Turnaround Artist Revamped Nasdaq
The day after Gov. Gray Davis named him one of his energy advisors, Frank Zarb was polishing off his previous rescue mission.
Zarb on Thursday announced the results of a private sale of stock in Nasdaq, capping his three-year overhaul of the market’s operations as CEO and chairman.
The child of Maltese and Italian immigrants who has scaled the heights of Wall Street and Washington, Zarb is used to overcoming steep odds. Among his accomplishments is engineering the partial public buyout of the Long Island Lighting Co., which led to 15% cuts in the rates paid by residents of the suburbs east of New York City.
Though he was circumspect Thursday in discussing the California crisis, Zarb made it clear that he sees it as a sizable challenge.
“It appears to me it’s a very, very intractable problem, but one that can be solved with some leadership and some grit,” Zarb said during a news conference on the Nasdaq sale. “I’m going to give it everything I can.”
But Zarb, 65, said that since he had just been brought on board, it was too early to provide specifics on how California can extract itself from the electricity crunch.
Davis was California’s controller in the late 1980s when he met Zarb, then the chairman of Smith Barney. Wednesday night, Davis said Zarb will advise him on “a range of matters, including ways in which to keep the utilities viable in the future, and keep us appraised of market and financial expectations in that regard.”
The addition of Zarb to Davis’ energy team also brings Wall Street cachet to California’s efforts to stave off a financial disaster.
By all accounts, Zarb is a quick study--and a quick doer. “It’s his management style--getting people to deal with him in relatively short periods of time,” said Sheldon Silver, the veteran Democratic speaker of the Assembly in New York. “Frank is a terrific crisis manager.”
New York’s Republican Gov. George Pataki, who tapped Zarb to fix Long Island’s electricity woes in 1996, called Zarb “a very talented person who is a problem-solver, who has a very strong sense of public responsibility. . . . You couldn’t have a better person than Frank Zarb.”
Zarb grew up in the Flatbush neighborhood of Brooklyn and assumed he would emulate the mechanical skills of his father, a refrigerator repairman. But thanks to the prodding of a high school teacher, he enrolled in night classes at Hofstra University on Long Island. He ultimately earned a master’s degree in business from Hofstra, which in 1994 named its business school after him.
After graduating, Zarb landed in the back office of a Wall Street firm, Goodbody & Co. He extracted himself from the clerical side of the industry and began to rise as a financier. President Richard Nixon tapped him for a slot in the Labor Department, which led to Zarb’s three-year stint in the Beltway hot seat as President Gerald R. Ford’s energy czar during the oil crisis of the mid-1970s.
Even though he was often pilloried during that tumultuous time, Republican Zarb won praise from many Democrats for fair-mindedness.
After his stint in Washington, Zarb returned to Wall Street and built a reputation as a turnaround artist, reviving Smith Barney, among other concerns. In 1996, Pataki tapped him to head the Long Island Power Authority and to get a wide range of parties to agree to the governor’s plan to deal with the local utility’s financial meltdown.
Zarb brought to the job “an extraordinary understanding of business and an extraordinary understanding of energy,” said the power authority’s vice president for communications, Bert Cunningham. “Plus his demeanor. He is a very businesslike person. But he is a very inclusive person.”
Zarb’s next stop may have been his toughest challenge--heading the National Assn. of Securities Dealers, which owns Nasdaq.
Before Zarb’s arrival, Nasdaq had been under fire from the Justice Department and the Securities and Exchange Commission for a scandal in which Nasdaq brokerage firms were accused of colluding to fix the prices at which investors bought and sold stocks.
Zarb oversaw a revamping of Nasdaq’s regulatory structure, boosted morale and presided over the market’s overseas expansion.
“He transformed an organization that was demoralized and questioning itself into a dynamic [force],” said Frank Baxter, chairman of Los Angeles-based investment bank Jefferies Group Inc. and a board member of the securities dealers association.
In the last two years, Zarb has worked to overhaul Nasdaq once again, this time to fend off the rival New York Stock Exchange and a host of smaller electronic systems that are siphoning Nasdaq trading business.
Amid this, Zarb again answered Pataki’s call and helped craft a strategy to pull a financially ailing Long Island county government from insolvency.
On Thursday, the securities dealers group announced that it had taken a key step in its plan to make Nasdaq more competitive by turning it into a for-profit company. The dealers group said it had completed the second phase of a private-placement stock sale to 2,900 large investors that has raised a total of $516 million.
On a conference call announcing the sale, Baxter credited Zarb for the transformation. “Frank has a characteristic,” Baxter said, “that when you bring a problem to him he says, ‘Fix it.’ ”
