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Issue Date: April 2011


Quick Fixer

Peter Raskind works best against the clock. The last CEO of National City has found an unlikely second act as interim turnaround leader of Cleveland's port and schools.
Erick Trickey
trickey@clevelandmagazine.com

Four hours into his first day as interim CEO of the Cleveland schools, Peter Raskind stared down an ugly cocktail of snow and ice. Sitting at his home computer well before sunrise on Feb. 1, he studied the weather radar as if he were calculating a balance sheet.

On one side of the ledger lay the city's wintry burden: road and sidewalk conditions, temperature, wind chill. By phone, the district's chief of operations relayed reports from the security guards who patrol school buildings overnight. Their news: The roads were OK, though not great; city crews had gotten out ahead of the storm, salting and plowing.

On the other side of the books, he added up another set of figures: 44,000 students and the two hot meals the schools provide nearly half of Cleveland schoolchildren every weekday. If he canceled classes, thousands of parents would have to scurry to arrange child care, breakfast and lunch. "Where are the kids going to go?" he asked. "How are they going to be fed?"

Seventeen school districts in Cuyahoga County closed that day, but not Cleveland's schools.

Raskind disappointed thousands of kids hoping for a snow day. And by noon, he'd drawn the ire of his first official critic: city councilman Mike Polensek, the angry backbencher from Collinwood. Furious because hardly any kids showed up at his teenage son's MC2 STEM High School that day, Polensek blasted Raskind in the press. "We have students who are walking to school in the street because sidewalks are not clear," Polensek complained. "I hope this is not an indication of further decisions to be made in regards to our students and schools."

That snowball fight is still on people's minds two days later when Raskind steps to the front of the huge auditorium at East Tech High School. He's early, and some of the principals and teachers coming to hear him speak from Collinwood, Lee-Harvard and West Park are still streaming in, finding seats. So Raskind walks up an aisle to greet people one on one.

Wearing a banker's suit and a yellow tie with an expensively intricate pattern of black dots, he does not need introduction. He's the sharpest-dressed, most-CEO-looking guy in the room. Still, he politely introduces himself to four principals up front. A woman in a vaguely feline tan and black striped blouse — Juliane Fouse-Shepard, principal of Newton D. Baker School of Arts near Kamm's Corners — tells him that keeping the schools open was a good move, despite Polensek's jabs.

"I have experience being criticized by all kinds of people," Raskind assures her. "I'm pretty sure we made the right decision."

It doesn't take much to pick up the reference. Most Clevelanders know Raskind as the last CEO of National City. He took charge of the Cleveland-headquartered company just as its aggressive push to grow from hometown commercial bank to a leading national mortgage lender began to bear rotting fruit.

As the American economy rejected the troubled mortgage loans in its bloodstream, Raskind spent his entire 18 months as CEO in crisis mode, trying to save National City from its billion-dollar losses. Finally, under pressure he describes as "hellish," Raskind hurriedly negotiated the 163-year-old bank's sale to PNC for $5.6 billion, a fraction of its former value.

Now Raskind, 54, has a chance to be known in Cleveland for something other than bank failure. He's taken on an unlikely second career as an interim CEO for troubled government agencies, a problem-solver who turns a leader's badly timed departure into opportunity. Last year, he not only stabilized the Cleveland-Cuyahoga County Port Authority after a crisis of confidence, but he also killed its grandiose $600 million plan to relocate to East 55th Street with a single, swift stroke.

So this winter, Mayor Frank Jackson asked him to take on a much bigger task. When Cleveland Metropolitan School District CEO Eugene Sanders abruptly departed for Maui, leaving behind a looming deficit and an unfinished "transformation plan" to reform the schools, Jackson asked Raskind to step in, keep the reforms moving and balance the budget.

Raskind is working, as he did at the port, for a salary of $1.

