Gene Rotberg, a lawyer and international investment banker, is an expert on risk taking, interest and exchange rates, financial market regulation, and the role of international development institutions. He served as vice president and treasurer of the World Bank from 1968 to 1987, responsible for overall funding and investment operations.
Early career: the Securities and Exchange Commission
After receiving his law degree from the University of Pennsylvania in 1954 and subsequent service in the U.S. Army, Gene Rotberg joined the U.S. Securities and Exchange Commission (SEC) (1957–1968) as attorney advisor. He later became associate director for trading and markets and chief counsel for the Office of Policy Research. At the SEC, he was the principal author of the congressionally mandated “Special Study of the Securities Markets” in the early 1960s with respect to the operations of the over-the-counter market and the structure of the securities markets generally. In the late 1960s, he conducted public hearings focused on the activities of the major stock exchanges, its members, and investment banking and brokerage firms—particularly with respect to the antitrust implications of their activities and agreements. For almost 200 years, the stock exchanges and their members had fixed minimum commissions for transactions on the stock exchanges, which had to be paid by the public (nonmembers).
The Institutional Investor magazine described his work at the SEC as follows: “In the mid-1960s, he spearheaded the SEC’s push to crack open the New York Stock Exchange’s (fixed) commission rate schedule. It was Rotberg, more than anyone else, who set in motion the forces that would culminate in the complete unfixing of commissions on ‘May Day, May 1, 1975,’ and the dawning of a new competitive era on Wall Street.”
“At the SEC, Gene had the task of leading the drive to abolish fixed commission rates and caused an uproar on Wall Street the way he grilled the brokerage firms in his career.”
The World Bank
In 1968 he was asked by Robert McNamara, the recently appointed president of the World Bank, to serve as its vice president and treasurer. John Gutfreund, CEO of Salomon Brothers, later wrote, “It was one of McNamara’s blessings when he got Gene Rotberg.”
At the World Bank, Rotberg was responsible for borrowing in the capital markets throughout the world to finance the World Bank lending program to developing countries. He was also responsible for the management and investment of over $20 billion liquid assets in 20 different currencies.
During his tenure at the World Bank, Rotberg was credited with opening up new capital markets throughout the world, establishing new ways of borrowing, developing worldwide capital markets, and creating innovative financial products in a score of different currencies. Many of these techniques and products were used in later years by both industrialized and developing countries to facilitate raising funds outside of their own borders for infrastructure, trade, and overall economic development. This permitted “globalization” of the world's financial system, in which savings from one country were borrowed in the capital markets to facilitate economic growth in other countries. During his tenure, he was credited with having borrowed $100 billion. (see also www.generotberg.com/testimonials.html)
Ben Weberman in Forbes magazine wrote, “In the financial markets around the world, Rotberg is held in awe.”
The most innovative product was the “swap” first done by the World Bank in a transaction facilitated by Salomon Brothers with IBM in 1981. The swap in its original form permitted a borrower of one currency to shift its obligation into another currency or to permit a borrowing at floating interest rates to shift to a fixed-rate obligation or vice versa. The swap thereby permitted the liquefying of balance sheets so issuers were able to shift their original obligations through exchanging cash flows with a counter-party. Later, the swap was used in a wide variety of financial products. It is used today as both a risk-reducing and risk-taking product. The swap market has developed into the largest securities market in the world, accounting for over $500 trillion in transactions. It revolutionized financial management for governments and the private sector in the management of their resources.
In describing the product, Financial Weekly wrote that it is “one of the most ingenious deals I have ever seen. It is a stroke of genius and I am thunderstruck that anybody could have such an inspired thought” (see also Institutional Investor).