Ironically, after Chase gave up on Interamericana, IBEC converted it into a mutual fund, Fundo Crescinco, the first of its kind in Latin America. Most of our Brazilian partners rolled over their investment into the new company, which proved to be enormously profitable and still exists today. Many of our original Brazilian partners also created their own investment banks, a further indication of the validity of our original concept. Sadly, Chase had fumbled a major opportunity.
THE STRUGGLES WITHIN CHASE
My efforts to get Interamericana launched were among my last activities in the Foreign Department. In September 1952 I was promoted to senior vice president and assigned responsibility for the bank’s New York City branches and customer relations.
During my six years in the Foreign Department I saw that radical changes in management structure and style needed to be adopted to enable Chase to be a more aggressive and profitable financial services institution. As I rose through the hierarchy, from assistant manager to vice president, I was able to implement some changes, but as a relatively young officer in a department of secondary importance, I did not have the clout needed to make a broader impact in any of the areas that I thought were fundamentally important. Furthermore, among old-line officers in both the domestic and international areas, I sensed some resistance to the changes I proposed and concern about the role I was playing in the bank.
My introduction to international banking had been eventful, replete with a number of successes and some failures. But it would take a full decade more before my concerns about international expansion and a more sophisticated professional management and organizational structure began to be accepted.
*The National City Bank (now Citigroup) was really more of a Rockefeller bank than Chase. William Rockefeller, Grandfather’s brother, owned a substantial percent of National City’s stock and was closely associated with James Stillman, the bank’s president between 1891 and 1909. Two of William’s sons married two of James Stillman’s daughters; their clan became known as the Stillman Rockefellers, and their family maintained a close relationship with City Bank over the years. In the 1960s, Stillman Rockefeller, William’s grandson, was chairman of First National City Bank when I became president of the Chase. However, by this time Stillman and his family owned less than 1 percent of City Bank’s stock, and my family about 1 percent of Chase’s. While Stillman and I had cordial personal relations, we were not close friends and were unabashedly ardent competitors.
CHAPTER 11
LAUNCHING A PARALLEL CAREER
I had other responsibilities beyond Chase that claimed my attention after the war. The most important of these were my wife and children, and the affairs of the Rockefeller family, particularly in the areas of international relations, urban affairs, culture, and education. Over time, each of these areas would become of intense importance to me, consuming an expanding portion of time and creating what can only be called a “parallel career.”
ESTABLISHING A HOME LIFE
My first and most important challenge was to reconnect with my wife and children. I made a start by establishing a permanent home in New York where they would feel secure after my wanderings and the uncertainties of the war years.
During the war Peggy had found an apartment on Fifth Avenue, and they were living there upon my return. Peggy, our fourth child and third daughter, was born there in October 1947. She was the first of three children who came to be known as Series B. Richard (“Dick,” as we always called him, named for my dear friend Dick Gilder) and Eileen followed at two-year intervals. Even with three children it became clear that we would have to move.
Peggy found a house on East 65th Street that fit our needs perfectly. It had enough rooms to accommodate our growing family and a friendly atmosphere, almost like a country house; it featured a large living room with eighteenth-century English pine paneling and a small, cozy garden at the rear. We bought it in mid-1948, and it would be our New York City home for the rest of the century.
On weekends we took the children to Pocantico Hills, first to the Stevens House inside the walls of the estate, but within a short time we took them to our own home. My sister Babs, recently divorced, decided to leave the beautiful redbrick Georgian House just outside the Pocantico Estate, designed for her in 1938 by Mott Schmitt, and move to Oyster Bay, Long Island. Knowing that we wanted a larger country home, Mother persuaded Babs to sell us the house. Hudson Pines, as we named it, was located across a public road from the family estate. It included forty acres of land, a caretaker’s house, a stable, flower and vegetable gardens, and some barns—just what we were looking for in a country place.
Peggy and I also established a base on the coast of Maine for our summer home. My childhood summers had been spent in the Eyrie on Mount Desert Island, and it was there that I learned to sail and developed a deep interest in nature. I wanted my children to have the same exposure. Peggy had been there with me to visit my parents several times before the war, and she shared my love of the mountains and coastal islands. We were delighted when my parents offered us the use of Westward Cottage, a simple white New England frame house close to the ocean. When Father realized we were happy there, he generously gave us the house.
MAKING ENDS MEET
The only real drawback to acquiring three homes in one year was that we needed a considerable amount of furniture for three rather large houses. This presented a serious financial challenge since I had no capital of my own and was dependent on the income from the trust that Father had established for me in 1934, which in 1946 amounted to slightly more than $1 million before taxes.
The operative phrase was “before taxes.” During the war the tax rate on incomes of more than a million dollars increased to nearly 90 percent—in my case exactly $758,000 in 1946—after first deducting charitable contributions of $153,000. As a result I was left with less than $150,000 in discretionary income. So even with a gross income of a million dollars, what I was left with in terms of spendable funds was clearly modest.
