Memoirs

by David Rockefeller

  Some observers at the time criticized my extensive travel as “irrelevant” or “a waste of stockholders’ resources.” They completely missed the point. The reason for these trips was to generate business for the bank, and from the start they produced important links with business and political leaders in Europe, Latin America, the Middle East, Asia, and Africa that were critical to the bank’s expansion. Further testimony to their value came from the fact that Chase officers, both domestic and foreign, continually requested that I travel with them because their customers were eager to talk with me on a broad range of political and economic subjects in addition to banking relationships. (Even today, many years after my retirement, Chase’s management still asks me to travel on behalf of the bank.) I think it is fair to say that my visits to the far corners of the world in the 1950s and 1960s helped lay the groundwork for the expansion and consolidation of Chase’s global position in the 1970s.

  As an international banker with an equally heavy commitment to a wide range of not-for-profit organizations, I had continual contact with a large number of people. This was not a burden because I have always enjoyed meeting people and learning about their personal concerns, ideas, and activities—finding out what makes them tick. I have been fortunate in the number and quality of the friendships I have made with people from all walks of life. I am always open to and aware of the potential of a new relationship, whether for its intellectual challenge or the emotional pleasure it brings, or because it opens up the prospect of a new business or philanthropic opportunity. I often have immediate feelings of empathy and compatibility with others, but I am equally capable of feeling the reverse.

  My interest in others has helped me cut through cultural differences to establish a quick rapport. This direct and uncomplicated approach applies to people I meet every day as well as world leaders. I have never felt that a close personal friendship and a good business relationship need be mutually exclusive. In fact, I firmly believe that the most successful business associations are based on trust, understanding, and loyalty, the same qualities that are essential to a close personal friendship.

  ESTABLISHING INSTITUTIONAL ROOTS

  In the early 1960s I began the task of putting down roots in the major countries of the world. Since we had a very thin network of branches in Latin America, Europe, and Asia. I knew that creating a comprehensive global branch system de novo would be too costly and time-consuming. A more promising course would be to affiliate with indigenous banks throughout the world, commencing in an area with which I was most familiar: Latin America.

  For some time I had tried to establish a Chase presence in Brazil, the largest and most promising of Latin America’s economies. Our failure to do so had been particularly frustrating because many Brazilian businessmen understood that foreign capital was essential to their economic growth and diversification.

  In 1961 an associate of Nelson’s informed me that Antonio Larragoitia, the chairman of Sul America, the largest insurance company in South America, wanted to sell a majority interest in its Brazilian banking subsidiary, Banco Hipotecario Lar Brasileiro. Although Banco Lar was small by Brazilian standards, it was well managed and profitable, so I immediately contacted Larragoitia, who confirmed that he was willing to sell 51 percent of the stock of his bank for $3 million. He agreed to give Chase management control, which would allow us to transform Banco Lar into a full-fledged commercial bank. We had an unprecedented unique opportunity to establish an immediate presence within a dynamic economy at a bargain basement price. Furthermore, I viewed the acquisition as a test of both my ideas and my clout as president and co-CEO.

  George Champion reflexively opposed the deal. He was put off by Brazil’s political instability, chronic fiscal and budgetary problems, and dizzying inflationary spiral. Admittedly, it was a precarious time politically, since Brazil’s new president, João (Jango) Goulart, was a populist with strong socialist convictions. One couldn’t be sure how things would turn out, and clearly our purchase would involve a risk. But the low price reflected that risk, and in my judgment if we waited until a country was risk-free before moving, we would never go anywhere. When George remained obdurate, I took the matter to the board, where we debated the issue several times. Despite the opposition of George’s allies, I persevered, and the board gave its assent to the deal in April 1962.

  We gradually added to our equity interest in Banco Lar, and in 1980, as a result of an informal conversation over cocktails at my home in New York with Carlos Langoni, governor of the Brazilian Central Bank, we were able to purchase the balance of the shares. I simply told him that Chase wanted to increase its ownership and asked if the Brazilian Central Bank would allow us to proceed. To my great surprise he agreed, and Chase purchased the rest of the bank.

  Over the years Banco Lar proved to be a solid acquisition for Chase. Now known as Banco Chase Manhattan, it is one of the leading foreign banks in Brazil with assets of more than $1.1 billion. Not bad for an initial $3 million investment.

  A similar affiliation in Venezuela in 1962 went a lot more smoothly. Chase had maintained a representative office in Caracas for a number of years, and our strong position with the petroleum industry made the advantages of a strategic alliance there acceptable even to George Champion.

  Luís Emilio Gómez Ruíz, whom I had met when he was his country’s foreign minister, had become president of the Banco Mercantile y Agricola, which was controlled by the Vollmer family. I approached Gómez Ruíz in 1961 about an affiliation with Chase and, after several meetings in New York and Caracas, eventually persuaded him and Gustavo Vollmer to sell us 42 percent of the bank’s stock for $14 million. This deal gave us a controlling interest in one of Venezuela’s leading banks; it had assets of more than $71 million and fifteen branch offices throughout the country.