"Given the financial challenges the school district faces, if we could save a few dollars by not paying me, that's advantageous," he explains. "I'm fortunate enough to be in a place in my life where I can do that and still eat, so why not?" That flash of wit is built on understatement: His annual compensation at National City ranged as high as $4.6 million, his severance reportedly worth $8 million or more.

"My motivation here is very simple and pretty pure: It's public service; it's altruistic; it's trying to inject a little meaning into my life," he says. "This is my version of a mid-life crisis."

He's hardly stepping into a Ferrari, but with 150 to 180 days to close a $47 million deficit, there's adrenaline coursing through the job description. The mayor and school board want to hire a permanent CEO by summer, and Raskind says he doesn't want the long-term job. But in the meantime, he'll have to negotiate concessions from the teachers' union, slash spending, issue pink slips and maybe even close more schools — yet still do his part to improve Clevelanders' confidence in the shrinking school system.

It might sound like too much to lay on a short-timer, and maybe it is. But as Raskind discovered at the port, the peculiar job of an interim CEO gives him unusual freedom to act.

"Someone from the outside can look at it and see things differently," Jackson says. "A long-term person who intends to be somewhere a long time will sometimes be hesitant to make those urgent, dramatic decisions."

Raskind understands the ticking clock. He knows what to do with it. The financial crisis compressed his year and a half as a bank CEO into a trial few executives ever experience. Now he's charged with wringing more change out of five or six months than some superintendents accomplish in years. In other words, Raskind's job is to bend time.
 
 

RASKIND SAYS LITTLE about National City while introducing himself to the principals and teachers at East Tech. Instead, he begins at the beginning, near Boston, where he was born.

"My father was a garment worker," he says, reaching quickly for common ground. "It was good, honest labor, and I'm sure [my] family [was] like most of yours." His dad belonged to a union, he says, a detail that draws applause from the audience, which includes the teachers union rep from each school.

"I thought you might be interested in that," he quips.

Raskind, the second-youngest of five brothers, grew up in Medford, Mass., then a working-class ethnic suburb of Boston. "My mother was the best financial manager I've ever seen," he says. "I never knew until after the fact how little money my father made, because she did an amazing job of stretching it."

He remembers her announcing the family would buy a color TV, a goal she'd never mentioned until she'd saved up the money.

Gertrude Raskind also encouraged her sons' educations with regular trips to the library. Peter devoured historical biographies; somehow, one about "Mad" Anthony Wayne sticks in his head, the Revolutionary War general who told George Washington, "I'll storm hell."

Sharp in school, gifted in math, Raskind headed off to Dartmouth College on student loans, a little money from his parents and odd jobs. He spent his freshman summer in the garment factory with his father, David, lugging around rolls of cloth. It was no life for him, but he watched and learned.

"Labor and management were at each other's throats all the time," Raskind says. "I saw what horrible management and leadership look like — just abusive. Even then, I said to myself, Boy, if I ever manage, I think I can do better than this."

The next summer, his typing skills got him a temp-agency job at First National Bank of Boston. "I looked around and thought, This looks a lot better than the factory!" He spent the summer commuting to the city's financial district and working with blue-blooded Brahmins with IIs and IIIs in their names. He'd already been studying economics, combining his knack with numbers and interest in people. A senior vice president invited him back the next summer. Two degrees from Dartmouth later, Raskind set out for a job at Harris Bank in Chicago.

One night, to celebrate the end of a project, Raskind and his co-workers went out for drinks. He and a fellow banker named Julie, from Cleveland, slipped away from the cocktail hour to have dinner together. It is, he admits to their kids now, a rather bank-nerdy how-we-met story.

Julie Adler Raskind left banking once they started their family. Now, she's board president for the nonprofit advocacy group Voices For Ohio's Children, and — this is the other bit of biography that gets the crowd at East Tech clapping — she and her 82-year-old father tutor at Buckeye-Woodland School on Cleveland's East Side.