Both Peggy and I had been brought up to be economical in our expenditures, but we both wanted the things we owned to be of good quality. By good fortune, soon after the war we met Cecil Turner, an English dealer who had started the Antique Dealers Fair in London’s Dorchester Hotel. Cecil understood our budgetary limitations but was impressed with our insistence on furnishings of good quality. He took us under his wing and taught us to recognize quality and to spot fakes. Over the years he helped us buy many fine pieces of eighteenth-century English furniture at prices we could afford.
Our zest for antiques extended also to porcelain, silver, and glass, a taste that had been encouraged by my mother and Aunt Lucy, both ardent connoisseurs and collectors. Perhaps it was just as well, at least for the sake of our pocketbook, that it was not until we had completed the furnishing of our homes that we became interested in French Impressionist and Post-Impressionist paintings.
Thanks to Peggy’s considerable talents, good taste, and thrift, we managed to furnish our homes without ever using an interior decorator. Peggy obtained a decorator’s license, enabling her to buy furnishings at a 30 percent discount. Peggy’s first chance to develop her skills as a decorator had occurred right after our marriage when Father told her that he would pay for the furnishing and decoration of the Stevens House if she would be responsible for doing it. Within a short time she had shopped around to find attractive furniture, rugs, and draperies at wholesale prices. To Father’s amazement and admiration Peggy had bought everything needed for $5,000! Over the years Peggy made our homes cozy and inviting. As our financial resources increased, I like to feel they had style and elegance as well.
ORGANIZING AS BROTHERS
In early 1946, when all five brothers returned to New York to pick up the threads of our lives, Father was still the overlord of the Family Office, the acknowledged moral leader of the many Rockefeller philanthropies, and master of the substantial family fortune. It soon became apparent that the brothers needed to present
a united front in dealing with Father if the process of generational transition was to move forward more swiftly and in harmony with our vision for the future.
Nelson had taken the initiative before the war in organizing our generation. He suggested we meet on a regular basis to talk about our careers as well as to explore how we might work together on issues of common interest. At the outset we met every two months or so, often at the Playhouse in Pocantico but sometimes at one of our homes.
The brothers’ meetings served a practical purpose both in managing family affairs more efficiently and in giving us a chance to keep in touch with one another on a more personal level. The five of us had widely diverging and, in some ways, conflicting interests, but largely because of these regular get-togethers we maintained a basic respect and affection for one another, something that has not always been the case with other wealthy families.
We asked Abby to join us, but she wasn’t interested. We also asked Father to sit in with us, but he also declined. He seemed uncomfortable, almost threatened, by the prospect of facing all of his sons at the same time, perhaps out of concern that we might confront him with unanimous decisions with which he disagreed. Mother would have enjoyed the experience, but I think she felt awkward joining us when Father had declined our invitation. So she, too, declined, leaving us to meet by ourselves.
My brothers unanimously elected me secretary of the group, responsible for keeping minutes, since I was the youngest and “the only Ph.D.” I retained that position during the thirty-eight years that we held the meetings. In later years our divergent careers and busy schedules made regular meetings impossible, but there was never a year when we didn’t meet at least twice.
We began meeting in 1940 and initially did little more than bring one another up to date on our individual activities and plans. We soon decided, however, that philanthropy was an area in which closer cooperation could be beneficial. Each of us received annual requests from a number of charitable organizations, and each tended to respond differently depending on our inclinations and financial resources. We decided it would be more efficient and effective to pool our gifts to organizations such as the United Jewish Appeal, Catholic Charities, the Federation of Protestant Welfare Agencies, the United Hospital Fund, the Red Cross, and the United Negro College Fund. The result was the incorporation of the Rockefeller Brothers Fund (RBF) in late 1940. For the first twelve years of its existence the RBF had no endowment. Instead, each of us made annual contributions proportional to our income. Arthur Packard, Father’s senior philanthropic advisor, served as director and helped us determine the allocation of funds.
A decade later our individual annual contributions to the RBF had grown to the point that we were able to support organizations which individual brothers had initiated or in which one of us had a special interest. Nelson, for example, had created the American International Association (AIA) to provide rural credit and advice to farmers in Brazil and other South American countries, similar to the U.S. government’s agricultural extension programs. RBF became a substantial funder of this effort. John was deeply concerned about the dangers of escalating world population growth long before most people recognized the urgency of this critical issue. The RBF provided crucial support to John’s Population Council during the early years of its work. Over time, the fund provided us with the opportunity to work together and to forge a philanthropic philosophy that reflected our generation’s values and objectives.
