Hans-Joerg Rudloff started his career at Credit Suisse and then got a job at Kidder Peabody in New York, arriving on Wall Street in 1967. He recalls being “like some French country girl coming to Paris for the first time, all wide-eyed amazement.” He had a trainee position but no real idea of what to expect or what he was meant to do.
So he started to collect answers to requests coming in by telex from the different offices of Kidder, relating to brokerage research and capital markets. He learned who in the head office knew the answers and so developed a good feel for the organization of one Wall Street’s top investment banks.
In an office by the elevator sat Albert Gordon, a Wall Street legend, watching employees buzz past and sometimes calling them in through the always open door.
“I think he liked me,” recalls Rudloff, “because I was European. He would ask: ‘Young man, what’s the news from Europe?’”
Gordon was the last chairman still active on Wall Street who had lived through the crash of 1929, and he sometimes shared stories of the past of a great investment bank, still revered in the US as the correspondent of the powerful Baring Brothers, which had financed a lot of US reconstruction after the civil war.
Rudloff rehearses Gordon’s tales for Euromoney: “Kidder, like so many other firms, got into trouble, because clients started pulling their deposits, leaving firms in shambles. Particularly harmful in Kidder’s case was the pulling by the Italian government of a big deposit. Many Wall Street companies had already failed and Kidder also got into serious difficulties, which led another top Wall Street firm to support the company to avoid being the next to fall. They proceeded to put new management into Kidder – scions of two wealthy families.”
Man of principle
Gordon, a graduate from Harvard Business School, was to run Kidder, but he had to report every afternoon in person to John Pierpont Morgan on its financial condition, in exchange for continuing support. One day, so he related to Rudloff, he was asked to stay for tea. And he knew then that Kidder had made it and he had gained the confidence of Morgan.
Gordon was a man of principle and sound banking, with top clients and particularly careful risk management, who remained Rudloff’s idol.
Back at the telex machine, Rudloff found a stream of strongly worded messages from someone called Stanley Ross in the London office saying Kidder risked losing out on the new Euromarket. Rudloff asked to go back to Europe to join in.
We were like missionaries, knocking on every door to convince issuers and investors of the benefits of this market- Hans-Joerg Rudloff
Rudloff first ran sales in Geneva before joining Ross to add banking and new issues to his trading prowess.
Rudloff recalls: “There were still grandees in the City who would tell us tales of the free flow of international capital before World War I. They gave us a dream of reviving international finance and almost by accident, with no one setting out the ambition or a precise plan, the pieces fell into place. Slowly but surely this big new Eurobond market began to grow.”
He adds: “We were like missionaries, knocking on every door to convince issuers and investors of the benefits of this market.”
It was a slow process, initially ignored in the US, with its own efficient capital market. Many Americans even thought the Eurodollar was a different currency.
In 1980, Credit Suisse First Boston re-hired Rudloff, based on his success at Kidder Peabody. He quickly helped to make CSFB the leading issuing house in the Euromarkets and he has fond memories of ground-breaking transactions such as for the Republic of France for more than $3 billion in 1981.
That transaction had to be channelled through the EEC, as France’s credit worthiness was not acceptable anymore and the country was in a desperate financial condition. The former president and then vice-president of the European Commission, François-Xavier Ortoli, negotiated conditions with the new French president, François Mitterrand.
The French president was initially reluctant to promise the abolition of wage indexation for fear of social unrest. The inflationary consequences of indexation were a big obstacle to France’s economic revival at the time.
Faced with few options, Mitterrand finally accepted the strict conditions but requested total confidentiality for a year to create the consensus around ending indexation. Mitterrand succeeded and the Euromarkets proved their usefulness in a crisis situation.
“I reminded various people in Paris, Brussels and Berlin of this transaction when the problems in Greece blew up,” says Rudloff. “While not always comparable, the biggest problem was not helping Greece, but the lack of confidentiality, speculation, leaks and public discussion and political disputes.”
He adds: “Financial crises cannot be resolved on a public stage”.