  We followed up on this promising start with other strategic affiliations in Peru, Colombia, Argentina, and Honduras over the next five years. The process of Latin American expansion was not always smooth and trouble-free. We encountered problems with populist politicians and restrictive regulations wherever we went—not unlike our experience in some areas of the United States. But by the end of 1962, having successfully rebuffed internal opposition, I felt encouraged by the pace of our expansion in Latin America and set out to find similar opportunities in other parts of the world.

  MISSED OPPORTUNITY IN CANADA

  As important as Latin America was to my strategy of international expansion, I considered Canada even more important. Canada was, and is, our nation’s largest trading partner, and U.S. firms controlled more than half of Canadian mining, petroleum, and manufacturing. Many of Chase’s most important customers were active there. Even though Canadian law prohibited foreign banks to have branches, I believed it necessary for us to have a direct presence north of the border.

  There were a few hopeful signs. I had enjoyed good relations with many of Canada’s business and political leaders dating back to Father’s friendship with Mackenzie King. Soon after World War II, I had gotten to know Lester (Mike) Pearson personally when he was secretary of state for external relations and represented Canada at the United Nations. In April 1963, Mike became prime minister and called for strengthening political and economic ties with the United States. His positive attitude suggested to me that there might be a more favorable climate in Ottawa toward foreign banks.

  The need for Chase to do something became urgent in July 1963 when City Bank bought the Mercantile Bank of Canada, the smallest national bank and the only one already owned by foreign interests. City Bank’s purchase created a nationalist uproar, but it fundamentally changed the banking equation in Canada. I felt this was a challenge we could not ignore. Affiliation with one of the principal chartered banks seemed to be our best alternative. Toronto Dominion, Canada’s fifth largest, with assets of $2.2 billion and more than six hundred branches, looked especially attractive. Moreover, we received an encouraging letter from Alan Lambert, TD’s chairman, indicating that he
“would understand if it later developed that you people found it necessary to make some move into this area.” I had developed a cordial relationship with Lambert and decided to approach him with an offer to purchase as much as 40 percent of Toronto Dominion’s stock. This was my intention when I flew to Canada on November 13, 1963.

  Lambert had offered to host a lunch for me and suggested we meet privately in his office for a few minutes beforehand—the perfect opportunity to advance my proposal. To my great surprise Lambert opened our conversation by asking me whether Chase would be interested in buying one-third of TD’s stock. I told him the idea had great appeal to me and that I would explore it with George Champion. Lambert’s proposal would have required a Chase investment of almost $60 million, more than triple the amount we had invested in all our foreign affiliations up to that time. I realized that such a large commitment required careful consideration, but I felt instinctively that we should seize what might be a fleeting and unique opportunity to link two of North America’s largest financial institutions.

  George Champion did not dismiss the proposal outright but insisted that we first ascertain whether our U.S. corporate customers would find it helpful if we had a stake in a major Canadian bank. From my perspective this was the wrong question. As I saw it, our primary interest in affiliating with TD would be to generate more business directly with leading Canadian firms. What our domestic customers thought about the move seemed relatively unimportant.

  When George determined that our domestic customers were indifferent to our having a stake in a Canadian bank, he used that as an excuse to postpone making a decision. That was a serious error because our window of opportunity was rapidly closing. Walter Gordon, minister of finance, had introduced legislation that would limit foreign ownership of domestic banks by any one individual or institution to no more than 10 percent.

  In a last-ditch effort to save the original terms of the deal, I flew to Ottawa in November 1964 to see Prime Minister Pearson. I tried to convince Mike that restricting Chase’s ability to do business in his country, while allowing City Bank a free hand, was unfair to Chase and probably detrimental to the economic development of Canada. Mike said he agreed with my views and promised to review the legislation. But a few months later Lambert told us Gordon had informed him that “he had the complete sympathy and support of the prime minister in his proposed legislation, and that any impressions obtained from Pearson to the contrary are without validity.” And that was that.

  TD’s loss was a terrible setback. The debacle was a glaring consequence of divided authority at the top of Chase and our inability to develop a unified vision for the bank. It was one of the most frustrating experiences of my joint tenure with George Champion.

  TURNING POINT IN EUROPE

  Despite George’s visceral distrust of foreign operations, the irresistible tide of global change forced him to temper his position, and he did not resist the incremental growth of our European and Asian operations. The turning point in George’s thinking about Europe resulted, oddly enough, from bad loans we had made in South Africa and managed from our London offices. Initially, George viewed the loan problem as confirmation that little good could come from venturing outside the safe confines of the United States. He dispatched a trusted lieutenant to London to straighten out what he considered the mess made by the International Department.

  Soon after he arrived, George’s emissary realized just how strongly entrenched City Bank had become, not only in London but in almost every major Western European country. It was doing business directly with European corporations and starting to make strong inroads with Chase’s domestic customers with overseas operations—a danger that I had long warned of.

