Peter G. Peterson, a self-made billionaire financier who was briefly commerce secretary under President Richard Nixon and was a longtime fiscal Paul Revere, spending much of his fortune to sound the alarm about the perils of the burgeoning national debt, died March 20 at his home in Manhattan. He was 91.
The death was confirmed by his wife, Joan Ganz Cooney. The cause was not immediately known.
Since the late 1970s, “Pete” Peterson was among the most prominent public figures warning that runaway spending on Social Security, Medicare and other entitlement programs – for an increasingly long-living population – had lit the fuse on a budgetary time bomb. He criticized the politicians who he said were focused “not on the next generation but on the next election” and were too craven to rein in deficit spending.
“We are at a make-or-break point in American history,” Peterson said. “The entitlement monster is unfunded.”
He spoke those words in 2008, shortly before launching the New York City-based Peter G. Peterson Foundation to warn about the country’s economic challenges. Peterson poured hundreds of millions of dollars into the nonpartisan organization, which has contributed to think tanks as politically varied as the Brookings Institution, the American Enterprise Institute, the Heritage Foundation and the Bipartisan Policy Center.
Another recipient of Peterson Foundation money was the Concord Coalition, which promotes fiscal responsibility and which Peterson founded in 1992 with former Sens. Warren Rudman, R-N.H., and Paul Tsongas, D-Mass.
The term “national debt” is not as simple as it may sound. The Treasury Department cites “debt held by the public,” the total outstanding funds borrowed by the government to finance its deficits, as the most meaningful definition. (The most recent figure stands at almost $21 trillion.)
Some of Peterson’s proposals – cutting Social Security benefits for the wealthy, for instance, or eliminating the mortgage-interest deduction long cherished by middle-class homeowners – have been seen as political “third rails.” But he was credited with daring to say what others in positions of influence would not.
“He has been a prophetic advocate for addressing the country’s risk-laden and dangerous fiscal prospects that our political system simply will not face,” Robert Rubin, a former Goldman Sachs executive who was treasury secretary under President Bill Clinton, said in 2016 at an event honoring Peterson’s 90th birthday. Rubin praised Peterson as “that rare figure in contemporary America, a true public citizen with serious impact in many areas.”
Peterson, a son of Greek immigrants, had attended elite universities and first became known as a business wunderkind. In the early 1950s, he was an advertising executive in Chicago, rising to director of marketing services at McCann-Erickson, an advertising agency with global reach, before he was 30. Seven years later, he was chief executive of the Bell and Howell electronics company.
In 1971, President Nixon named him assistant for international economic affairs. A year later, he became commerce secretary. He also led Nixon’s National Commission on Productivity and served as the U.S. chairman of the U.S.-Soviet Commercial Commission.
But Peterson was never a White House insider. Nixon loyalists distrusted him because he was comfortable with Democrats, and Nixon once needled him about his “friends in the Georgetown cocktail set,” Peterson wrote in his 2009 autobiography, “The Education of an American Dreamer.”
Sensing he would soon be at “the far end of a telephone that would rarely ring,” he stepped down as commerce secretary after a year and felt lucky that he departed unscathed by the Watergate scandal.
He had plenty of offers on Wall Street and joined the venerable Lehman Brothers investment firm as vice chairman in 1973. At Lehman, Peterson sometimes wielded a sharp pencil, culling those he deemed underperformers, and helped to increase the firm’s profit margins.
He became involved in a power struggle as Lehman was split between traditional, old-line bankers and an aggressive new breed of traders. One of the latter was Lewis L. Glucksman, who had been a partner at Lehman and was briefly co-chief executive with Peterson in what soon proved to be an impossible arrangement.
“Symbolically, it was the clash between bankers and traders carried to extremes, but it became very personal on both sides,” Ken Auletta wrote in his 1986 book “Greed and Glory on Wall Street.”
