Few chief executive officers can look back and say they wrought revolutionary change - not only in their companies but in their industries. But Walter Wriston can. His time as Citibank/Citicorp chief spanned most of the twenty-year history of this magazine, and during that period he guided his institution to new heights of power and profit. Even more significant, Wriston - more than any other individual - aggressively sought to redefine what a bank is and isn't, and in so doing lit the flame of the financial services revolution. Today he is a director of nine corporations, including General Electric.

I had just been made president and CEO of the bank in 1967. George Moore was chairman, and we were just dreaming up the idea of the bank holding company.

We were looking for a way to survive because it was clear that the banks, with their current product lines, were losing their advantage. I remember we had an offshore policy meeting in the Bahamas, on Paradise Island, and we sat around for two days and debated the question of whether we should form a holding company. Some of the most senior guys in the bank were against it. The debate was just about even, and George Moore was on the sidelines. He was thinking about something else.

Then the phone rang; it was Aristotle Onassis inviting us all to his yacht for dinner.

Everybody got charged up about what fun that would be. George woke up and picked up the argument and came down on the side of forming the holding company, and the thing passed our policy committee by a small margin. And one of the ironies of history is that I still believe that, if Ari hadn't telephoned at that time, who knows how it would have come out? Because it interrupted the discussion. It energized George, who had sat through a whole day - which was unbelievable for George - saying almost nothing. And then he got all excited: "We're going to go see the yacht tonight. Isn't that terrific? What's the issue we're talking about here, fellows?" And that was it.

In '67 we were professionals with other people's money, and we were amateurs with our own. We had no budget in Citibank. We had a historical society: At the end of the year we'd sit around and say, "That wasn't bad." We had no formalized salary scales. We didn't have the general tools that modern corporate management requires. We had no management information system.

And so, in order to figure out where we should be in ten years, we hired a think tank by the name of Tempo, a subsidiary of General Electric.

That went on for almost a year. And at the end of that period they came in and briefed us for several days, and then we put together a corporate plan. We set targets for where to go, and we bet pretty heavily on technology.

And I think that it's fair to say that the Tempo study was a catalyst in getting that vision out. The vision was very simple. It was to supply any worthwhile financial service anywhere in the world, where we were permitted to do so by law and where we could do so at a profit. And, so far as I know, that still holds. So that vision was extremely clear.

It was around the same time that we came up with the 15 percent annual earnings growth target. We were growing at about 6 or 7 percent at the time. And we sat around at one of the offshore policy meetings and looked at all these ranges of numbers and saw that the top range of corporations then was around 15 percent. We decided collectively that that was a good number for a target. One of the interesting things is that it sort of became embedded in an analyst's mind: If you didn't make it one year, it was a terrible failure, and if you went over it - as we did for several years - we obviously set it too low. The usual can't-win syndrome.

Did we always make it? No. Might it have been 16 or 12? Yes. But the real question, to me at least, is: Did it serve as one of the motivators to move the corporation to where it is today, the greatest financial institution in the world? Or did it not? And I would argue that it did.

One other thing on the 15 percent, just historically, that might interest you. Arthur Burns used to come and see me to talk down the interest rate. The interest rate got up to some wild number like 6 or 8 percent. And he would come and sit in my office and say, "Walter, you're wrong to have an earnings target." And I would say, "Arthur, you keep saying we ought to have more capital. I've got terrible news for you. In order to sell my stock in the marketplace, we have to have as good an earnings record as General Motors or IBM or anybody else because it's a tough, competitive world out there." He said, "But banks are different." I said, "Tell that to the portfolio manager of the pension fund." And we had a long debate. And what fascinated me was that I was at an Institutional Investor conference in Cannes a year ago and Arthur and I were on the same program, and he looked at me at dinner and said, "You know, Walt, you turned out to be right. Banks have to earn money in order to sell capital."

Hallelujah.

Getting back to the subject of interest rates, you may recall that Arthur, as well as the president of the United States and other players, kept beating up on the banks, saying that interest rates were too high, they were slowing down the progress of the world, etc. It's the oldest argument in the world.

So we looked around and we kept saying, "Look, the prime rate is a market rate." They kept saying that it isn't, it's an administrated rate, whatever that means. So we looked around for a way to make it crystal clear that it was in fact a market rate, and we came up with the idea for a floating prime rate.

