“Ohio, baby,” he said, naming the point in the previous night’s returns when he’d begun to celebrate. Then the cameras rolled, host Betty Liu repeated the question, and the private equity investor stifled a smile.

Mr. Hindery’s giddiness aside, there was reason to believe that Ms. Liu’s Wednesday morning show would be gloomy. During the run-up to the election, much had been made of Wall Street’s support for Mitt Romney and its antipathy toward President Barack Obama, the turncoat who banked the financial sector’s support in 2008, then chided banker “fat cats.” And so Off the Record arrived at Bloomberg’s Lexington Avenue headquarters to take in the news outlet’s weekday morning television show, looking to gauge the Wall Street’s morning-after mood. (Disclosure: this reporter was an intern at Bloomberg News during the summer of 2011 and the winter of 2012.)

If we were looking for pathos, OTR didn’t find it. Harvey Golub, the former chairman of AIG and an ardent Romney supporter, was looking particularly dejected, but Ms. Liu didn’t linger on it. She asked former Morgan Stanley CEO John Mack whom his first post-election telephone call would have been to were he still running the investment bank, and who he liked as the next secretary of the treasury. She dialed up Pimco CEO Mohamed El-Erian from a remote location and asked him what he thought Federal Reserve Chairman Ben Bernanke was thinking. She asked everyone, including former Fed Chairman Alan Greenspan (remotely) and Loop capital CEO Jim Reynolds (in studio), about the fiscal cliff.

“We knew early on the story wasn’t going to be who won, but what they would do after,” Ms. Liu told OTR. “So we tried to pivot right away to the 60 days after.”

Along with a gift for equanimity and a sunny disposition—when OTR asked Ms. Liu about the recent hubbub over a Bloomberg TV marketing campaign that falsely stated she’d been nominated for a Pulitzer Prize, she replied, “I didn’t find it embarrassing at all”—the In the Loop anchor has the résumé of a serious financial journalist.

She started her career as a Hong Kong reporter for the Dow Jones Newswire in the aftermath of the British handover and earned a quick promotion to chief of Dow Jones’s five-person Taiwan bureau at the age of 23. After five years at The Financial Times’s Atlanta bureau and a year off after the birth of twin boys, she took to live TV, first as an Asia correspondent for CNBC and, for the last five years, as an anchor at Bloomberg.

At Bloomberg TV, Ms. Liu has a reputation as a CEO-whisperer. She’s one of the few journalists Warren Buffett will speak to and is well-trusted by master-of-the-universe types. “I was just having lunch with Jim Chanos at Michael’s,” she told OTR, name-checking the Kynikos Associates hedge fund manager perhaps best known for shorting Enron’s stock. “He was joking, ‘Everyone who’s making deals is in the back room, everyone who wants to interview the people making deals is in the front, waiting for the deal-makers to come out.” Where did Ms. Liu and Mr. Chanos dine? “We were in the back. I was trying to make a deal to interview him!”

Indeed, Ms. Liu’s comfortable relationship with executives was apparent on Wednesday’s show, as guests treated the set as a clubhouse of sorts. Mr. Hindery teased Mr. Mack about the election results—“You used to be a good North Carolina Democrat”—and Mr. Reynolds seemed to have a deal he wanted to pitch to just about everybody.

Even sad-faced Mr. Golub, now the chairman of boutique investment bank Miller Buckfire, was in a chatty mood. “I like to do Betty’s show because I have no idea what her politics are,” he told OTR.

And so Ms. Liu and her guests, live and remote, shared their views on U.S. debt, the future of the Republican party, the president’s next moves, and yes, whether the nation would avoid the fiscal cliff.

“It’s going to be bumpy,” Ms. Liu told OTR. “But I think they’ll get something done.”

As Mr. Golub left the set, he mentioned he was getting ready to jet to Florida to escape the coming nor’easter. Ms. Liu, likewise, was in the process of helping Wall Street move on. “You don’t make money talking about the past,” she said. “You make money talking about what’s going to happen in the future.” —Patrick Clark

Two tables down, Anthony Weiner had a very long lunch with another gentleman. The possible mayoral candidate drank iced tea and wore a pale gray suit with a blue shirt and no tie. Mr. Weiner greeted people as they filtered out, including Bill Rudin, who stopped for a few minutes at the politician's table.

We also had a senator from Washington State here on Monday. Her name is Maria Cantwell, and she must be a Democrat because she was here with Leo Hindery and he doesn't give money to Republicans.

Bethenny Frankel was supposed to come on Monday morning to celebrate her one-year anniversary on camera for her show Bethenny Ever After. (Remember when she got married here and peed in my wine bucket? I do.) But at the last minute, they had to fly to the West Coast. Maybe they are making a Bethenny movie!

