This Bloomberg Markets article is part of “The Only One in the Room,” an oral history of the Black experience on Wall Street.
Franklin Raines, 71, served in President Jimmy Carter’s administration before joining Lazard Frères & Co. in 1979, where he became Wall Street’s first Black partner in 1985. He became chief executive officer of the Federal National Mortgage Association in 1999. In 2004 he left Fannie Mae amid accusations of improper accounting. (In a 2012 civil suit ruling, a judge found no evidence of wrongdoing by Raines.) Raines has sat on the boards of several companies, including Pfizer Inc. and Boeing Co.
Because Lazard was such a small firm, I was immediately thrown into a number of deals, M&A deals.Felix Rohatyn, who was senior partner at the firm, had been part of the rescue of New York City—he didn’t do that as a business matter, he did that as a citizen. But a number of other local governments who were suffering financially then—during the ‘80s—began to call the firm. And Felix would say I’ve got to go to Iowa or Texas or any of these places, and so they sent me.
A colleague of mine,Eugene Keilin, had helped Felix with New York City. He and I began a business at Lazard of helping state and local governments in financial trouble. We built that business over a decade into the largest financial advisory business on Wall Street for state and local governments. Lazard was already a major financial advisor to corporations and had done some work internationally with countries and now we were doing it with state and local governments in the U.S.
One of the things that most of these cities had in common was there had been growth in Black leadership. And it became clear to me early on that the Black legislators, Black mayors were looking to me for validation that what they were being told was the right thing to do. And that happened really even when I didn’t know much at all. But they looked at me because these are folks who hadn’t been dealing with Wall Street. They had not been in the middle of issuing bonds before, particularly not in the sizes that we were talking about—$300 million was a big number in those days. So I think that was the thing that got me the most, the extent to which I was viewed as a validator by the Black elected officials of what they were being told by these investment bankers from New York.
I think the best thing that’s happened [since then] is that there are more Blacks outside of public finance. Public finance, it became sort of the only place where Blacks could succeed, and now there are more people in corporate finance and M&A and investment management. There’s a lot more diversity than when I was there but it still doesn’t come close to reflecting the population or even the population of people with MBAs. And so it still lags dramatically. It’s more diverse, it’s just not sufficiently diverse.
I’ll tell you a cute story. When I became the head of Fannie Mae, I was elected to be a member of the Business Council. Obviously, I was the first Black member. In those days it was a very formal kind of group. Each meeting, they had a formal dinner where everyone was wearing tuxedos and the only women there were the spouses of the CEOs, because there were no women CEOs. I’m standing there and didn’t really know anybody, and one of the members comes up to me and says, “Could you get me a martini extra dry, with an olive?” And he looks at me, and he does a double take, and he says, “Oh, you’re a member here just like me.” So that gives you an idea.
If you want to have 20 more Black analysts, go find them, hire them, and train them. Don’t just talk about it. And if you want to support minority business, set up a unit that deals with minority business. Do it the same way you’d do with any other part of your business. Don’t just say, “Oh, this is our goal,” and then forget about it.
I worry that this time will be like Rodney King [who was beaten by Los Angeles Police Department officers in 1991, sparking protests], when people talked about it but did precious little in terms of their own companies. I mean, people are doing good things in the world. I don’t want to denigrate that. It is good to support nonprofits. It’s good to support education. But what did you do in your business [to correct] racial disparities? What concrete [thing] did you do and continue to do? That’s much tougher. If firms step up to that challenge, then I’m very optimistic.
Tan covers finance for Bloomberg News in New York.
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