It took us quite a while to make a decision on it. I remember we were out in California - [then Citicorp president William] Spencer, [executive committee chairman Edward] Palmer and myself - and we continued this debate standing in the lobby of the Fairmont Hotel, waiting for our wives to come home from a dinner party. And we had been arguing about this thing for a year. We were getting all kinds of political heat about holding the rate down. So we finally said, let's do it.

And we said, gee, if you do it, you can't do it without informing the powers that be. And it happened that the secretary of the Treasury was coming to address that conference we were attending. But I was going to the Philippines the next day and Billy was going to Japan. So we told Palmer, "Why don't you go out and meet John Connally at the airport, ride in the car with him and lay it on him?" And that's precisely what he did. And Connally said: "I don't have any objection to that. It is a market rate. Go ahead and do it."

It was nothing more or less complicated than trying to focus the attention on the market and not on the venal bankers. That was the object of the exercise. I think it made it more difficult for them to bludgeon us. And I think history will bear out the fact that they couldn't make the same argument and that argument died.

We went through our share of crises; there's no doubt about that. One was Penn Central. At one point we were their lead banker, and, I have to say, we weren't totally surprised by the collapse. About six to nine months before the balloon went up, the fellow who handled the account came in to the senior credit officer, George Scott, and said: "The company is going to hit the wall. I've taken all these numbers apart, and it's going to go bankrupt." And he was 100 percent right. The chief financial officer - I'll never forget it -- asked for a meeting of the banks, and we had one at 399 [399 Park Avenue, Citicorp headquarters]. Before the meeting, Scott brought him in to see me, and the CFO said, "I'm going to get up and ask for X million dollars." And we said, "There's no way. You don't have any assets. You're down the slippery slope." He got extremely indignant, and he said Penn Central does not give collateral, and so on and so forth. He got up on his high horse, and Scott sat there and said no way. Scott said: "I will give you the use of our hall. You can talk with the banks, but you can forget it as far as we're concerned."

And so he went down, and he made his speech and that was about it. It was clear that when nothing happened at that point, we were on a downhill slope last hope was for a so-called V loan: a government-guaranteed loan for the transportation of military supplies. That was to be approved on a Friday afternoon. And my phone rang. It was about 6:00 on Friday, and it was Dave Packard, deputy secretary of defense. He said, "Walt, we have disapproved the loan." So I said, "We're in a tank." He said, "You're in a tank."

On Saturday I was up in the country; we were building a house and we had sort of a foundation and we had a phone. I got on the phone around 9:00 in the morning and hung up at 4:00, and we had Burns, [Transportation Secretary] John Volpe, [Treasury Secretary] Dave Kennedy and every once in a while, I think, Jim Lynn, who was a general counsel.

And the issue was that Penn Central had a bunch of commercial paper coming due the next Monday; my memory of it is it was $300 million. So the argument was: What's going to happen to the market? And I kept saying to Arthur: "What you have to do is call all the Federal Reserve banks, all twelve of them, and tell them to call all the dealers and the banks and say, 'The discount window is open.' And then nothing will happen." And he said, "Well, you know the banks know that." And I said, "I have terrible news for you. There are reserve banks like the one in Detroit and the one in Atlanta that aren't about to lend any money. And there are others like New York and San Francisco." He said, "They're all the same." I said, "Please believe me." We argued about this all day long. And I said, "If you do that, the market will absorb this whole thing."

I got a call about 10:00 Sunday night from the chairman of the New York Fed saying the discount window was open. I said, "Thank you very much." And no bank borrowed from the discount window the next day. The market took the $300 million. It was one of the reasons why I believe in the strength of markets. The debate between the Fed and the market is always whether the market can sustain it, and those of us who believe in markets believe it can. And it turned out that that was right, even though we all took tremendous hits and got back very innovative Mickey Mouse paper, one of which was even a lien on a lawsuit.

Then we had the New York City fiscal crisis. The city was selling this paper, and people weren't paying all that much attention. It's like somebody challenging the figures of the U.S. Treasury Department. How do you know what the national debt is?

But what happened was that we had a fellow named Jack Friedgut, who was an urban economist, and he came in one day and said the city is going down the tubes. And I said, "It is?" And he said, "Yes. And you're going to sit still and listen to me while I tell you why." And I said, "You got my attention."

When he got through, it was clear he was right. And so the next fellow who came in - I forget who it was; maybe it was still Jack - said they're going to run out of cash this week. So I got in a cab and went down to see [New York Mayor] Abe Beame, and I said, "Sir, you guys are going to run out of cash." He said, "It's a total lie. It's not true." And I said, "Well, that's what I'm told by my folks." Then he brought in [Deputy Mayor James] Cavanaugh, and Cavanaugh also said it's totally untrue. So we came back, and I looked at all the numbers again; Jack Friedgut was right.