Last week Ralph Lauren came in. He likes meat, so he usually orders a hamburger. While he was waiting for Barry Diller to arrive last Wednesday, Joel Klein said hello to fellow diners including Donald Marron and Pete Peterson, who was eating with Phoenix House founder Mitch Rosenthal. It was quite the literary week, with Simon and Schuster magnate Michael Korda lunching with Mary Higgins Clark, and Tuesday, Lynn Nesbit brought Amartya Sen, the Nobel Prize-winning economist!

The prince has been coming every day. On Monday, he arrived in a brown coat with mink trim and was so unhappy sitting alone that he left in the middle of his meal. On Tuesday, he had learned his lesson, so he brought a friend, a Lebanese gentleman.

I'm very happy that finally everyone is back from spring break, and it's getting to be the time of year that people start going out again. Even though it's freezing outside, we have our cherry blossoms up and our spring menu is in full swing. Last week a group of six young women came in for lunch and squeezed in at one table. They were celebrating a birthday and drank Dom Pérignon Rosé Champagne. I served them an enormous cotton candy, and they took it to go in a giant white plastic bag. Can you imagine!? Then they invited me to join them to drink Cristal in their white limousine outside.

"If [Bloomberg] would just write me a check for as much as he wrote the Sheraton on the night of his election, we'd have it pretty well taken care of," he said this morning.

Of course, Freddy has to raise the money within campaign finance limits, but you get the idea. Will Mike take pity?

(Cost of that election-night party: $249,765.)

In the following weeks, the local Democratic Party seemed too distracted to worry about the klatch of high-profile defectors. Who would dare discipline, or even criticize, a major campaign donor? Call it impunity of the purse. In a recent interview with The Observer, Mr. Rattner flaunted his new leadership role.

“I typically support Democratic candidates, but I think slavery has been abolished in this country and I’m free to make a decision on a case-by-case basis,” Mr. Rattner said, noting that he’d never signed a “lifetime contract” with the Democratic Party.

What’s more, Mr. Rattner added: “I can’t think of a single active Democrat in New York who’s supporting Freddy Ferrer. And when I say active Democrats, I mean the people in our world, who help raise money for Presidential candidates and things like that.”

And, addressing party loyalists, he concluded: “They can't excommunicate us, because we are the party.”

Those comments, and others, have ignited a firestorm among local Democrats who are trying to elect Fernando Ferrer as Mayor this year. Even those who weren’t surprised by Mr. Rattner’s initial support for Mr. Bloomberg—he is, after all, a personal friend of the Mayor—confess that they are stunned by Mr. Rattner’s criticism of Mr. Ferrer and his suggestion that his fellow wealthy donors may be the only class of Democrats that matters.

“Mr. Rattner’s comments are outrageous and deeply offensive,” said Howard Wolfson, a consultant to the New York State Democratic Party. “That’s the kind of thing a Republican would say. This party belongs to everyone.”

Jen Bluestein, a campaign spokesperson for the Democratic Mayoral candidate, Fernando Ferrer, was also taken aback by Mr. Rattner’s stance.

“Mr. Rattner apparently never learned what most Americans know in their hearts, regardless of party affiliation: that wealth alone doesn’t determine status,” she retorted.

Mr. Rattner, however, made it clear that he is not happy with the candidates who have been wearing the Democratic label in recent Mayoral elections. “It’s disappointing and somewhat surprising to me that, in what might otherwise be considered the heartland of Democratic politics, we haven’t been able to put forward a compelling candidate in almost 20 years,” he said.

“Compelling to who?” replied Ms. Bluestein. “The Democratic Party is more united around Freddy Ferrer than the party has been around a candidate for more than a decade—we can’t speak for the people who Steve Rattner talks to at cocktail parties, but Democrats from Hillary Clinton to Eliot Spitzer to John Kerry know that Freddy Ferrer’s fight … is compelling to those of us who believe in equality and prosperity for all, not just for some millionaires.”

But wealth certainly gets attention. As trumpeted last month by the Mayor himself, the elite membership of Democrats for Bloomberg includes Alan Patricof, an investment banker and a supporter of retired General Wesley Clark’s 2004 Presidential campaign; Roger Altman, who served as deputy treasury secretary during the Clinton administration; and movie moguls Harvey Weinstein and Jane Rosenthal.

Mr. Bloomberg doesn’t need the wealth represented by Democrats for Bloomberg—he is financing his campaign himself—but he coveted the group’s support, because it means that these wealthy Democratic donors won’t be sending checks to Mr. Ferrer.

While Mr. Bloomberg’s new Democratic friends aren’t ready to announce any official events at the moment, they probably have “kind of done our job,” as Mr. Rattner said. In a city were Democrats outnumber Republicans nearly five to one, their support bolsters Mr. Bloomberg’s credentials with other Democrats who are not wedded to the party line.

