1/25/05

Walter Wriston passed away on January 20, 2005. He died from pancreatic cancer at the age of 85. Wriston wrote a book in 1992, “The Twilight of Sovereignty,” which I found to be quite intriguing.

In The Twilight of Sovereignty: How the Information Revolution Is Transforming Our World,'' Walter Wriston analyzed and predicted the geopolitical implications of the information revolution. He was absolutely prescient in his analysis of the impact of information technology on sovereign institutions, i.e., countries. His analysis had nothing to do with banking and everything to do with millennial change in the world political economy, some of which we are only beginning to experience.

The implications of the technology revolution have been analyzed and described by others, most notably Kenichi Ohmae in his books “The End of the Nation State” and “The Borderless World,” as well as the somewhat disturbing work by Davidson & Rees-Moog in “The Sovereign Individual, Mastering the Transition to the Information Age.”

The latter analysis discusses the very fundamental and frightening concept of violence as used by sovereign nations throughout history to exert the political will of those in power over their citizenry as well as over other nations. Davidson & Rees-Moog argue that the information technology revolution will eliminate political boundaries formed through violence and coercion of citizens. As a result, states will no longer be able to force individuals to conform to the wishes of those in power, thus creating the individual as a sovereign person.

Wriston’s thesis is that information technology, due to its facilitation of the flow of information, and in particular, the near instantaneous flow of financial information, will lead to the break down of sovereign nations and the elimination of barriers between financial institutions. Davidson & Rees-Moog take this point to a higher level, arguing that artificial political barriers between and among countries will be eliminated. I say “artificial” barriers because that is exactly what they are, having been formed by political power groups that determine political boundaries, i.e., country borders, through war or negotiation. Furthermore, any break down of barriers and country borders will obviously have enormous implications for the entire world.

We see this now with daily, hourly and minute by minute fluctuations in the value of the U.S. dollar and other currencies.

Walter Wriston Outspoken chairman of Citicorp who exploited new ideas and technology to revitalise the US's hidebound banking sector

WALTER WRISTON, for 14 years the chairman of Citicorp — the holding company for Citibank and now part of Citigroup — was a financial giant and iconoclast who helped to redefine banking for an entire generation. Dominating Citicorp’s evolution for almost two decades, Wriston championed a range of innovations in financial technology and services that, in most parts of the world, became standard practice. He also, with less wholly positive effects, championed the 1970s explosion of lending by commercial banks to developing states — which then reaped the consequences. “Countries don’t go bust,” he proclaimed. More than 6ft, and with spirit to match his physical dimensions, Wriston was certainly outspoken. Explaining his view of financial institutions, he noted how US banking had evolved to its pre-1970s, cautious and tradition-bound format because of “wagon trains going West”. “Wherever they stopped,” he continued, “somebody hung out a sign reading ‘bank’, somebody else a sign reading ‘saloon’, and somebody else started raising horses. Our banking system grew by accident; and whenever something happens by accident, it becomes a religion.” That particular religion, he felt, should be dismantled, and instead, banks should become competitive, venturesome businesses. He began his ascent to the heights in 1946 — at the start of his career he occupied a roll-top desk in a New York department at Citibank’s earlier incarnation, First National City Bank. He vowed to depart within a year if the job proved a bore. But, helped by the patronage of George Moore, and also by close relationships with Aristotle Onassis and other shipping magnates that boosted the bank’s overseas business, he advanced. By 1960 he became executive vice-president. To achieve greater meritocracy, he ordered the recruitment of “a new breed of people, the best and the brightest from the top schools”. Along with colleagues, he transformed corporate banking by introducing the new negotiable certificate of deposit, enabling firms to earn higher returns on cash holdings. In 1967 he became Citibank president, and engineered its placing within a holding company, Citicorp; the move permitted diversification into previously restricted product areas, and paved the way for modern financial supermarkets. Wriston, chairman from 1970, introduced challenging profit targets. To hit them, he was soon pioneering radical innovations. One was automatic teller machines which were distributing widely throughout New York City — Wriston described them as “polite, bilingual in English and Spanish, and available 24 hours a day, without coffee breaks”. He championed a vast expansion of the use of credit cards by enlisting millions of new account-holders and spread Citicorp branches to more than 40 US states, many stiffly resistant to external competition. Wriston, investing heavily in new technology, gambled with the bank’s existence. But by 1984 loans, assets and earnings had all increased to between five and ten times their former levels. The bank was also now truly international: more than two thirds of its income came from abroad. It was with lending to developing countries that Wriston would be even more closely identified, and once debtor nations’ problems became evident, his reputation was impaired. Some domestic loans also encountered difficulties. He had already undertaken keen debates with opponents regarding the capital reserves needed to underpin lending levels. Instinctively distrusting regulation, Wriston argued that provided a bank was well managed, growing and profitable, only narrow reserves were needed, Wriston waited until just two months before his mandatory retirement in 1984 before nominating his successor. Otherwise, he said, “the whole corporation would have stopped, because there would be the old feller sitting there not doing much.”

The Washington Post

January 22, 2005

Walter B. Wriston, the legendary chairman and chief executive of Citicorp under whose reign the bank introduced automated teller machines, interstate banking and the negotiable certificate of deposit, died of pancreatic cancer Wednesday in New York City. He was 85.