And so I said, "What do you then do?" I talked to my partner Billy [Spencer], and I concluded that we couldn't do anything except to alert people. The New York Times doesn't know there's a crisis because they're worrying about the Middle East and you can't get their attention.

So I called the senior senator from New York, Jack Javits, who was an old friend of mine, a remarkably wonderful man, and I said, "Jack, the city of New York is going to go bankrupt." And he said: "Yeah, it's very interesting, Walt. I'm on my way to Russia to free the Soviet Jews, and then I'm going to stop in China. When I get back, I'll call." I said: "Jack, you don't understand what I'm telling you. I'm telling you that the city is going broke." He said, "I'll remember what you said," and he left.

And I said, "Now what do we do?" So I called Jim Delaney, who was the head of the New York congressional delegation, and I said, "Jim, will you get the New York delegation together? I will send down Jack Friedgut with a dog-and-pony show to explain why the city is going to hit the wall." And he said, "That's very interesting, yes." And Ed Koch's book opens with that conference. But the only people there were Elizabeth Holtzman, Ed Koch, Jim Delaney and one other. Four guys showed up. Holtzman called Beame and said, "Citibank says the city is going broke." Beame said, "They lie."

So we could not get anybody's attention. And it was one of the most frustrating things in my life.

What finally happened was that they couldn't sell the paper; the syndicate that was going to flog the paper quoted an interest rate that was totally unacceptable to Beame. And there was some lawyer working on the prospectus - I can't tell you who it was now - who wouldn't go along with it. And that was the end of the ball game. Then [New York newsman] Gabe Pressman was down at the 399 lobby, running around looking for the man who took New York bankrupt. That was me. And then my friend [labor leader] Victor Gotbaum turned out 10,000 pickets. The media then shifted from saying it was our fault to saying we were imprudent because we had too much paper and we were about to go bankrupt.

And so I finally said to the boys: "The hell with it. Let's publish how much city paper we've got." So we published it. And then finally all the banks did, and the world didn't stop. And then the governor stepped in, and, as they say, the rest is history.

It was around the same time that we started to get some attention with our consumer strategy. We began by looking at the fundamentals, and that was that the demand deposits of the clearinghouse banks in New York didn't increase for ten years in nominal terms. You don't have to be too bright to know that with the nominal GNP increasing every year, we're out of the game.

So the CD was invented and gave the clearinghouse banks another couple of years of life. But there's a finite limit to everything. And the next thing was holding companies issuing commercial paper. That gave them another ten years of life.

What do you do after that? The answer is you have to go, as Willie Sutton said, where the money is. And the money was in the consumer's pocket. We did a little study that showed how many households there were and how much money they had, and it was perfectly clear that that's where the money was.

Second, the first rule of thumb of banking is to diversify both assets and liabilities. And while you could buy money in the market for your Euros or whatever, the more you had in consumer deposits the steadier your institution would be, whatever wind blew in the future.

And then the question is, How do you do it? And we really didn't know. We had a good branch system in New York, but it wasn't really making any money on a fully loaded basis. We had some Mickey Mouse accounting that said it was, but no one believed that. And so we formed a little task force and put a fellow called Reed [John Reed, now Citicorp chairman] in charge of it and said, come up with a vision and a strategy and a plan on how to get from nowhere to someplace. And we went to our board and we explained the rationale, and they said, "Okay, we'll go with you."

Well, there were two years when nobody got an IC [incentive bonus] payment. Walking down the hall was not the greatest experience. And we took some enormous hits - lost lots and lots of money - and took a lot of ink from our friends in the media on how dumb we were.

I don't think we ever doubted it would work. I think that we had moments of thinking about the price we were paying. I'd go in and talk to my partner Billy, and he would say, "Do you realize that this is the biggest goddamn risk we've ever taken?" I understood that, and it was tough, very tough.

We took some big hits on our credit cards. The credit card was a chicken-and-egg deal. You go out and tell all the restaurants you've got a zillion cardholders, and you tell all the cardholders you've got a zillion restaurants. And then one day none of the above is true. What you've got are a lot of deadbeats.

The changes were enormous. You needed an incredible computer system. You had a whole different culture based on marketing. All the guys from General Foods who were shlepping coffee were now dreaming up Citidollars. The cultural shock was enormous.