His wife's Cleveland connections are one reason Raskind joined National City in 2000, after rising to vice chairman for branch banking at US Bank in Minneapolis. National City made Raskind the head of its consumer finance business, in charge of credit cards, car loans and home mortgages, areas he hadn't worked in directly before. Raskind told a banking publication it'd be a great rounding-out experience for him.

It would be an education.
 
 

PLACE THEM ON THE SCALES, and there is a heft to each side. On one, Raskind's seven years in senior management at National City, including promotions to vice chairman and president. On the other side, Raskind's tenure as CEO.

Looking back at the latter, he says, "I feel like I got two careers' worth of experience in a year and a half."

When he joined National City, Raskind was itching to speed up its gentle corporate culture to keep up with rival banks. Four months into his job as head of consumer finance, he closed the bank's Loan Zones, storefront mortgage offices that lent to subprime borrowers. Next, as head of retail banking, Raskind pushed National City to pay more attention to checking-account customers, adding a rewards program, new technology in the branches and accounts with no ATM fees.

He was named CEO in July 2007.

"I thought my biggest challenges were going to be continuing to build a performance culture within the bank," he says. "I had no idea that day — I don't think any of us did — how difficult it was going to get."

Raskind had succeeded Dave Daberko, the CEO who'd led National City's aggressive push to become a major national mortgage lender. In the early 2000s, when the housing market boomed, National City's mortgage business, including its other subprime lending arm, First Franklin Financial Corp., generated huge profits. But as the housing market cooled, National City was more invested in real estate, more exposed to risk, than its rival banks. It sold First Franklin in 2006 but couldn't sell all the loans First Franklin had originated. As the mortgage market decayed, the wounds of the bank's troubled loans severely weakened the whole company.

Daberko had set his strategy in motion in the late 1990s, before Raskind arrived. But for two stretches, as head of consumer finance and vice chairman, Raskind oversaw the bank's mortgage business. As vice chair, he was a key part of Daberko's management team, assisting in key strategic moves, including the 2006 purchase of Florida banks, which observers thought was a costly overreach. But at least twice, Raskind tried to rein in National City's risky mortgage strategy — when he closed the Loan Zones and when he argued unsuccessfully for cutting back on lending through mortgage brokers.

The reckoning for National City began a week after Raskind took over: The capital markets, spooked by failures in the subprime loan industry, suddenly stopped buying mortgages. Raskind, now in charge, called an immediate halt to broker-originated mortgage loans.

His job became a never-ending exercise in crisis management. Stuck with loans it had hoped to sell, National City began posting losses. In March 2008, as the failure of investment bank Bear Stearns fed investors' fears, National City's stock price and deposit levels fell.

Raskind rushed back to Cleveland from a family vacation in St. Maarten. He looked into possible mergers, but instead negotiated a $7 billion infusion of capital from private-equity firms.

But the bad news kept coming. In mid-2008, as the bleeding in its loan portfolio spread, National City posted quarterly losses of $1.8 billion and $729 million. That fall, when major national banks began to falter and fail, National City was in even worse shape than most regional banks.

"If you weren't in the middle of it at the time, it's hard to grasp how scary it was," Raskind says. "There was the very real possibility that the whole financial system was coming apart at the seams."

Working on adrenaline and little sleep, Raskind and his management team tried to save the bank. "There was no time of the day or night you couldn't pick up the phone and call Peter and find him at it, working his tail off," recalls Christopher Connor, CEO of the Sherwin-Williams Co., who was a member of National City's board of directors. "There was no shirking of responsibility, no bemoaning of the fact he inherited this mess, just ownership: We're going to deal with this, and leave no stone unturned working through it."

But in mid-October came the fatal moment: National City's main banking regulator told Raskind that National City would likely be denied funds from the federal bank bailout. For reasons still shrouded by confidentiality laws, the Treasury Department had decided National City was too weak, a bad risk of taxpayer money. That left the bank with only one option, a merger. And the clock was ticking. The Treasury warned it might release its bank bailout list without National City on it, which could've triggered a swift death spiral: a run on the bank, a government seizure.