According to Leo Hindery Jr., the multimillionaire Democrat who is Mr. Ferrer’s finance chair, the media coverage given to Mr. Rattner’s group—admittedly a small, though powerful, group of Democrats—is disturbing, not to mention dirty politics.

“This thing is a hit squad by very wealthy people who have suckered off of the party for a very long time,” said Mr. Hindery. “They have had a position of influence and prominence in the party, and it’s very disingenuous of Steve Rattner to suggest that this is just business as usual.”

“It’s very hurtful,” he added. “It’s very personal, and I think that it’s one of the most unfortunate things I’ve seen in politics, because it’s not ‘Democrats for Bloomberg.’ It’s ‘Friends of Bloomberg Against Ferrer,’ and let’s call it that. It has nothing to do with money because Mike doesn’t need any money. It doesn’t have anything to do with votes.”

Mr. Hindery also tackled a thorny topic that most Democrats have, so far, met with either silence or private grumbling. Her name is Maureen White. Ms. White is married to Mr. Rattner, and she also serves as the finance chair of the Democratic National Committee. Her murky role seems to have gagged the D.N.C., which hasn’t taken any real shots at individual members of Democrats for Bloomberg. Howard Dean, chairman of the D.N.C., did say in a statement to The Observer that he disagreed with Mr. Rattner’s assessment of Mr. Ferrer’s support. “There are lots of people in New York City supporting Freddy Ferrer,” he said. “The Democratic Party is larger than any one individual or group …. I believe Freddy will be a wonderful Mayor for all New Yorkers.”

Ms. White said that she would not take sides in the Mayor’s race. And no one, she explained, seemed particularly upset with her.

“Nobody is calling me screaming at me, absolutely, positively not,” she said.

No Wrist Slap?

But some folks, it seems, would like to.

“I’ve heard from varying sources that they are upset that she’s not even getting a slap on the wrist for this,” said Heather Woodfield, a registered Democrat and the director of Democracy for New York City, a group of Dean supporters.

For Mr. Hindery, the disappointment seemed even more profound. “It’s heartbreaking,” he said. “Maureen has formal standing in the party, you know, and people whom I respect utmost in the world—Harold Ickes, Bob Rubin, others—all of us have said, ‘This is not right.’”

But Ms. White is prepared to defend herself from criticism that, suddenly, she is sleeping with the enemy. “I would’ve thought that we had advanced to the point where people understand, in modern American society, that husbands and wives have different opinions on things, especially things in the public arena,” she said evenly.

On the record, she would only offer one, unsurprising comment on the incumbent.

“My fundamental problem with Bloomberg is that he’s given an awful lot of financial support to national Republicans who don’t serve either the city or the country well,” she said.

And with that, Ms. White paused and put The Observer on hold for a moment, so she could run this last statement by the former journalist in the family: her husband, Mr. Rattner.

Now this, from Bloomberg News, of all places:

Leo Hindery, Wall Street Racer, Captures Le Mans Flag

June 20 (Bloomberg) -- Leo Hindery Jr., who left his job as chief executive officer of Yankees Entertainment & Sports Network in April 2004 to pursue his racing hobby, won the GT2 category at France's Le Mans 24-hour race yesterday.

Hindery, 57, was at the wheel of the Alex Job team's Porsche 911 GT3 RSR when the BAM!-sponsored outfit from Tavares, Florida, edged defending champion White Lightning Racing by a single lap at the racetrack in northwestern France.

"This means everything,'' Hindery said in an e-mail just after completing his four-year quest to capture the top prize.

At a May lunch at his usual table at New York's Four Seasons restaurant, Hindery promised that this year would be his last attempt to win the world's premier sports car endurance test. ``Four Le Mans outings and I'm still walking,'' he laughed. "The bones are starting to hurt, just a little bit.'' The restaurant is one of the sponsors of the three-man Alex Job team.

Make sure you read to the end of the story, where you can learn about Hindery's next challenge. Read the whole thing. Really.

Steinbrenner's new sports station, was on a conference call, oozing his special

brand of confidence and boardroom bonhomie. It was Sept. 10, and he was

announcing the culmination of months of negotiation: the formation of the YES

network, born out of the burgeoning YankeeNets sports empire.

"TheNewYork Yankees are the most legendary team in professional

sports," Mr. Hinderysaid.Then, clarifying a key point about how this new cable

station might prevail, he said, "It is our intention that the YES network be

part of the basic package available to all subscribers."

There it was: a network ready to broadcast 125 Yankee games next

year, a new C.E.O., a plan for success and even office space at the Chrysler

Tower. All that was needed was for the network's two main investors, Goldman

Sachs Inc. and Steven Rattner's Quadrangle Group, to close on their joint $300

million investment.