I guess the people whose tails were on the line were Spencer and I. If the thing hadn't worked, I think I'd probably be somewhere else. The new folks coming in probably would have sacked Reed, too, I suppose, but that's all subjective stuff. The fact is, Wilbur, it did fly.

Meanwhile, on the international side we were dealing with the recycling process - which was, I suppose, one of the greatest successes in the history of international finance, especially when you consider some of the nonsense we heard at the time. When the Arabs went from two bucks a barrel in two stages to $30, Bob Roosa wrote a piece for "Foreign Affairs," saying the Arabs would own the world in a few years. You had people warning that, quote, the Arabs would pull all of their dollars out of America and we'd come crashing down. When that surfaced, I held a press conference and explained that you couldn't take dollars out of America except in a tin box, and that's not many.

The world adjusted extremely well, considering the shock to the system. What nobody knew was that Volcker was going to lock the wheels of the world. And when he threw the U.S. into the deepest recession since 1933, it spread to the whole world. And that's what started the, quote, international debt crisis: Export ratios that looked very good the month before he took office looked like a disaster a year later.

Now, you could say that we should have known that that would happen. We didn't. In fact, I recommended to [President Jimmy] Carter that he put Paul in there because I told him that if anybody was in there who was a name the Europeans had to learn how to spell, we'd be in trouble. But then one day he just locked the wheels. And the fact is, that's what caused the international debt crisis. It wasn't the recycling or the rest of it; it was the fact that the growth which the world had been enjoying was suddenly stopped.

I said at the time that no American bank would fail because of it - which turns out to be true - but that many would fail on good American real estate and oil. That turns out to be true, too.

But that's not very exciting. People would rather talk about my comment that LDCs don't go bankrupt. Well, they don't.

And the facts are - if anybody reads that article, which, of course, nobody does - what I said was that the infrastructure doesn't go away, the productivity of the people doesn't go away, the natural resources don't go away. And so their assets always exceed their liabilities, which is the technical reason for bankruptcy. And that's very different from a company.

Would I have done anything differently? In the recycling process, probably riot. Once again, none of us, I particularly, thought that the Fed would throw the country into a depression. I just didn't believe that was going to happen. I was wrong. They did. And that's what caused the whole damn problem.

I realize there was a lot of talk about my management style when I was at the bank. People get characterized as confrontational or needling or whatever, and there's a certain amount of truth in all sides.

Was I exacting? Sure. Was I occasionally sarcastic? Of course. On the other hand, good people knew that if they had a real problem, personal or otherwise, they were going to get dealt with fairly.

But the stories still go around - like the one about my supposed edict when we were building Citicorp Center. [Wriston reportedly was so annoyed by the pornographic bookstores and massage parlors surrounding the building site that he demanded they be evicted at any cost.] You know, in the great echo chamber that is the media, you get a story like that and it's on my Nexis data base out there forever.

The facts are that "The New York Times" said that I went to my window in my office and I pointed and said, "Get rid of that massage parlor." Well, as you probably know, my office faced Park Avenue and the massage parlor turned out to be on 53rd Street, between Lexington and Third. So all I could have been pointing at was the George Washington Bridge. But it's been immortalized, even though it's totally untrue, because it makes a terrific story.

Of course, it's been a great disappointment to the media that the management team I left is still in place. A great disappointment. I remember that during this great competition [the horse race to succeed Wriston] I had a very famous former government official come to call. He said: "You've got these three vice chairmen, and what's going to happen is what happened to the First of Chicago with Bob Abboud and Dick Thomas and all of these fellows. The only way to solve this problem is to bring in somebody from the outside - like me."

And I said: "Well, thank you very much. It turns out that these folks all work together pretty well. It's a pretty big outfit. And we think that it may just work." And he said, "You're making a terrible mistake, and the whole bank will self-destruct." That was sort of typical of what went on. What really went on was what you now see.

Today I'm happy and employed and have more to do than I know what to do with. People ask me if I'm disappointed that I haven't been tapped for public service. No, I'm not. The train's been through the station a few times, but that's the way it goes. You know, you make your decisions on the basis of the known facts at that time, and you sit with them the rest of your life.

When I left, I decided that I wouldn't want to stay on the board. You see, I'm one of those folks who walk out the door and don't look back. I believe very strongly that there's nothing worse than staying on. If you say something, you're messing around in the new guy's yard. If you don't say anything, you're kind of useless. So what is your function?

Billy and I gave it our best shot. We made mistakes; we also didn't do that bad. It's a pretty good outfit. No regrets. So now it's yours, fellas. And we're not going to mess around with it.