Raskind was chasing several possible mergers, but the choices had dwindled to one: US Bank, for the low price of $1.75 a share. But on the morning of Oct. 23, hours before the National City board was to vote on the deal, Jim Rohr, CEO of PNC, called Raskind and revived talks that had broken off two weeks earlier. At 2 a.m. that night, Raskind met Rohr at the Hyatt Regency in Cleveland's Arcade and hammered out a deal for $2.23 a share. The $5.6 billion merger was announced less than an hour before the stock market opened.

That morning, Raskind spoke to National City employees from the fourth-floor auditorium of the bank's East Ninth Street headquarters. He couldn't say more than a sentence or two without choking up.

"It was the saddest day of my professional life," he says. "You had a company founded in 1845, with a rich history and importance to this community and many others that was going to cease to exist.

"Here I am, breaking this news that none of [the employees] ever wanted to hear in their careers. It was horrible. It was devastating."

That day, Raskind told Plain Dealer reporters: "I wish it had been a different reality. And maybe if we made different decisions in the past, it would have been a different reality." Now, he adds only two sentences about what he meant: "The bank had, relative to its size, substantial real estate exposure. So obviously, if we'd had less real estate exposure, we would have been less vulnerable to a real estate downturn."

Raskind's last day was Dec. 31, 2008, the day before the merger became final. Still thinking about its effects on the city, he donated an undisclosed portion of his severance to the Cleveland Foundation.
 
 

FLIPPING THE CALENDAR to the new year resolved little for Raskind.

At home in Shaker Heights, he tried to rest but had trouble sleeping as he wrestled with what had just happened. He didn't know how to feel or what to do next.

His evolution from former bank CEO to crisis manager wasn't planned. But when a troubled bank wanted his advice, he discovered that his time piloting a sinking bank had given him a peculiar set of skills. Raskind could talk bankers and bank investors through pressures that they'd never seen before, because he'd lived them. He began to draw lessons from his experience.

"It's better to get out ahead of issues and confront them than hope they go away," he says he tells clients. "Being proactive beats being defensive, even when it's painful."

He tells them to keep communicating during their crisis: with regulators, local politicians and especially employees. "If you deliver information in a very straight way — no spin, this is the reality — people appreciate it, and they will respond with engagement and outright heroics."

Then, late in 2009, came another call, from Bob Smith, vice chair of the board of the Cleveland-Cuyahoga County Port Authority. The board had just fired CEO Adam Wasserman, who had championed a $600 million relocation of the sleepy port to the foot of East 55th Street. The mayor and other community leaders had endorsed Wasserman's vision of reinventing the old port land as a downtown, lakefront neighborhood. But the port board had begun to doubt the plan — and Wasserman.

"I've been advised there's no chance you'll do this, but ..." Smith began. He told Raskind he was looking for an interim CEO to run the port for six months, until the board could find a permanent chief executive with maritime experience. The port was in upheaval, embarrassed, being torn apart in the press. It needed someone who could bring stability, Smith told Raskind, someone with business and management skills and credibility with the community.

"I thought, Why not?" Raskind recalls. "It'd be a different experience, an interesting experience. And maybe I'd learn something about what I wanted to do."

After National City's collapse, Raskind was a surprise choice, even a strangely ironic one: The ex-CEO of Cleveland's failed bank was going to turn around its port?

Smith thought differently. He knew Raskind from when they'd served together on the Greater Cleveland Partnership's executive committee. When Cleveland Foundation CEO Ronn Richard suggested him as a possible interim, Smith jumped at the idea.

"He was time-tested, had been through a difficult situation and demonstrated great character through the process," Smith says of Raskind and his last months at National City. "He cut the best deal possible at a very difficult time."

