each passing year.” Theoundation is still getting o the ground,and much o its two-foor space remainsempty while the current sta o about20 employees continues to expand. Theoce, which rises high over CentralPark with views stretching to YankeeStadium, is also home to PetersonManagement, “like a amily oce,”Michael says, that separately manageshis ather’s investments.Peterson repeatedly touts thathis lie has been “a case study in theAmerican dream.” His parents, GeorgiosPetropoulos and his wie Venetia,arrived in Nebraska rom Greece inthe early 1900s. The immigrants soonAmericanized the amily name and hadtwo sons and one daughter, instilling insimply changed who we’re going to haveto work with in the coming our years.During the course o the oundation’sexistence there will be many.” Michaeltook time away rom the oundationand his own Philadelphia-based privateequity and investment rm to volunteeror the current president during hisall election campaign—“a pretty goodindication,” he says, o the oundation’snonpartisan commitment.Last summer the PetersonFoundation unveiled itsel as “anindependent, nonpartisan convener andacilitator o solutions that transcendage, ideology and party lines,” withPeterson as chairman and Walkeras president and CEO. Walker’s“Fiscal Wake-Up Tour” had by thenevolved into a documentary, entitled“I.O.U.S.A.,” in which he starredalongside Warren Buett and AlanGreenspan. The oundation boughtthe rights to the lm—which aimedto be the “Inconvenient Truth” orthe nancial environment—ater itspremiere at the Sundance Film Festivaland used it or publicity.
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“I ound out that I was good at what would laterbe called multi-tasking, and that I liked it. I wasrestless in my interests and got bored doing just onething. I didn’t know it at the time, but I was settinga pattern I would ollow or the rest o my lie.”

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