Glucksman sensed Peterson looked down on him and discounted his contributions, according to Auletta. In his memoir, Peterson alluded to the trail of cigar ashes left by the earthy Glucksman and to the dandruff on the shoulders of his suit coat.
Glucksman marshaled enough support to oust Peterson late in 1983, leaving the latter “upset, embarrassed, ashamed really,” Auletta said in an interview.
Yet timing and luck were on Peterson’s side again. While at Lehman, he had befriended and mentored Stephen A. Schwarzman, who was two decades his junior and had become chairman of Lehman’s mergers and acquisitions committee. In 1985, Schwarzman left Lehman and joined Peterson in forming a new investment banking firm, the Blackstone Group. (“Schwarz” is German for “black,” and “petros” is Greek for “stone.”)
Peterson recalled later that he and Schwarzman decided to engage in “strictly friendly investments.” But the Blackstone Group fired more than 800 workers after acquiring a travel-reservation company in 2006, according to InvestorPlace.com.
Blackstone became fabulously successful. When it went public in 2007, Peterson reaped well over $1 billion, after taxes. Lehman was crippled by its internal struggle and sold to American Express in 1984. The resulting unit, Shearson Lehman, was spun off in 1993 and reclaimed the Lehman Brothers name, only to fail in the financial crisis of 2008.
Peter George Peterson, the eldest of three children, was born Peter Petropoulos in Kearney, Nebraska, on June 5, 1926. His father left his job on the railroad, changed the family’s surname and opened a diner in Kearney. He kept it open seven days a week, sometimes around the clock, with Peter helping on the cash register.
Peterson recalled his father as “a distracted and elusive figure who appeared mainly late at night.” His mother, who stomped grapes in a basement tub making wine to sell, was plunged into an abiding depression after a daughter died of a respiratory illness.
As a boy, Peterson didn’t fit in. “I wanted to be 100 percent American while my parents clung to their Greek customs,” he wrote. They dressed him in old-world clothing that made him look “like a Greek folk dancer” and drew laughter from schoolmates.
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He got his revenge by finishing at the top of his high school class in 1943. Too nearsighted for military service in World War II, he enrolled at the Massachusetts Institute of Technology. But he soon decided he was not cut out to be an engineer and quit MIT when he faced suspension for cheating on a term paper.
He transferred to Northwestern University, where he had a social life rich with beer, women and occasional “debauchery,” as he put it, yet managed to graduate summa cum laude in 1947 with a degree in marketing. In 1951, he earned a master’s degree at the University of Chicago’s Graduate School of Business, where one of his mentors was Milton Friedman, a leading advocate of free-market economic theory.
Peterson became a loyal Republican but opposed the Reagan administration’s supply-side economics, which he regarded as dangerously unsound. As early as 1982, the columnist George Will observed that Peterson’s two-part article on the “coming crash” in Social Security, which appeared that year in the New York Review of Books, punctured “the balloon of fantasy” about entitlement spending.
Peterson’s first two marriages, to Kris Krengel and Sally Peters, ended in divorce. Survivors include his wife of 37 years, Joan Ganz Cooney, a creator of “Sesame Street,” of Manhattan; five children from his second marriage, John Peterson of Ross, California, and Jim Peterson, David Peterson, Holly Peterson and Michael Peterson, all of New York; a brother; and nine grandchildren.
Peterson wrote several books, including “Running on Empty: How the Democratic and Republican Parties Are Bankrupting Our Future and What Americans Can Do About It” (2004) and “Steering Clear: How to Avoid a Debt Crisis and Secure Our Economic Future” (2015). From 2000 to 2004, he was chairman of the Federal Reserve Bank of New York. He also was board chairman of the Council on Foreign Relations from 1985 to 2007.
He said he gave his monthly Social Security check to his foundation. Why not give the money – or more – to the government to help reduce the deficit, a New York Times reporter once asked him facetiously. “I wouldn’t have much confidence that they would know how to spend it,” Peterson replied.