Jim Millstein may have had the most difficult job in finance the past two years: turning around AIG for the federal government, U.S. taxpayers, and some would argue, the economy at-large.
It was a job that required every bit of restructuring experience that Millstein gathered in 18 years practicing corporate law at Cleary, Gottlieb, Steen & Hamilton and nine years working on turn-around deals for Lazard Ltd. His masters degree from the University of California's political science department came in handy as well.
Millstein, 55, was a natural pick. He was part of Pres. Obama's transition team in late 2008 and he had orchestrated some of the biggest bankruptcies in history, including those of Worldcom and Argentina. Now, however, he is a man unmoored, having resigned from his post as Treasury Department chief restructuring officer late last month.
FINS talked to Millstein about following in his father's footsteps, his next career move and why he had little appreciation for how tough the AIG job would be.
Kyle Stock: You worked on some huge bankruptcies and turnarounds, including Worldcom and Argentina -- was AIG kind of like the Super Bowl for you?
Jim Millstein: It was. The numbers were just daunting: a trillion of assets-under-management, the most complicated inter-corporate structure you can imagine. In the first instance, it's like an emergency room; you're trying to stop the bleeding wherever it may be. And then you're looking for ways to repay the debt, to de-lever and de-risk the corporate entity.
Here, the big things to sell were so big that there were very few buyers for them. You could think about selling your Asian life insurance operations, but to get $30 to $35 billion, there were only one or two companies in the world that could write that kind of check.
KS: Did you know what you were getting into?
JM: The truth of the matter is, I didn't. I hadn't really paid a lot of attention to AIG. In the waning parts of my tenure at Lazard, I had a very full plate in terms of restructurings. I was working on one of the best deals I think I ever did in the restructuring of Charter Communications.
KS: How did the conversations go in advance of you taking the job?
JM: I had joined the transition team right after the president was elected. They asked me to look at Fannie and Freddie and then they asked me to look at autos. But the first thing the president did in office was pass a much more stringent anti-revolving door policy, which went back two years. That caught some of the work I did for the [United Auto Workers], so I had to recuse myself from working on the autos. I went home and I was disappointed. I got a call from the secretary a month later asking if I had any conflicts on AIG, and I pulled down the 10-Ks and 10-Qs and started reading.
KS: In May, you told Congress that bailing out AIG was the only responsible and viable option -- did you think that at the outset?
JM: Based on the work I had done at Lazard and being a participant in the credit markets as I was, I don't think there was any question that the financial markets were on the brink of collapse in Sept. 2008. I think at the end of the day, history will judge what Geithner, Chairman Bernanke and Paulson did was heroic. They were learning in real-time. I think they made a mistake on Lehman Bros. They would argue they didn't have the tools necessary to deal with Lehman, but two days later, they rescued AIG and you could argue they could have used the same tools with Lehman. But they were learning in real-time. They drew a line in the sand and created a fire-break and it worked.
KS: What was the most challenging part of the job?
JM: It was very unusual. There was no handbook or guidebook. So getting a diverse group of new directors and a new CEO and a mix of old and new senior executives was a challenge. And getting the Federal Reserve, which was acting as a senior lender, and getting the Treasury Department, which was a major owner, getting all those parties on the same page and figuring out a path forward that worked for everybody's ideological and financial positions was really the challenge. There wasn't any precedent for this situation in U.S. history.
KS: You must have had a lot of sleepless nights, how did you cope with stress?
JM: Exercise. Honestly, I don't sleep much to begin with, but I ride a bike, I work out in a gym. I've always found five days a week of exercise to be a great way to relax.
KS: Bernanke apparently shoots hoops, did you ever join him?
JM: (Laughter) I've never been invited.
KS: Your father, Ira Millstein, was a well-known corporate attorney. Did you always want to follow in his footsteps?
JM: I had other ambitions, but becoming a lawyer was like a residency requirement in my family. You couldn't come home for Thanksgiving dinner without a law degree.
KS: What was the first big break in your career?
JM: I first went to graduate school in political science, thinking I was going to get a Ph.D. and become a professor. There must have been 40 or 50 Ph.D. candidates in my program and I think there was one teaching job that year in the country for political science, because every refugee from the Vietnam War had gone to graduate school. I realized that as much as I wanted to be a teacher, the odds were stacked against me. It gave me an excuse to go back to law school.
KS: How important do you think it is to find a mentor?
JM: A good lawyer is part psychologist, part strategist and part personal advisor -- but he's not hired for any of that. A lot of legal careers founder on the inability to do those things. In my third year at Cleary, I stumbled into a mentor -- Alan Appelbaum [a partner at Cleary Gottlieb in Manhattan who practices corporate and financial law]. He helped me figure that stuff out and it changed my career.
KS: Were there parts of your career where you felt stuck, like you were in a holding pattern?
JM: I'm sure there were, but I've been really fortunate. At the end of the day, what a good lawyer is and a good i-banker is and a good Treasury Department official is is a problem solver. I've just been incredibly lucky to have been invited into a lot of rooms where there were a lot of incredibly big problems to solve.
When I went to Lazard, I was 45 and I just didn't think I had another 25 years of practicing law in me. It was starting to feel like a grind. Two guys I had worked with over the years had just joined Lazard in the restructuring business. We worked on a deal together for a year and at the end of the process, we were flying back from Korea and they leaned over the aisle and said 'You're in the wrong biz.' I said: 'Make me an offer I can't refuse.'
KS: Who was the best competitor or negotiator you ever encountered?
JM: Any time a deal gets done there are two really good negotiators in the room, because a complicated corporate deal requires two to tango. One of the most entertaining was David Schulte at Chilmark Partners. He's just a very bright, creative and entertaining deal guy.
KS: What would you consider your biggest success?
JM: Certainly AIG was the one that has had the most impact in terms of its impact on other people. It was the poster-child for the bailout and it was the object of everyone's ambivalence of what the government did. More than anything else, it became a symbol. The fact that it didn't collapse under the weight of its problems and that the government is going to get all of its money back is a small part of a change in the view of TARP and what the government did at the time.
It's hard to prove a negative, but if you think about the alternatives -- had those programs not been successful and had the AIGs and the Citibanks gone the way of all flesh and been liquidated -- we'd be in a very different position today as a country. It's part of a foundation on which you see a growing confidence in the U.S. economy.
KS: How about your biggest regret or failure?
JM: When I was trustee of the village of Larchmont, [N.Y.], one of the things the mayor asked me to do was to renegotiate the police and fire union contracts. We spent a lot of time particularly with the fire department on a different approach to funding post-retirement benefits. And we got very close to an approach that I think would have been better for the village and better for the firemen. I'm talking about health savings accounts. It introduces a level of personal responsibility that we currently don't have in our health-care system. We just ran out of time and it was too much for one little municipality to pull off.
KS: So what's the next move for you?
JM: The only thing I've decided is I'm not going back to Lazard. It feels like it's time to do the next thing, though I don't know what the next thing is.
I've had three big career moves. Whatever I do next I want it to have the same sense of excitement and freshness that it had when I moved to Lazard and when I moved from Lazard to Treasury.
KS: Are you looking elsewhere on Wall Street?
JM: I'm talking to a lot of people in the financial services industry about a lot of different roles, but I'm also talking to a lot of universities and think-tanks and talking to myself, quite frankly, and thinking of other avenues like starting my own business.
Basically, everything is on the table.
Write to Kyle Stock