In late 1998, while Washington was in the throes of the Monica Lewinsky scandal, Rahm Emanuel, a departing senior political aide to President Bill Clinton, ventured out to an elegant restaurant in Dupont Circle for something of a job interview.
John Simpson, who ran the Chicago office of the investment banking boutique Wasserstein Perella & Company, had flown to Washington to meet with Mr. Emanuel at the behest of Mr. Simpson’s boss, Bruce Wasserstein, a major Democratic donor and renowned Wall Street dealmaker who had gotten to know Mr. Emanuel.
“I had this idea that this could work and that it had upside,” said Mr. Wasserstein, now chairman and chief executive of Lazard, the investment bank. “It worked out better than I could have hoped.”
And better than Mr. Emanuel could have imagined as well. Over the course of a three-hour-plus dinner, Mr. Simpson and Mr. Emanuel discussed how they might work together. Shortly afterward, Mr. Emanuel accepted an offer, nudging him down what has by now become a well-trodden gilded path out of politics and into the lucrative world of business.
Mr. Emanuel, who was chosen last month to become President-elect Barack Obama’s White House chief of staff, went on to make more than $18 million in just two-and-a-half years, turning many of his contacts in his substantial political Rolodex into paying clients and directing his negotiating prowess and trademark intensity to mergers and acquisitions. He also benefited from the opportune sale of Wasserstein Perella to a German bank, helping him to an unusually large payout.
The period before he was elected to a House seat from Illinois is a little-known episode of Mr. Emanuel’s biography. Former colleagues said the insight it afforded him on the financial services sector is invaluable especially now. But Mr. Emanuel built up strong ties with an industry now at the heart of the economic crisis, one that will be girding for a pitched lobbying battle next year as the incoming Democratic administration considers a potentially sweeping regulatory overhaul.
After Mr. Emanuel left banking to run for Congress, members of the securities and investment industry became his biggest backers, donating more than $1.5 million to his campaigns dating back to 2002, according to the Center for Responsive Politics.
Mr. Emanuel also leaned heavily upon the industry while he was chairman of the Democratic Congressional Campaign Committee during the 2006 midterm elections. Financial industry donors contributed more than $5.8 million to the committee, behind only retirees.
Friends of Mr. Emanuel’s from his private-sector days said he still checks in with them regularly to plumb their insights on economic issues.
“He asks me what am I seeing, what business is like, what’s the climate, where are the weak spots,” said John A. Canning Jr., chairman of Madison Dearborn Partners, a Chicago private equity firm that is in the same building as Wasserstein’s offices.
Mr. Canning was one of many financial executives Mr. Emanuel met with soon after he left the White House to discuss job prospects, with Mr. Emanuel’s political connections often opening doors. Mr. Canning agreed to sit down with Mr. Emanuel at the recommendation of several friends, including Stanley S. Shuman, an investment banker at Allen & Company and a major Democratic donor who once stayed in the Lincoln Bedroom at the White House as a guest of President Clinton’s.
Mr. Canning could not offer him a job, but Mr. Emanuel came to pitch deals to him and they became friends. Employees of that particular firm became Mr. Emanuel’s biggest financial supporters in Congress, according to the Center for Responsive Politics.
When the House was weighing a measure last year to significantly increase the tax rate on profits earned by private equity firms, Mr. Canning said Mr. Emanuel attended a luncheon with Madison Dearborn executives, first reported by Bloomberg News, to listen to their arguments against the changes.
Mr. Emanuel, however, wound up joining other Democrats in voting for the measure.
In an interview, Mr. Emanuel, pointed to other actions he had taken over the objections of the financial industry, including sponsoring a bill last year to curb the ability of hedge fund managers to defer paying taxes on compensation they stashed in offshore tax havens and another measure that imposed new reporting requirements on financial firms for what investors pay on stocks and mutual funds.
“I would say I’ve been as tough on my friends as others,” Mr. Emanuel said. “I call it like I see it.”
Confidants of Mr. Emanuel’s said he decided to try his hand at business because he wanted financial security for his family, before eventually returning to public service.
It was Morton L. Janklow, the literary agent for several former presidents, who introduced Mr. Emanuel to Mr. Wasserstein. Erskine B. Bowles, the White House chief of staff and a former investment banker, also said he recommended Mr. Emanuel. Mr. Emanuel met in Mr. Wasserstein in his New York office, where they had a wide-ranging discussion about the future of financial regulation, as well as Mr. Emanuel’s plans.
