Sister of California governors transfers her sense of public service to municipal finance

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A Goldman Sachs executive was at a Chicago dinner party recently when a fellow guest, hearing she had just relocated from California, asked what she thought of the new governor there.

The executive, Goldman's chairman of investment banking for the Midwest region, launched into a glowing endorsement of Gov. Jerry Brown, a liberal Democrat serving a third nonconsecutive term.

The dinner guest, perhaps expecting a more Gordon Gekko-esque assessment, seemed surprised.

"That's a very positive report," Kathleen Brown recalled the woman saying. "I said: 'It should be. He's my brother!'"

Coming from someone else, say, a power-suited piranha of the genus more commonly associated with Wall Street, the story might have oozed derision for the ill-informed table mate. Brown, however, told it with the hearty laugh that suggests a grounded, more secure and battle-tested ego.

Brown built a public career in California, carrying on the family tradition of both her governor-brother and her governor-father, the late Edmund G. "Pat" Brown. But later she moved into private business, and now she's embracing her role as a Chicago-based flag bearer for Goldman Sachs in the Midwest.

"I've been in various out-of-state witness-protection programs, as I like to call it," she said. "When my father was elected governor, I went to Massachusetts. Now, to be here when my brother is governor, is just fine."

Brown is a senior leader on Goldman's Midwest investment banking team. Her specialty, however, is municipal finance, helping cities and states get money to build infrastructure or make other investments. That's the part of the business she handled in California, the leading issuer of municipal debt in the United States.

Even by Wall Street standards, having the sister of the California governor leading your California municipal finance team would not have passed ethical muster.

"Had she continued to work with California municipalities, it might have created the perception of a conflict of interest," Goldman spokesman Michael DuVally said when Brown's move was announced.

At first the plan was to simply carve out California state business from her portfolio, said Brown, 66. But Goldman was also looking for a senior investment banker for its Chicago office. When Goldman offered relocation and a broader role, the decision was easy, Brown said. She had a connection to the business community here, dating back to her days working for Bank of America.

Her husband, the widely respected and now retired former CBS News President Van Gordon Sauter, cut his teeth as a newsman in Chicago, first at the Daily News, then at WBBM. Brown recalled asking Sauter's thoughts on the proposed move.

"There was this very long pause," she said. "Then he said, 'I could be there by Sunday.'"

Sauter, who boasts that he was a judge for columnist Mike Royko's contest to find the ugliest dog in Chicago, said his years here were the happiest of his career as a newsman. (Royko, it happens, coined the moniker "Governor Moonbeam" for Jerry Brown.)

"Chicago is the great American city," Sauter said.

Brown is equally enamored of her new home.

"I like so many things," she said. "I think you start with the people. It's an embracing, warm, open city. And it's a city that loves politics. I have a genetic defect called the political gene."

Formative lessons

Brown grew up in the spotlight, spending her teenage years in the governor's mansion in Sacramento, Calif. She showed a rebellious streak early when, at 19, she eloped with her first husband. She left Stanford University when he enrolled at Harvard Law School, eventually returning to graduate in 1969. Two children later, she began her political career, winning a seat on the Los Angeles City Board of Education in 1975.

After her first marriage ended, she met Sauter, quickly forming an unlikely couple with the political conservative.

"On our first date I told her I was going to marry her," Sauter recalled. "She thought I was an insane Republican."

Asked what sparked the romance, Sauter said: "She laughed at all of my jokes. She asked questions that were insightful. I was absolutely enthralled."

The couple moved to New York when Sauter took the top job at CBS Sports. Brown earned a law degree from Fordham University, starting a law practice that continued when they returned to California in the late '80s.

Brown easily won her first foray into statewide politics, taking over as California treasurer in 1990 and setting the stage for her run against incumbent Republican Gov. Pete Wilson in 1994. Early polls showed her poised to win. But Wilson surged as he carved out strong positions against affirmative action and the granting of state benefits to illegal immigrants. After a bitter campaign, he won by a wide margin.