BUYING ROCKEFELLER CENTER FROM FATHER
No subject loomed larger in our meetings after the war than the future of Rockefeller Center. During the first eighteen years of its operation, the property had not generated enough revenue to fully cover interest and taxes, let alone amortize the debt owed to the Metropolitan Life Insurance Company and to Father. After construction was completed in the mid-1930s, Father had covered the Center’s operating deficit for almost a decade. Through the end of 1944, Father had invested a total of $120 million: $55 million in common stock and another $65 million in interest-free notes. As a result the common stock, all of which Father owned, was worth very little.
Nevertheless, Nelson, who had served as president of the Center for a few years prior to the war, saw great long-term potential in the property. He was convinced that once the debt was paid off, it would be an increasingly valuable asset. He encouraged the brothers to take advantage of the “great opportunity” he saw by asking Father to sell us the Center’s common stock. With our concurrence Nelson pressed Father on the matter, and while Father saw merit in his arguments, he explained that he was not a totally free agent. Before he could sell his stock, he had to obtain the permission of both Columbia University, which was the landlord, and Metropolitan Life, the principal debt holder. Met Life readily agreed, but the university gave its consent only after the terms of the lease were modified to incorporate ironclad guarantees that the lease payments would be made and that the common stock could not be sold to anyone outside the family. An additional provision stipulated that no dividends could be paid so long as any of the original debt remained outstanding. My brothers and I agreed to these stiff conditions because we believed the long-term financial future of the Center was bright. However, some of these restrictive lease covenants would continue to limit the Center’s flexibility and marketability as long as Columbia remained the landlord.
In 1948, after ironing out these complexities, Father sold us his Rockefeller Center stock for its appraised value of $2,200,000. The five of us acquired ownership of the Center with its eleven fully occupied buildings in a prime location for $440,000 apiece. Taking ownership of the company, however, meant assuming its debt of $80 million: $20 million still owed to Met Life and $60 million to Father. In 1950 we repaid the final portion of the Met Life loan, and the following year we made a payment of $2 million on the debt to Father.
How to deal with the remaining debt generated a good deal of intra-family tension before it was finally resolved. Father was seventy-eight in 1952, and his health, never robust, had begun to decline. His lawyers became increasingly concerned about the impact that holding the Center’s notes would have on his estate. Shortly after we purchased the common stock, Nelson proposed that Father forgive the indebtedness so we could free up the funds needed to modernize and possibly expand the Center. Father countered by pointing out that this would oblige him to pay $26 million in gift taxes, so he declined. Since canceling the debt was not feasible, we proposed that Father give the notes to the RBF, which badly needed an endowment. In fact, Nelson felt so strongly about this that he threatened to resign as chairman of the Center if Father did not agree with our proposal. Father eventually yielded and gave the notes to the RBF. In so doing he effectively ended his financial involvement with Rockefeller Center, leaving its management entirely in our hands.
Father’s contribution of $57.7 million to the RBF had great significance for my generation. As the Center paid down the debt over the next seventeen years, the RBF gradually built up an endowment enabling it to support new initiatives that had not been possible previously. The Rockefeller Brothers Fund emerged as my generation’s most significant joint philanthropic endeavor, and it was the principal vehicle for our support of groups in fields such as population, conservation, economic development, urban affairs, and basic scientific research.
Rockefeller Center would become an increasingly valuable investment not only for my brothers and me but also for our heirs. For Father, however, the venture had been almost a total financial loss. All told he invested $55 million in common stock and $65 million in personal notes. (This does not take into account the “opportunity cost” of financing these obligations by selling securities, primarily oil stocks, at rock-bottom prices during the Depression.) On a total investment of $120 million he received $2.2 million for the common stock and was repaid only $7.5 million on the notes. Few people realize that despite the long-term benefits produced for his descendants, Father sustained a direct loss of more than $110 million as a resul
t of his courageous decision to proceed with the building of Rockefeller Center during the Depression.
BUYING THE POCANTICO ESTATE
Another important topic of discussion at the brothers’ meetings was the future of the 3,300-acre Pocantico estate. By the late 1940s the tax consequences of property transfers had become quite costly, and steps had to be taken to deal with Father’s potential estate problems.
Nelson, without informing any of his brothers, approached Father about selling the Pocantico property to us. Father was somewhat reluctant to do this because he had been responsible for the design and construction of Kykuit when he was a young man and had supervised the development of the property into one of the most beautiful estates in the country. Understandably, he was not keen on giving up control of a property that had meant so much to him for the better part of his life. However, Nelson then implied that if he refused to sell, none of us would be interested in remaining on the estate. That was stretching the truth by quite a bit, but Father, faced with what he thought was an ultimatum from his sons, agreed to the immediate sale.
In January 1951, Father formed the Hills Realty Company and folded the entire estate into it, taking back stock valued at $700,000 in return. The following year he sold all the Hills stock to the five of us, retaining a life interest for himself—a reasonable compromise from my point of view. Each brother paid just over $152,000 for a one-fifth undivided ownership in the full estate.
Memoirs Page 18