That seemed to be the easy part: "With this deal, you could say

yes on the phone," Mr. Rattner was quoted in the next day's New York Times .

Yet one week later, after everything else in New York had

changed, the YES deal did, too. On Sept. 17, Yankee president Randy Levine

received a call from Mr. Rattner, Quadrangle's founder and high-profile

principal partner, saying Quadrangle and co-investorAmos Hostetter were

withdrawing their $160 million contribution to the deal. Goldman Sachs then

quickly stepped in, and the deal closed a week later.

But what had happened to Mr. Rattner, the former New York Times reporter, intimate of the

Gores and Clintons and onetime protégé of Lazard Freres legend Felix Rohatyn?

He was an all-star investment banker if ever there was one-the dean of media

and cable investment bankers. Along with three partners from his old firm, Mr.

Rattner had recently reinvented himself as a private equity investor, and they

seemed to be a perfect fit for the Yankees.

Looking back, however, there were hints as early as August-and

certainly as the negotiations dragged on into September-that something was

wrong. According to Mr. Rattner, it was this: He and his partner, Peter

Ezersky, had concluded that Mr. Hindery for one, and the Yankees in particular,

were asking too much of them given the heft of their investment. They objected

to the salary they were paying Mr. Hindery, his expensive and top-heavy

administrative team, the governance structure that had been established and

what they claimed was an escalating rights fee the network would pay the

YankeeNets.

"While no single change caused us to leave, cumulatively they

made the deal significantly less economically appealing," Mr. Rattner said in a

statement. "Combined with an unwieldy and difficult governance situation, the

deal became uninteresting."

To which Mr. Hindery, never one to hedge, responded: "I have all

the respect for Steve Rattner, who has never run a business in his life. All of

these items were budgeted in July, including my own compensation. There are no

surprises here. This is just a guy who does not want to do a deal."

Asked to reply, a Quadrangle spokesman said: "All the parties,

including Leo, have agreed to limit our comments. We prefer to respect that

legally binding agreement."

In the clubby little cable industry, it rarely comes to this.

Certainly, Mr. Rattner, Mr. Hindery and Mr. Hostetter have been doing deals

together for 15 years.

But these are high-profile dealmakers in tough economic times. In

this milieu, china doesn't just crack, it shatters. And so it seems it has

here.

The

finance deal for the YES network dates to May, when Goldman Sachs media

banker Joe Ravitch began discussions with Mr. Levine. The Yankees had finally

cut the cord with their 12-year partner, Cablevision's MSG network.They needed

a new partner.

From the start, Goldman had a C.E.O. in mind: Leo Hindery.

Goldman bankers had worked closely with Mr. Hindery at his various stops as a

top executive at TCI, AT&T Broadband and, most recently, Global Crossing.

Mr. Hindery had become famous in selling John Malone's TCI to AT&T for $70

billion. He was a dealmaker to the bone and, Mr. Ravitch said, always made

money for his shareholders. Besides, he was the perfect Steinbrenner guy:

brassy, in his office by 5 a.m., a world-class race-car driver.

In early June, in a suite at the Regency Hotel, Mr. Ravitch

introduced Mr. Hindery to Mr. Steinbrenner. Sharing Catholic-school upbringings

and baseball buddies, they hit it off. Goldman bankers felt sure they had a

deal.

Numbers were crunched, and the network was valued at $800

million. Goldman was set to invest $300 million for a 40 percent minority stake

through a series of its private equity funds.

But as Mr. Ravitch was working his end, New Jersey Net co-owner

and YankeeNet board member Ray Chambers had entered into discussions with Mr.

Rattner and Quadrangle.

For Mr. Rattner and his three partners-Mr. Ezersky, Joshua

Steiner and David Tanner-the timing was perfect. They would be closing their

first billion-dollar fund in July. High-profile investors included Mike Ovitz,

Harvey Weinstein (who is in talks with the Yankees about joining the YES

board), and cable titans Amos Hostetter and Comcast chief executive Brian

Roberts (both advisory board members). The YES investment would be their

biggest to date, at $150 million, but the potential, they thought, was infinite.

In mid-June, the YankeeNet board was convened at its offices in

Rockefeller Center. James Murdoch, son of Rupert, was there, as well as Mr.

Steinbrenner, Mr. Chambers, and Mr. Chambers' partner and co-owner of the Nets,

Lewis Katz. Goldman Sachs and Mr. Ravitch made their case, highlighting Mr.

Hindery's role as C.E.O. Only he, they contended, could cut a deal with

Cablevision's Chuck Dolan to put the network on basic cable service, a key to

its success.