Brown took the loss hard but leaned on a lesson from her father, who taught her to follow her instincts. She said this allowed her to stand tall in defeat, knowing that she didn't compromise herself in search of votes.

"I lost the governor's race in no small measure because of positions I took that were out of sync with what the people wanted," she said. "They were in a very different mode. But I felt that I conducted myself with integrity. In the end, once I picked myself up, I realized that my reputation hadn't been damaged."

Sauter said her reaction reveals an essential character trait: a thick skin and a decisive, positive, forward-looking attitude.

"Those experiences build scar tissue," he said. "It provides a great deal of clarity about the fundamental rules of life. Some contests you win, and some contests you lose. … That's the very nature of getting in the ring."

A public passion

After the defeat, Brown moved into the private sector. She started a career in banking that landed her at Goldman in 2001, initially managing private accounts in the Investment Management Division. She took over as Goldman's head of public sector and infrastructure for the West region in 2003.

The cynic might conjure an image of the clout-laden pol cashing in on government connections to act as rainmaker for the powerful Wall Street firm. Brown, instead, said she has found a true avocation.

"I stand at the intersection of public policy, finance and politics," she said. "I feel very fortunate to be able to be doing what I'm doing."

J. Timothy Romer, who took over Brown's position when she left for Chicago, said her passion for government is not sales pitch. "She truly has a passion about making government better," he said.

Brown said it's not possible to work as hard as people in her business do without loving it. That's why she steers clear of people who take an overly harsh view of government when recruiting for her team.

"It's important that, if you're in this business, you have a healthy respect for what the government does, and that you have a healthy respect for the challenges elected officials face," she said.

Perhaps not surprisingly, since they are her clients, Brown speaks positively about the job local officials are doing and sees reason for optimism across the country.

"The crisis that we are seeing in the public sector is being addressed because it needs to be. It has to be. There is no choice," she said.

Chicago Mayor Rahm Emanuel, she added, "is taking on very tough problems that have grown up over the years, and he's looking them in the face and he's dealing with them."

One thing she hadn't appreciated until moving here last year, she said, was Chicago's cooperative energy.

"What I have found, that I didn't appreciate, is the connectivity between the business community, the political community and the not-for-profit community. That cohesiveness is a cultural attribute that I think is unparalleled in a city of this size and diversity," she said. "I marvel at it."

One of her goals in her new role is to be a cheerleader, of sorts, for Chicago.

"One of the things I've tried to do is communicate more energetically what a stake, and what a flagship, Chicago has always been for Goldman Sachs," she said.

Indeed, she said, a key moment in the history of the firm was its first significant initial public offering: Sears Roebuck & Co. in 1906.

Brown speaks with admiration about the industriousness of the early leaders of her firm, who scratched, clawed and hustled their way into the clubby, restricted world of turn-of-the-century, white-shoe Wall Street.

Romer said the same passion and work ethic fuels Brown.

"She drives everyone around her to find the best solution," Romer said. "She is unbelievably tireless and enthusiastic. She is always putting her clients first."

This attitude appears to grow from another lesson Brown said she learned from her father.

"He said to always remember who you represent," she said.

Able to reconcile interests

Brown knows her association with the liberal Democratic politics of her family seems at odds with Goldman's image these days. This was driven home in her brother's recent gubernatorial race.

According to reports on the campaign, her brother's supporters were champing at the bit to exploit former eBay CEO Meg Whitman's role as a former Goldman director, particularly after SEC charges were announced against the firm in 2010. Goldman would eventually pay a $550 million fine, the largest ever levied against a Wall Street firm, over charges it misled investors. But the fact that Jerry Brown's sister worked at the firm neutralized the issue.

Brown said Goldman's role in the economic meltdown, still reverberating through the economy, cannot be ignored but should be viewed in larger context.

