Up from Some Stumbles

Every now and then, residents of Washington's Foggy Bottom neighborhood see a rumpled man with sad beagle eyes bearing a big, round bundle from his bachelor apartment to a coin-operated basement laundry. There goes W. Michael Blumenthal, 52, one of the most potent powers of global finance, carrying his dirty underwear to a washing. Blumenthal surely could afford a maid, even though he took a $534,000 salary cut--from $600,000 down to $66,000--when he left private industry to become a Government servant. But he prefers to perform his own chores because he is a man without pretensions.

Not that the Secretary of the Treasury does not savor luxury. He likes Cardin belts, monogrammed shirts and $500 Dunhill suits, but on his round shoulders they just flop and hang. He also has a taste for $1.25 Jamaican Dunhill cigars, of which he burns up five to seven a day. Whenever he does not have an official dinner, he likes to slip out to a small and modest Italian restaurant, where he is seldom recognized. When it is on the menu, he orders steak tartare, which he tosses and stirs with great panache.

Among his many other little pleasures are playing a middling game of tennis and jogging up to a mile and a half along the Potomac footpath three times a week at 6:30 a.m. He also reads voraciously and fast. Recently he has consumed the biography of Mao's widow, Chiang Ch'ing, Menachem Begin's autobiographical White Knights and Jules Witcover's Marathon, the story of Jimmy Carter's pursuit of the presidency. Says Blumenthal: "I wanted to see how they got together and did it."

Naturally, he works hard, as might be expected of the man who has the responsibility for formulating domestic and international financial and tax policies, managing the public debt and supervising the Treasury's major law enforcement arms, including the Secret Service. But he delegates wisely; he recruited Robert Carswell, 49, a Wall Street lawyer, as Deputy Secretary to handle the Treasury's 126,344-employee bureaucracy, and assigned Anthony Solomon, 58, an economist and State Department veteran, as Under Secretary for Monetary Affairs, to run daily international operations. That leaves Blumenthal free to concentrate on the big-bang issues of inflation, taxes and the dollar--and have at least some chance to quit the office after the twelve-hour days that he considers the optimum for efficiency. He carefully guards his weekends as private times, and sometimes leaves on a quick vacation without revealing his destination to anyone except his secretary.

Blumenthal's well-documented rise from adversity is the kind of tale that businessmen like to tell their skeptical children to prove that opportunity still flourishes in America. A refugee from Hitler's Berlin, a street-smart survivor of wartime Shanghai, where his father worked at odd jobs and his mother supported the family by selling cloth to dressmakers, Blumenthal landed in California at the age of 21 in 1947 with $60 in his pocket. He worked up through two dozen menial jobs, among them serving as a gambling shill near Lake Tahoe and handling the lights at strip shows featuring Lili St. Cyr and Sally Rand. He got a scholarship to Princeton, earned two master's degrees and a Ph.D. in economics, taught for a while but switched to the more exciting world of business, joining a subsidiary of Crown Cork & Seal, where he quickly climbed to vice president and director. In 1963, he was named the U.S. ambassador to the Kennedy Round of international trade talks in Geneva. There he proved to be a tough negotiator, showing qualities that still linger. Says a Treasury aide: "I've never seen a guy who can get you on the defensive so easily. He's the master of oneupmanship. He always gets the other guy off balance."

After four years in the trade job, Blumenthal in 1967 became president of Bendix Corp., the Detroit-area conglomerate (auto parts to mobile homes). He rose to become chairman, and under his leadership Bendix was known in business circles as one of the best-managed companies in the country. Beyond increasing sales and profits, Blumenthal argued forcefully, business also has a social role. Long before it became fashionable, he conducted an outspoken campaign for corporations to adopt a code of ethics, urging others to emulate Bendix's openly professed policy of refusing to make payoffs to win orders.

In addition, Blumenthal was a political activist. Says he, rather hyperbolically: "You can count the leading Democratic businessmen on one hand." In Campaign 1976, he supported Walter Mondale and then Scoop Jackson, but, better late than never, he ultimately hopped aboard the Carter bandwagon. When Carter was searching for a Treasury Secretary, he was impressed by Blumenthal's business success, well-rounded personality and intellect.

Once he moved to Washington, the "kid from Shanghai" (as he is still called by some Treasury aides) stumbled for the first time in his life. He separated from his wife, who has earned her Ph.D. in education and works as a researcher at the National Academy of Sciences. (Says a friend: "They were two highly charged people, who were terribly busy and saw too little of each other to really make a couple.") He seemed lost in Washington's bureaucratic maze and naive about infighting. His relations with Congress were poor, and he sometimes was an ill-prepared witness at hearings on Capitol Hill. He failed to earn the trust of businessmen, partly because he had spoken so loudly about the need for business reform, and partly because the Carter Administration did not designate him as its economic spokesman, a role that traditionally falls to the Treasury Secretary. Instead, Carter's old friend, Budget Director Bert Lance, took on much of that function, as well as the job of Administration envoy to businessmen. When the scandal over Lance's finances broke last summer, some of his loyalists in the White House accused Blumenthal of being "too energetic" in pressing the probe. In fact, Blumenthal was only doing his duty as the man in charge of the Office of the Comptroller of the Currency and the Internal Revenue Service--and events proved that he was right all along.

After Lance was forced to quit, his departure left a power vacuum, and Blumenthal seemed the most likely candidate to fill it. Impressed by his ideas and his staying power under pressure, Carter began to pay much more heed to him and made Blumenthal practically his economic chief of staff. Says Blumenthal: "The whole question of who says what on economic issues has not been much of a problem in recent months. It's pretty clear who talks to the business community." The talker is, of course, Mike Blumenthal.

If businessmen listen, they will have reason to conclude that they have a friend in Blumenthal. He is particularly proud that he persuaded Carter to pick William Miller to head the Federal Reserve Board. As Blumenthal says: "I pushed hard for a tried and true business executive who had the credentials of running a major enterprise and therefore of understanding corporate wants and needs, because that was a very important element in giving confidence. We'll work together well. This was my greatest acquisition in some time."

Blumenthal is basically conservative in economics, as devoted to free markets and opposed to Government interference as any corporate chieftain. Wage-price controls are anathema to him, though he has declared broadly that more Government planning might be helpful. In general, he favors some spending controls but sees nothing sacrosanct about a balanced budget. He urges the $25 billion tax cut that Carter proposes this year for businesses and individuals; he argued successfully against eliminating tax benefits for capital gains but could not talk the President out of proposing a crackdown on deductions for expense accounts, including those very rare "three-martini lunches."

Beyond that, says Blumenthal in his only slightly accented English, "I'm a little different from most businessmen. My social views, not my economic views, are a little more liberal." Jimmy Carter describes himself in much the same way: a social liberal and a fiscal moderate. Given the similarities of their philosophies, it is not surprising that these two self-made millionaires--the man from Plains and the Shanghai kid--get along just fine.

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