Mr. Rattner and Mr. Ezersky then spoke. Mr. Rattner's cable guy

was Mr. Hostetter, who was conferenced in from his Boston offices. An

influential AT&T board member, he is the founder of Continental

Cablevision, an original cable franchise, and widely recognized as one of the

cable industry's visionaries. 

At the outset, it became clear that they were not in favor of Mr.

Hindery, people at the meeting said. Quadrangle partners were well aware of Mr.

Hindery's volatile history at AT&T and Global Crossing-both high-profile

jobs with short tenures and a trail of less-than-fond memories. They also saw

the $800 million network as too small for Mr. Hindery's appetites. Their plan

was to close the deal first, make Mr. Hostetter chairman and then find a C.E.O.

The board, impressed with both presentations, pitched another

idea to Mr. Rattner and Mr. Ravitch: We like you both; figure out how to split

the deal.

Immediately, Mr. Hindery's salary came up. YankeeNet chairman

Harvey Schiller got $2 million; Mr. Hindery wanted $500,000, plus $250,000 for

his expenses and his private plane, according to YankeeNet officials. (Mr.

Rattner contends that Mr. Hindery initially offered to decline a salary, which

Mr. Hindery denies.) In addition, he wanted a large administrative staff, some

with salaries of $400,000.

Mr. Rattner and his team blanched. While a $500,000 salary is not

beyond the pale for a TV executive, especially a cable bigwig of Mr. Hindery's

stature, the network was, in Quadrangle's eyes, a start-up, in one of the worst

advertising climates in a decade.

Then there was the fee to be paid to YankeeNets for broadcast

rights, which Quadrangle partners say was increased from the initial amount.

YankeeNet officials say the Yankees fee was always $52 million, while the fee

for the Nets has yet to be decided. But, when added to administrative costs of

some $40 million, it meant $100 million in costs from opening day in March-and

this before even reaching an agreement with the cable companies over carriage,

or meeting with any advertisers.

Tempers flared. Did Mr.

Hindery really need a plane to fly to the Bronx, Quadrangle partners queried?

Mr. Hindery is a world-class executive, Goldman bankers countered.

"Leo is a rock star," said Mr. Ravitch. "This is what you do when

you hire a guy of this caliber."

On several occasions, Quadrangle came close to pulling out. By

then, it had gotten personal. Goldman bankers, meanwhile, attached a provision

that would prevent Quadrangle from firing Mr. Hindery.

But that wasn't the final straw. In mid-August, Mr. Rattner and

his team were told that Mr. Hindery, who already had reduced his stake from $35

million to $15 million for personal financial reasons, had secretly sold off $5

million of it to prospective board member Bill Bresnan. Mr. Hindery denies that

he attempted to sell any such stake. Both sides, especially his Goldman

backers, weren't happy about Mr. Hindery's first downsizing. For him to offload

the rest would be a deal breaker.

"Did we like the fact that Leo went from 35 to 15? No," said Mr.

Ravitch. In the end, however, Goldmans saw the $15 million as "a significant

amount. Our interests are aligned."

His $15 million stake would ensure, bankers hoped, that Mr.

Hindery would fulfill his three-year contract. Nevertheless, Quadrangle bankers

became more wary of Mr. Hindery's commitment.

At one point, the talks became so nasty that Mr. Hindery came

close to walking away, Mr. Hindery confirms. As he saw it, the Quandrangle

partners seemed to be pushing him to do it-a charge they deny. First they made

Mr. Hostetter chairman; then they attacked his salary, expenses and staff. They

were, in effect, saying they didn't trust him.

"It had just become needlessly petty, which was unfortunate,"

said Mr. Hindery.

Last on Quadrangle's complaint list was the YankeeNet insistence

on having Bill Bresnan as the sole independent board director. Mr. Bresnan is a

longtime cable investor and an old friend of Mr. Steinbrenner and Mr. Hindery.

In mid-September, Mr. Rattner and partners also learned that Mr. Bresnan-who is

also a Quadrangle investor-was the father-in-law of Yankee general manager

Brian Cashman.

On Sunday night, Sept. 16, with the deal set to close on Tuesday,

Mr. Rattner called Mr. Levine: Taken with everything else, especially Mr.

Hindery's attempt to lessen his stake, the Bresnan-Cashman link had tipped the

scale. Quadrangle would have to pull out.

Mr. Steinbrenner, the most forceful advocate for Mr. Bresnan, was

reported to be livid. A believer in the power of institutions, he had always

favored Goldman Sachs as sole investor. But he'd agreed to Quadrangle to

appease his new partner, Mr. Chambers.

He knew little about them. Indeed, after an early meeting,

according to one source close to the deal, Mr. Steinbrenner had commented,

"They're nice guys, but as far as I can see, they're just four kids with a lot

of money sitting in an office at Rockefeller Center. I don't know what they can

do for me."