"We went through, in this country, not only a financial crisis but a systemic, global financial crisis, both at the same time. Generally you have one or the other. And the impact of that on people in our country and around the world has been nothing short of devastating," she said. "We have also not a decade but a generation — 25 or 30 years — of a widening of the gap between the rich and the poor. It's way beyond my pay grade to give you the reasons for that, but I think the facts demonstrate that it's the case. There's always a distrust of big institutions. And there is, among people on Main Street, a distrust and skepticism about Wall Street. So this is, to me, an understandable and not an irrational reaction and emotion."

The fact that clients keep coming back, she said, speaks well for Goldman.

"Our clients are people, too, and whether they are governments or whether they are corporations or whether they are individuals, if what has been said and believed in some of our popular culture (were true), we wouldn't have a business. They can vote with their feet. There are plenty of other firms on the Street."

And on fault? There's plenty to go around.

"You do look for who to blame, and we deserve a share of the blame, as do other firms on the Street," she said. "We are not perfect. I'm sure there are many things that, could we do over again, we would have done over again differently. But at our core ... is a firm that is committed to the highest standards and the highest values."

Not everyone agrees, of course. A Goldman executive tendered his resignation earlier this year via the opinion pages of the New York Times, blasting what he said was the firm's ethical lapses.

"It was hard and has been difficult. But each one of us as bankers, at least on my team, we reached out to our clients," Brown said. "To a person, the clients said this does not relate to the (Goldman) team I work with. It's been a tough few years, but we've soldiered on."

Brown said part of Goldman's problem is that it was a closely held private partnership for most of its history. The firm went public in 1999, and that not only shone a light inside Goldman's business dealings, it created a need to communicate more openly about them. The firm, initially, didn't always do a good job at this, she said.

"We came into the public market without any expertise in communicating to the public and certainly not the mass public," she said.

Goldman seems to be trying to correct this. This month The New York Times noted a rare occurrence: back-to-back televised interviews by Goldman CEO Lloyd Blankfein, followed the next day by a speech explaining the company's support for gay rights.

"By stepping into the spotlight even a little," the Times article said, "Goldman appears to be embarking on a subtle campaign to repair its reputation."

If this is the case, Sauter observed, Brown is a good person to have on the team.

"The quality (of hers) that I most admire is one she learned from her father," he said. "Kathleen is incredibly skilled at finding common ground between people who are divided."

As for Brown, she sees Goldman and the country as facing a common issue in the future.

"How do you instill and maintain the mentality, be it in government or business, of investing for the long term? I think that's the challenge."

Kathleen Brown

Age: 66

Title: Chairman of Goldman Sachs investment banking for the Midwest region

Family: Married to Van Gordon Sauter, former president of CBS News, her second husband. They have five grown children and 12 grandchildren.

Lives: In the Gold Coast. Favorite restaurants include Coco Pazzo, Kiki's, Erie Cafe, Mon Ami Gabi,Naha, Oak Tree and Frankies.

Politics: Served as California treasurer from 1990 to 1994. She was the Democratic nominee for governor in 1994 but lost to then-incumbent Gov. Pete Wilson.

Famous former dog: Brown's dog, Sutter, has become California's "first dog" and has his own Facebook page. He went to live with her brother, Gov. Jerry Brown, when she moved to Chicago and "insinuated himself right away. He humanizes my brother, makes him more approachable." The Corgi, she said, was "a celebrity waiting to be discovered."

Favorite nonworking activity: Spending time with her grandchildren.

On adversity: "You learn more from your failures or mistakes, because you are more open. If you succeed, you don't question. You just accept it and move on to the next challenge. … I could write a book titled, 'The worst thing that ever happened to me was the best thing that ever happened to me.' It would have a number of different chapters."

Other activities: Serves on the board of directors of Forestar, a real estate and natural resource company. She also serves on the board for the Great Lakes Protection Fund and is a member of the Council on Foreign Relations, the Chicago Network and the Commercial Club of Chicago.

Copyright © 2014, Los Angeles Times
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