Jeffrey A. Rosen, now deputy chairman of Lazard and a former managing director of Wasserstein Perella’s international practice, said Mr. Emanuel was “both a developed and a raw talent.”
“His years in the White House and what he’d done before that really honed what I’d call deal-making instincts, which could be easily translated into the business arena,” Mr. Rosen said. “Plus, he was someone who was well connected in Chicago and highly respected.”
Mr. Emanuel turned out to be an effective banker, proving a quick study with financial concepts, even as he relied on others in his office for heavy number crunching, former colleagues said. He worked 12-hour days and was known among clients for his relentlessness, constantly on the phone or sending e-mail, and being unafraid to pitch deals. Revenue in Wasserstein’s Chicago office climbed significantly after his arrival.
There is no evidence Mr. Emanuel used his political clout on behalf of his clients, but his connections certainly helped drum up business and contributed to his hiring, former colleagues said. Indeed, a partial list of clients from Mr. Emanuel’s Congressional financial disclosure in 2002 is easily linked up to the various strands of his political career, including his time as a fund-raiser for Mayor Richard M. Daley of Chicago and then for Mr. Clinton’s first presidential run.
The clients included Loral Space & Communications, run by Bernard L. Schwartz, one of the Democratic Party’s biggest donors, who said he got to know Mr. Emanuel while he was in the White House; the Chicago Board Options Exchange, whose chairman and chief executive, William J. Brodsky, became friends with Mr. Emanuel while he was working for Mayor Daley; and Avolar, a business aviation company whose top executive, Stuart I. Oran, was formerly in charge of governmental affairs for United Airlines, a role in which he said he interacted with Mr. Emanuel at the White House.
One of Mr. Emanuel’s major deals was the purchase in 2001 of a home alarm business, SecurityLink, from SBC Communications, the telecommunications company that was run by William M. Daley, the former secretary of commerce in the Clinton administration and the brother of Chicago’s mayor.
Mr. Emanuel represented GTCR Golder Rauner, a Chicago private equity firm that was buying the business for an affiliate. Bruce Rauner, the firm’s chairman, had first met Mr. Emanuel when he was still exploring job prospects in Chicago after getting a call from Mr. Bowles, an old friend.
Instead of private equity, Mr. Rauner advised Mr. Emanuel to pursue investment banking, where his political experience might be more valuable in landing deals in regulated industries.
Mr. Emanuel called him back after starting at Wasserstein and asked if he could take over coverage of GTCR for his new employer. That eventually led to the nearly $500 million SecurityLink deal.
Mr. Emanuel’s biggest transaction came in late 1999 when he landed an advisory role for Wasserstein in the $8.2 billion merger of two utility companies, Unicom, the parent company of Commonwealth Edison, and Peco Energy, to create Exelon, now one of the nation’s largest power companies.
John W. Rowe, the former chief executive of Unicom who now holds the same position at Exelon, sought out Mr. Emanuel after he went to Wasserstein. Mr. Rowe said he believed Mr. Emanuel would offer a different dimension, providing wisdom on what might pass muster at the governmental level.
“You can’t understand utility transactions without thinking about whether they’ll play or not play in legal and political circles,” said Mr. Rowe, who was first introduced to Mr. Emanuel by Lester Crown, the billionaire scion of Chicago’s influential Crown family.
Tax returns Mr. Emanuel released while first running for office and reported in news articles, along with Congressional financial disclosures, reveal his steep financial ascent while working at Wasserstein. He earned more than $900,000 in 1999, his first year at the firm; nearly $1.4 million in 2000; and $6.5 million in 2001, when he left the firm in midyear to run for Congress. He collected $9.7 million more from the firm in deferred compensation in 2002.
Mr. Emanuel’s annual salary was not especially large but his hefty paydays came from bonuses for the business he brought in, as is customary in investment banking, along with the company’s sale in 2001 to the German Dresdner Bank, which allowed him to benefit from an equity stake, as well a large retention bonus paid to him based on his prior performance.
The bonanza Mr. Emanuel reaped would come in handy when he ran for the House seat vacated by Representative Rod R. Blagojevich, now governor.Mr. Emanuel contributed $450,000 out of his own pocket to his campaign in the primary, and his leading rival accused him of trying to buy a seat in Congress.