A Quadrangle spokesman noted that the firm's principals have

nearly 60 years of Wall Street, media and communications experience.

Mr. Steinbrenner did not respond to calls for comment.

Neither Mr. Steinbrenner nor Mr. Hindery would budge on Mr.

Bresnan. In their eyes, the Quadrangle partners were looking for an excuse to

get out of the deal.

"It's not as if we parachuted his name in. There were 100 drafts

where he was named as the independent director," said Mr. Hindery.

He added: "Bill Bresnan is my

partner and my friend; I've known him for 15 years. He is Brian Cashman's

father-in-law through four grandchildren; I mean, come on."

Mr. Rattner said, "Bill Bresnan is a wonderful man and would be a

terrific director of any company."

On Monday, Sept.  17, Mr.

Rattner faxed his investors, who had already sent in funds, informing them that

Quadrangle was out.

For YankeeNet officials, it was a relief.

"From Day 1, Quadrangle felt uncomfortable that they were not the

dominant partner," said one. "It was clear, too, that they didn't want Leo

Hindery to be C.E.O. They thought they could surround Leo, and you can't run a

company that way. At the end of the day, no one lost any sleep over it."

The Goldman bankers, meanwhile, say their enthusiasm is as great

as ever.

"Remember, all this was right after the World Trade Center

attacks," said Mr. Ravitch. "For us to double the size of our investment when

we couldn't get to our offices was a sign of how much we love the deal."

As for Mr. Rattner and Quadrangle, the bottom line seems clear:

Without greater control, the deal truly wasn't worthwhile.

Mr. Hindery, meanwhile, is ready to get going. With an office

full of executives working on programming and ad-related issues, he now has to

clear that all-important hurdle: getting Time Warner and Cablevision executives

to add the YES network to their basic cable package-the source of viewers and

ad dollars.

Meanwhile, by opening day

2002, he has to pony up about $28 million to Mr. Steinbrenner, as YES's right's

fee. That's some 180 days away.

Steinbrenner's new sports station, was on a conference call, oozing his special

brand of confidence and boardroom bonhomie. It was Sept. 10, and he was

announcing the culmination of months of negotiation: the formation of the YES

network, born out of the burgeoning YankeeNets sports empire.

"TheNewYork Yankees are the most legendary team in professional

sports," Mr. Hinderysaid.Then, clarifying a key point about how this new cable

station might prevail, he said, "It is our intention that the YES network be

part of the basic package available to all subscribers."

There it was: a network ready to broadcast 125 Yankee games next

year, a new C.E.O., a plan for success and even office space at the Chrysler

Tower. All that was needed was for the network's two main investors, Goldman

Sachs Inc. and Steven Rattner's Quadrangle Group, to close on their joint $300

million investment.

That seemed to be the easy part: "With this deal, you could say

yes on the phone," Mr. Rattner was quoted in the next day's New York Times .

Yet one week later, after everything else in New York had

changed, the YES deal did, too. On Sept. 17, Yankee president Randy Levine

received a call from Mr. Rattner, Quadrangle's founder and high-profile

principal partner, saying Quadrangle and co-investorAmos Hostetter were

withdrawing their $160 million contribution to the deal. Goldman Sachs then

quickly stepped in, and the deal closed a week later.

But what had happened to Mr. Rattner, the former New York Times reporter, intimate of the

Gores and Clintons and onetime protégé of Lazard Freres legend Felix Rohatyn?

He was an all-star investment banker if ever there was one-the dean of media

and cable investment bankers. Along with three partners from his old firm, Mr.

Rattner had recently reinvented himself as a private equity investor, and they

seemed to be a perfect fit for the Yankees.

Looking back, however, there were hints as early as August-and

certainly as the negotiations dragged on into September-that something was

wrong. According to Mr. Rattner, it was this: He and his partner, Peter

Ezersky, had concluded that Mr. Hindery for one, and the Yankees in particular,

were asking too much of them given the heft of their investment. They objected

to the salary they were paying Mr. Hindery, his expensive and top-heavy

administrative team, the governance structure that had been established and

what they claimed was an escalating rights fee the network would pay the

YankeeNets.

"While no single change caused us to leave, cumulatively they

made the deal significantly less economically appealing," Mr. Rattner said in a

statement. "Combined with an unwieldy and difficult governance situation, the

deal became uninteresting."

To which Mr. Hindery, never one to hedge, responded: "I have all

the respect for Steve Rattner, who has never run a business in his life. All of

these items were budgeted in July, including my own compensation. There are no

surprises here. This is just a guy who does not want to do a deal."

Asked to reply, a Quadrangle spokesman said: "All the parties,

including Leo, have agreed to limit our comments. We prefer to respect that

legally binding agreement."