  All this was reported to George, who finally agreed that we should strengthen our European management to counter this threat. A subsequent study, conducted by the same Champion loyalist, confirmed that Chase’s competitiveness depended on establishing a foothold in virtually every country in Western Europe. This study changed everything. George might discount my enthusiasm for expansion, but he could not dismiss the considered views of one of his most trusted men. As a result we initiated plans to acquire affiliates across the continent, a process that took the rest of the decade. During that period Chase completed a number of important acquisitions and affiliations.

  In Belgium we bought 49 percent of the Banque du Commerce from its parent, the Banque du Bruxelles. Chase also acquired a 30 percent interest in the Nederlandse Credietbank, which had more than sixty branches throughout Holland. We entered a joint venture with the Bank of Ireland, and we acquired a controlling interest or complete ownership of banks in Austria and Switzerland. And we continued to expand the scope and authority of our flagship branches in London, Paris, and Frankfurt and established new branches in Greece and Italy.

  By the end of the decade Chase had a presence in every major European capital.

  EXPANDING IN ASIA

  Our initial expansion in Asia was much more modest but eventually produced enduring benefits for the bank as well. As late as 1963, Chase’s Asian presence was limited to our two branches in Japan along with a representative office in Bombay. Our two Chinese branches had fallen victim to the Communist revolution, and we had unwisely closed the Hong Kong branch a short time later. We clearly needed a radical change in the character of our operations in the vast Asia-Pacific region.

  In the late 1950s, Jack McCloy had made an effort to enlarge our pitifully small Asian presence by offering to purchase an equity interest in the Mercantile Bank of India, a small British-based commercial bank with twenty-eight branches scattered across south and southeast Asia. While the management of the Mercantile Bank responded positively to our offer, Lord Cromer, the governor of the Bank of England, demurred granting permission. He suggested instead that we buy the east Asian branches of the Chartered Bank, another large British colonial bank. Cromer then persuaded the much bigger British-owned Hong Kong and Shanghai Bank to buy Mercantile out from under us, thus reinforcing British banking dominance in Asia.

  We had much better luck in 1963 when the Dutch-owned Nationale Handelsbank sold us its network of branches in Singapore, Bangkok, Hong Kong, and Japan for $2.5 million. This acquisition got us back into Hong Kong and gave us a new direct presence in two promising countries: Thailand and Singapore. Along with these well-placed branches came more than thirty experienced Dutch managers whose talents and contacts were invaluable in Chase’s regional expansion. Later in the decade we opened a new branch in the former Handelsbank building in Jakarta and other branches in Malaysia, South Vietnam, and South Korea. By the decade’s end we had positioned ourselves to play a strong role in financing the region’s exponential economic growth in the 1970s.

  FITS AND STARTS IN AFRICA

  Establishing a foothold in the newly independent African nations south of the Sahara proved a formidable undertaking. Traveling across that continent in 1959 I had seen a number of opportunities but just as many obstacles to the entry of American banks. The former colonial powers had granted independence but also ensured that their banks would continue to dominate. This fact neatly dovetailed with strongly nationalist policies in most African nations and made the task of entering these countries difficult and time-consuming for American banks.

  We did establish branches in Johannesburg, South Africa; Lagos, Nigeria; and Monrovia, Liberia, but it was clear that full coverage of this enormously rich continent would depend on Chase’s affiliating with one of the major British, French, or Belgian overseas banks already located there. Such an opportunity came unexpectedly in 1965 when Sir Cyril Hawker, the chairman of the Standard Bank, literally walked in the door and offered us a minority participation in his bank’s South African subsidiary as a way of protecting it from the threat of nationalization.

  Hawker had just merged Standard with the Bank of West Africa, creating an institution with more than eleven hundred branches spread over much of anglophone Africa and the Persian Gulf. We determin
ed that the parent institution would be more suitable to our objectives and proposed to buy 25 percent of the Standard Bank itself. Both Hawker and the Bank of England balked at our taking such a large stake but eventually did agree to our purchasing 14.5 percent of Standard’s shares for $21 million, making us their largest shareholder.

  An added benefit was that Sir Cyril, a conservative British banker, hit it off famously with George Champion. The two of them began to formulate a “grand design,” a powerful global banking unit that covered Africa, Asia, Latin America, and the United States. It would seem that George had become a convert to my views, but he never acknowledged the fact.

  Although Standard promised Chase operational influence and the chance to increase our own business in major African markets, it did not work out that way.

  From the outset I had insisted that Chase needed to increase its stake in Standard to ensure our real voice in their global operations and to enable us to leverage our activities in Africa. Hawker and Champion discouraged this as antithetical to their grand design. Within a few years it became obvious, as an internal study concluded, that “a gradual erosion of Chase’s management participation had taken place.” This was hardly the global partnership that had been envisioned.