In six months as the port's CEO, Raskind repaired strained relationships with the area's congressional delegation and negotiated new leases with tenants. He tackled the port's least sexy responsibility — finding local funding to keep the Cuyahoga River shipping channel dredged — even spending a day and a half at a dredging summit. He helped Smith, head of the CEO search committee, choose his replacement, William Friedman.

"He was no-nonsense: Here's what we're about, what we need to do and why," Smith says.

Finally, Raskind faced the elephant on the lakefront, the port's relocation plan. Early on, he concluded that the business assumptions behind it were shaky. The project's centerpiece was a huge set of docks meant to lure container shipping from ocean ports.

"I said, 'OK, so what's the total container volume today on the Great Lakes?' " Raskind recalls. The port authority employees looked at one another and started smiling.

The answer was zero.

The relocation plan was a $600 million gamble that Cleveland could attract a business that had never evolved on the Great Lakes because the biggest ocean freighters can't fit down the St. Lawrence Seaway. The containers would have had to be offloaded and reloaded onto smaller ships.

Everything Raskind learned made the plan look worse. The new port would've been built on an expensive new island made of dumped dredge material, and there was no easy way to get railroad tracks to it from across Interstate 90.

So last May, his final month on the job, Raskind wrote an opinion piece for The Plain Dealer that deserves to be required reading, a lesson in how to end a yearslong, communitywide debate with a single paragraph. Raskind called the East 55th Street plan "ill conceived," "built upon layers of questionable assumptions," and "never viable." The port didn't have to move because it had plenty of room for more business, he wrote, and if it ever moved to make way for development, a new port needed a less expensive site.

"I thought I had a unique opportunity to express an opinion unvarnished by politics, unvarnished by career aspirations," Raskind says. "I was on my way out the door. And I hadn't even been paid to be there."
 
 

THE ART OF THE TEMPORARY leader is to choose. What needs fixing, and what doesn't? What can be solved if he acts fast, and what has to go on the memo for the next person?

So, on the third day of his job as the schools' interim CEO, Raskind laid out his priorities to the principals and teachers at East Tech. "What this school district does not need is another plan, a new plan, a tinkered plan," he told them. "I feel quite strongly that you have invested a tremendous amount of blood and sweat and tears in forging and rolling out an academic transformation plan."

Raskind's first job is to ensure that Eugene Sanders' reform strategy, debuted last year, outlasts Sanders' tenure: the growth of innovative specialty schools, the efforts to break troubled high schools into smaller academies, the replacement of staff at some poorly performing schools. "The plan is the plan," Raskind adds.

But the budget is also the budget.

"We face enormous financial challenges, and they must be dealt with," he says. The schools have a $47 million deficit this year and bigger deficits coming, thanks to a shrinking city, declining enrollment, uncollectible property taxes, looming cuts in state aid, raises promised in union contracts and the rising costs of everything from fuel to health care. "Meeting those challenges is going to require participation on everyone's part," Raskind tells his audience, "and very probably sacrifice."

In early March, Raskind starts to define what he means by sacrifice, warning the school board about possible layoffs, other spending cuts and more school closings. The options are bad but not new. In fact, Sanders closed a similar deficit last year by doing all three, closing 13 schools.

Raskind's supporters hope putting a former bank CEO in charge for six months will mean more surgical cuts and more businesslike efficiencies.

"Unless money drops from heaven, the district is going to have to face massive layoffs of teachers," says Ronn Richard of the Cleveland Foundation, a key backer of the transformation plan. "It's great that we have someone like Peter who can deal with [the deficit] and find efficiencies in the system, to lay off as few teachers as possible." Richard thinks Raskind can find "massive opportunities for cutting out waste" in the shrinking school district, from transportation to food service.

He's counting on Raskind to use the fearless truth-telling skills he used at the port. "The fact that he's not a professional educator, not looking to do this permanently, gives him the freedom to tell it like it is," Richard says, "and it's pretty bad."