In the clubby little cable industry, it rarely comes to this.

Certainly, Mr. Rattner, Mr. Hindery and Mr. Hostetter have been doing deals

together for 15 years.

But these are high-profile dealmakers in tough economic times. In

this milieu, china doesn't just crack, it shatters. And so it seems it has

here.

The

finance deal for the YES network dates to May, when Goldman Sachs media

banker Joe Ravitch began discussions with Mr. Levine. The Yankees had finally

cut the cord with their 12-year partner, Cablevision's MSG network.They needed

a new partner.

From the start, Goldman had a C.E.O. in mind: Leo Hindery.

Goldman bankers had worked closely with Mr. Hindery at his various stops as a

top executive at TCI, AT&T Broadband and, most recently, Global Crossing.

Mr. Hindery had become famous in selling John Malone's TCI to AT&T for $70

billion. He was a dealmaker to the bone and, Mr. Ravitch said, always made

money for his shareholders. Besides, he was the perfect Steinbrenner guy:

brassy, in his office by 5 a.m., a world-class race-car driver.

In early June, in a suite at the Regency Hotel, Mr. Ravitch

introduced Mr. Hindery to Mr. Steinbrenner. Sharing Catholic-school upbringings

and baseball buddies, they hit it off. Goldman bankers felt sure they had a

deal.

Numbers were crunched, and the network was valued at $800

million. Goldman was set to invest $300 million for a 40 percent minority stake

through a series of its private equity funds.

But as Mr. Ravitch was working his end, New Jersey Net co-owner

and YankeeNet board member Ray Chambers had entered into discussions with Mr.

Rattner and Quadrangle.

For Mr. Rattner and his three partners-Mr. Ezersky, Joshua

Steiner and David Tanner-the timing was perfect. They would be closing their

first billion-dollar fund in July. High-profile investors included Mike Ovitz,

Harvey Weinstein (who is in talks with the Yankees about joining the YES

board), and cable titans Amos Hostetter and Comcast chief executive Brian

Roberts (both advisory board members). The YES investment would be their

biggest to date, at $150 million, but the potential, they thought, was infinite.

In mid-June, the YankeeNet board was convened at its offices in

Rockefeller Center. James Murdoch, son of Rupert, was there, as well as Mr.

Steinbrenner, Mr. Chambers, and Mr. Chambers' partner and co-owner of the Nets,

Lewis Katz. Goldman Sachs and Mr. Ravitch made their case, highlighting Mr.

Hindery's role as C.E.O. Only he, they contended, could cut a deal with

Cablevision's Chuck Dolan to put the network on basic cable service, a key to

its success.

Mr. Rattner and Mr. Ezersky then spoke. Mr. Rattner's cable guy

was Mr. Hostetter, who was conferenced in from his Boston offices. An

influential AT&T board member, he is the founder of Continental

Cablevision, an original cable franchise, and widely recognized as one of the

cable industry's visionaries. 

At the outset, it became clear that they were not in favor of Mr.

Hindery, people at the meeting said. Quadrangle partners were well aware of Mr.

Hindery's volatile history at AT&T and Global Crossing-both high-profile

jobs with short tenures and a trail of less-than-fond memories. They also saw

the $800 million network as too small for Mr. Hindery's appetites. Their plan

was to close the deal first, make Mr. Hostetter chairman and then find a C.E.O.

The board, impressed with both presentations, pitched another

idea to Mr. Rattner and Mr. Ravitch: We like you both; figure out how to split

the deal.

Immediately, Mr. Hindery's salary came up. YankeeNet chairman

Harvey Schiller got $2 million; Mr. Hindery wanted $500,000, plus $250,000 for

his expenses and his private plane, according to YankeeNet officials. (Mr.

Rattner contends that Mr. Hindery initially offered to decline a salary, which

Mr. Hindery denies.) In addition, he wanted a large administrative staff, some

with salaries of $400,000.

Mr. Rattner and his team blanched. While a $500,000 salary is not

beyond the pale for a TV executive, especially a cable bigwig of Mr. Hindery's

stature, the network was, in Quadrangle's eyes, a start-up, in one of the worst

advertising climates in a decade.

Then there was the fee to be paid to YankeeNets for broadcast

rights, which Quadrangle partners say was increased from the initial amount.

YankeeNet officials say the Yankees fee was always $52 million, while the fee

for the Nets has yet to be decided. But, when added to administrative costs of

some $40 million, it meant $100 million in costs from opening day in March-and

this before even reaching an agreement with the cable companies over carriage,

or meeting with any advertisers.

Tempers flared. Did Mr.

Hindery really need a plane to fly to the Bronx, Quadrangle partners queried?