Wriston, probably the most influential U.S. banker in his day, was considered a consummate corporate risk taker. He led Citicorp and its principal subsidiary, Citibank, for 17 years, retiring in 1984 after spending nearly his entire career with the firm.

He pushed the bank, once considered highly conservative, into the global market. He battered down the regulatory walls that prohibited commercial banks from the expanded financial services now considered standard and spoke out for laissez-faire capitalism in the industry. These views didn't always make him popular, and some blamed him for encouraging excessive loans to Third World countries under the belief that countries do not go bankrupt.

While he was chairman, Citicorp's profits rose from $145 million in 1970 to $890 million in 1984.

"Walter Wriston was a great man and one of the foremost bankers of the 20th century," Charles Prince, chief executive of what is now called Citigroup, said in a statement. "He had a profound impact on the financial services industry."

One of Wriston's innovations was signing up with the fledgling MasterCard operation. Citibank mailed out 20 million cards nationwide and lost $1 billion before it turned a profit. The problem was that the rate of inflation exceeded the amount of interest Citibank was allowed to charge its credit card customers under New York usury laws. Wriston moved the credit card operation to South Dakota, where there was no usury law limit.

The Connecticut native's survivors include his wife, Kathryn; a daughter; and two grandchildren.

From Bloomberg:

Jan. 20 (Bloomberg) -- Walter B. Wriston, the former chairman and chief executive officer of Citicorp/Citibank whose emphasis on technological innovations helped make the bank the world's largest, has died. He was 85.

Wriston died yesterday of pancreatic cancer in New York.

``Walter Wriston was a great man and one of the foremost bankers of the 20th century,'' Citigroup Inc. Chief Executive Officer Charles Prince said in a statement. ``He had a profound impact on the financial services industry and was an influential voice on the global economy.''

Citigroup Chairman Sanford Weill called Wriston ``a great man'' and praised him for ``thinking globally before it was fashionable.''

Wriston served as chief executive of Citicorp and its predecessor, Citibank, from 1967 to 1984. He also served as chairman from 1970 to 1984, when he left and handed the reins to John Reed, the current chairman of the New York Stock Exchange.

By the time Wriston retired, Reed had implemented much of Wriston's technological vision, including the introduction of ATMs, and Citibank had put $1.75 billion into computer hardware and software.

``Walt stood out among his many peers as an innovator, having pioneered the automated teller machine, which changed the way people banked forever,'' Prince said. ``He was my friend, a mentor, and I will miss Walt very much. One of the brightest lights in Citigroup's history has gone out.''

`Gentleman of the Old School'

David Rockefeller, who was chairman of Chase Manhattan Bank when Wriston was chairman of Citibank, said in a statement that Wriston ``was a giant in the banking industry'' and was ``one tough competitor,'' respected for his ``innovation, integrity and financial knowledge.''

``He was a very fine gentleman of the old school,'' said Jon Burnham, chairman of Burnham Asset Management. Burnham said his father, I.W. ``Tubby'' Burnham, who founded Drexel Burnham Lambert Inc. and died in 2002, was a ``very good friend'' of Wriston.

In a 1996 interview with Wired magazine, Wriston said none of the bank's technological innovations were well received ``by our friends in the banking community.''

```Old people won't use automatic teller machines,' they said `and young people won't use them because they prefer going to tellers with pearly white teeth.' But it turned out that people would rather get their money in front of the Hard Rock Cafe at 11 o'clock at night than get smiled at by a teller,'' Wriston told the magazine.

Best-Selling Author

Wriston was the author of several best-selling books, including ``Risk & Other Four-Letter Words'' (1986), and ``In The Twilight of Sovereignty: How the Information Revolution Is Transforming Our World''(1992), in which he wrote about the geopolitical implications of the information revolution.

Wriston said the basis for wealth had evolved from land to labor to information.

``Information about money has become almost as important as money itself,'' he said.

Wriston was the subject of a 1,000-page biography published by Crown in 1996, ``Wriston: Walter Wriston, Citibank and the Rise and Fall of American Financial Supremacy'' by Phillip L. Zweig, who spent eight years writing it.

Zweig called Wriston ``a giant'' who ``clearly created the banking industry'' and ``was totally committed to technology.''

``He and his bank clearly pushed the envelope in a lot of areas but there was no hint of any lapses of personal integrity,'' Zweig told Bloomberg News. ``He'd not tolerate for an instant the kind of nonsense and corporate misdeeds that we've seen over the last several years. There aren't many like him.''

Junior Inspector to Chairman

Wriston was born in Middletown, Connecticut, on Aug. 3, 1919, and graduated from Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University.

After a year's service as a U.S. State Department officer and a four-year tour of duty with the U.S. Army during World War II, he joined Citibank in 1946 as a junior inspector in the comptroller's division. Before becoming chairman in 1970, he held numerous posts in the bank's national and international businesses.

Wriston was a director of Icos Corp., York International Corp., Cygnus Inc., and Vion Pharmaceuticals Inc.

He was chairman of President Ronald Reagan's Economic Policy Advisory Board, a member and former chairman of the Business Council, and a former co-chairman and policy committee member of the Business Roundtable.

Wriston received the Presidential Medal of Freedom, the nation's highest civil honor, in June.

He is survived by his wife Kathy, daughter Catherine and two grandchildren.