Raskind's supporters — and there are a lot of them in Cleveland's business, political and nonprofit leadership — argue that the skills he honed during National City's long fall make him the perfect person to handle the schools' moment of extreme financial pressure.

"He can come up to speed on an issue as fast as anybody I've ever met," Chris Connor says. "He'll be thoughtful and inclusive. He has a sense of how to move in a crisis environment."

Still, the inescapable irony lingers: The city has turned its schools over to a leader who couldn't fix his own bank.

Mike Polensek, City Hall's resident angry guy, is mad about more than just snow. "Never take money from a Collinwood Slovenian!" growls the former National City shareholder.

"These guys destroyed a bank, where shareholders lost hundreds of hundreds of millions in equity," he says. "Then we reward these guys? He's working for a buck. He's not worth a buck!"

Still, Polensek says he's willing to give Raskind the benefit of the doubt. But he's not happy about it. "I'm not like the rest of these guys that have amnesia in this frickin' city."

Raskind certainly hasn't forgotten his National City experience. "One of the things I learned was how to be levelheaded and how to appear levelheaded," he says. "Big ups and downs are not helpful to others who are taking their cue from you."

He'll need a cool temper this spring as he tries to negotiate concessions from Cleveland's formidable teachers union, sits through angry community meetings about possible school closings and decides whether to ask city voters to approve the first new school levy in 10 years. He's a quick enough study to know the odds of winning a levy campaign are long. A levy "is not an answer by itself," he says, "nor should it be." Taxpayers expect the district to try everything else to solve its financial problems before asking for more money, he says.

It's easy to declare that the Cleveland schools are at a key turning point, and it can sound like a cheap sentiment when past turning points have come and gone without much change. But it's probably true this time because the schools are improving and shrinking at the same time. Cleveland is doing better on the state report cards, with the district now in the pretty-good category of "continuous improvement." Parents have more successful schools to choose from, such as the design, medicine and early college schools at John Hay in University Circle and the technology-focused MC2 STEM school.

Yet in some parts of the southeast and northeast sides, all the schools are still failing the state's standards. The district is losing students at an alarming rate — this year's enrollment of 44,000 students is down from 70,000 in 2001 — as families move out of the city or transfer their kids to charter schools. That's why the mayor, and Raskind, insist on pushing the transformation plan forward — even though transforming schools costs money, and the plan's price tag, $20 million to $25 million a year, means reforms may have to be rolled out more slowly.

"The customers are all leaving," warns David Abbott, executive director of the Gund Foundation, another donor to the transformation plan. "The only way to reverse that is sell a different product — a visibly, obviously different, better product. That requires everybody to think and act differently and use much more imagination and urgency."

Raskind's doing his part to encourage new thinking. Every organization has a culture, he says. Like he wanted to speed up National City's culture 10 years ago, he wants to loosen up the school district's culture today.

At his first school board meeting, a board member asked a district staffer a question. The staffer turned to Raskind. There was a long pause. "The board president leaned over and explained, 'Oh, the tradition is, they don't speak until you give permission to speak,' " he says.

"I think we're going to end the tradition," Raskind said afterward. Now the staff just answers the board's questions.

"We're going to have to be, as an organization, more efficient, but also probably more nimble and flexible," he says. "There's a balance between seeing to it that every child is assured the right educational experience without being so rigid that we can't tailor and we can't change."

It sounds like a philosophy Raskind is now following himself.

"I can't say I've got this all figured out, and I understand the direction of my life," he says. "But I am figuring out that it's stimulating to have different experiences and step out of my comfort zone. Whatever else happens in my life, I'll be able to know, for five or six months, I was the leader of one of the larger school districts in the country, and hopefully made a positive contribution. And that'll be cool."

Comments:
Wednesday, March 23, 2011 10:00:28 PM by Mark Jablonski
Great reporting, as usual. But skepticism is warranted. Look to Bartimole!
But still, Mr. Trickey, your shoe leathering is appreciated.

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