Mr. Hindery is a world-class executive, Goldman bankers countered.

"Leo is a rock star," said Mr. Ravitch. "This is what you do when

you hire a guy of this caliber."

On several occasions, Quadrangle came close to pulling out. By

then, it had gotten personal. Goldman bankers, meanwhile, attached a provision

that would prevent Quadrangle from firing Mr. Hindery.

But that wasn't the final straw. In mid-August, Mr. Rattner and

his team were told that Mr. Hindery, who already had reduced his stake from $35

million to $15 million for personal financial reasons, had secretly sold off $5

million of it to prospective board member Bill Bresnan. Mr. Hindery denies that

he attempted to sell any such stake. Both sides, especially his Goldman

backers, weren't happy about Mr. Hindery's first downsizing. For him to offload

the rest would be a deal breaker.

"Did we like the fact that Leo went from 35 to 15? No," said Mr.

Ravitch. In the end, however, Goldmans saw the $15 million as "a significant

amount. Our interests are aligned."

His $15 million stake would ensure, bankers hoped, that Mr.

Hindery would fulfill his three-year contract. Nevertheless, Quadrangle bankers

became more wary of Mr. Hindery's commitment.

At one point, the talks became so nasty that Mr. Hindery came

close to walking away, Mr. Hindery confirms. As he saw it, the Quandrangle

partners seemed to be pushing him to do it-a charge they deny. First they made

Mr. Hostetter chairman; then they attacked his salary, expenses and staff. They

were, in effect, saying they didn't trust him.

"It had just become needlessly petty, which was unfortunate,"

said Mr. Hindery.

Last on Quadrangle's complaint list was the YankeeNet insistence

on having Bill Bresnan as the sole independent board director. Mr. Bresnan is a

longtime cable investor and an old friend of Mr. Steinbrenner and Mr. Hindery.

In mid-September, Mr. Rattner and partners also learned that Mr. Bresnan-who is

also a Quadrangle investor-was the father-in-law of Yankee general manager

Brian Cashman.

On Sunday night, Sept. 16, with the deal set to close on Tuesday,

Mr. Rattner called Mr. Levine: Taken with everything else, especially Mr.

Hindery's attempt to lessen his stake, the Bresnan-Cashman link had tipped the

scale. Quadrangle would have to pull out.

Mr. Steinbrenner, the most forceful advocate for Mr. Bresnan, was

reported to be livid. A believer in the power of institutions, he had always

favored Goldman Sachs as sole investor. But he'd agreed to Quadrangle to

appease his new partner, Mr. Chambers.

He knew little about them. Indeed, after an early meeting,

according to one source close to the deal, Mr. Steinbrenner had commented,

"They're nice guys, but as far as I can see, they're just four kids with a lot

of money sitting in an office at Rockefeller Center. I don't know what they can

do for me."

A Quadrangle spokesman noted that the firm's principals have

nearly 60 years of Wall Street, media and communications experience.

Mr. Steinbrenner did not respond to calls for comment.

Neither Mr. Steinbrenner nor Mr. Hindery would budge on Mr.

Bresnan. In their eyes, the Quadrangle partners were looking for an excuse to

get out of the deal.

"It's not as if we parachuted his name in. There were 100 drafts

where he was named as the independent director," said Mr. Hindery.

He added: "Bill Bresnan is my

partner and my friend; I've known him for 15 years. He is Brian Cashman's

father-in-law through four grandchildren; I mean, come on."

Mr. Rattner said, "Bill Bresnan is a wonderful man and would be a

terrific director of any company."

On Monday, Sept.  17, Mr.

Rattner faxed his investors, who had already sent in funds, informing them that

Quadrangle was out.

For YankeeNet officials, it was a relief.

"From Day 1, Quadrangle felt uncomfortable that they were not the

dominant partner," said one. "It was clear, too, that they didn't want Leo

Hindery to be C.E.O. They thought they could surround Leo, and you can't run a

company that way. At the end of the day, no one lost any sleep over it."

The Goldman bankers, meanwhile, say their enthusiasm is as great

as ever.

"Remember, all this was right after the World Trade Center

attacks," said Mr. Ravitch. "For us to double the size of our investment when

we couldn't get to our offices was a sign of how much we love the deal."

As for Mr. Rattner and Quadrangle, the bottom line seems clear:

Without greater control, the deal truly wasn't worthwhile.

Mr. Hindery, meanwhile, is ready to get going. With an office

full of executives working on programming and ad-related issues, he now has to

clear that all-important hurdle: getting Time Warner and Cablevision executives

to add the YES network to their basic cable package-the source of viewers and

ad dollars.

Meanwhile, by opening day

2002, he has to pony up about $28 million to Mr. Steinbrenner, as YES's right's

fee. That's some 180 days away.