The Moneychangers (38 page)

"I don't know it," Roscoe Heyward said, "and I say your interpretation is biased and in error."

By now it was obvious this had become an extraordinary occasion. Board meetings normally were either rubber-stamp affairs or, in event of mild disagreement, directors exchanged polite. gentlemanly comments. Angry, acerbic ar
gument was virtually unknown.

For the first tim
e Leonard L. Kingswood spoke h
is voice was conciliatory. "Alex, I'll admit there's some substance t
o what you say, but the fact is
what's being suggested here is done all the time between big
banks and large corporations."

Intervention by the Northam Steel chairman was significant. At last December's board meeting Kingswood had been a leader in urging Alex's appointment as chief executive officer of FMA. Now he went on, "Frankly, if there's anything to be guilty of with that kind of financing, my own company has been guilty of it too."

Regretfully, knowing it was costing him a friend, Alex shook his head. "I'm sorry, Len. I still don't believe that it's right, any more than I think we should leave ourselves open to a conflict-of-interest charge by Roscoe going on the Supranational board."

Leonard Kingswood's mouth tightened. He said nothing more.

But Philip Johannsen did. He told Alex sourly, "If, after that last remark, you expect us to believe there is nothing personal here, you're crazy." Roscoe Heyward tried, but failed, to conceal a smile.

Alex's face was set grimly. He wondered if this was the last FMA board meeting he would attend, though whether it was or wasn't he would complete what he had begun. Ignoring Johannsen's remark, he declared, "As bankers we just don't learn. From all sides Congress, consumers, our own customers, the press we're accused of perpetuating conflict of interest through interlocking directorates. If we're honest with ourselves, most accusations are on target. Everyone here knows how the big oil companies liaise with each other by working closely on bank boards, and that's only one example. Yet we continue and continue wi
th this same kind of in
breeding: You be on my board, I'll be on yours. When Roscoe is a director of Supranational, whose interests will be put first? Supranational's? Or First Mercantile American's? And on our board here will he favor SuNatCo over other companies because of his directorship over there? The shareholders
of both companies are entitled to answers to those questions; so are legislators and the public. What's more, if we don't provide some convincing answers soon, if we don't cease be
ing as high-handed as we are, all
of banking will be faced with tough, restrictive laws. And we'll deserve them."

"If you followed through logically on all that," Forrest Richardson objected, "half the members of this board could be accused of conflict of interest."

"Precisely. And the time is dose when the bank will have to face that situation and amend it."

Richardson growled, "There may be other opinions on that score." His own meat-packing company, as they all knew, was a large borrower from FMA and Forrest Richardson had participated in board meetings where loans to his company were approved.

Disregarding the growing hostility, Alex plowed on. "Other aspects of the Supranational loan disturb me equally. To make the money available we're to cut back mortgage lending and small loans. In these two areas alone the bank will be defective in its public service."

Jerome Patterton said huffily, "It's been dearly stated that those cutbacks are temporary."

"Yes," Alex acknowledged. "Except no one will say just how temporary, or what happens to the business and goodwill the bank will lose while the ban is on. And then there's the third area of cutback which we haven't touched on yet municipal bonds." Opening his file folder, he consulted a second sheet of notes. "In the next six weeks, eleven issues of county and school district bonds within the state will be up for bid. If our bank fails to participate, at least half those bonds are certain to remain unsold." Alex's voice sharpened. "Is it the board's intention to dispense
, so quickly after Ben Rosselli’
s death, with a tradition spanning three Rosselli generations?"

For the first time since the meeting began directors exchanged uneasy glances. A policy established long ago by the bank's founder, Giovanni Rosselli, had First Mercantile American Bank taking the lead in underwriting and
selling bond issues of small municipalities in the state. Without such aid from the state's largest bank, such bond issues never large, important, or well known might go unmarketed, leaving financial needs of their communities unmet. The tradition had been faithfully adhered to by Giovanni's son, Lorenzo, and grandson Ben. The business was not especially profitable, though neither did it represent a loss. But it was a significant public service and also returned to small communities some of the money their own citizenry deposited in FMA.

"Jerome," Leonard Kingswood suggested, "maybe you should take another look at that situation." There were murmurs of assent.

Roscoe Heyward made a swift assessment. "Jerome… if I may." The bank president nodded.

"In view of what seems a sentiment of the board," Heyward offered smoothly, "I'm certain we can make a fresh appraisal and perhaps restore a portion of municipal bond funding without impeding any of the Supranational arrangements. May I suggest that the board, having made its feelings clear, leaves details to the discretion of Jerome and myself." Notably, he did not include Alex. Nods and voices signified agreement.

Alex objected, "That's not a full commitment, nor does it do anything to restore home mortgages and small loans." The other board members were pointedly silent.

"I believe we've heard all viewpoints," Jerome Patterton suggested. "Perhaps we can now vote on the proposal as a whole." "No," Alex said, "there's still one other matter."

Patterton and Heyward exchanged glances of half
-
amused resignation.

"I've already pointed to a conflict of interest," Alex stated somberly. "Now I warn the board of an even larger one. Since negotiation of the Supranational loan, and up to yesterday afternoon, our own trust department has bought" he consulted his notes "one hundred and twenty-three thousand Supranational shares. In that time, and almost certainly because of the substantial buying with
our trust clients' money, the SuNatCo share price has risen seven and a half points which I'm sure was intended and agreed to as a condition…"

He was drowned out by protesting voices Roscoe Heyward's, Jerome Patterton's, and those of other direct tors.

Heyward was on his feet again, eyes blazing. "That's a deliberate distortion!" Alex slammed back, 'The purchasing is no distortion."

"But your interpretation is. SuNatCo is an excellent investment for our trust accounts." "What makes it suddenly so good?"

Patterton protested heatedly, "Alex, specific transactions of the trust department are not a matter for discussion here." Philip Johannsen snapped, "I agree with that."

Harold Austin and several oth
ers called out loudly, "So do I!
"

"Whether they are or aren't," Alex persisted, "I warn you all that what is happening may be in contravention of the Glass-Steagall Act of 1933, and that directors can be held responsible…"

A half dozen more voices erupted angrily at once. Alex knew he had touched a sensitive nerve. While board members were undoubtedly aware that the kind of duplicity he had described went on, they preferred not to know of it specifically. Knowledge implied involvement and responsibility. They wanted neither.

Well, Alex thought, like it or not, they knew now. Above the other voices he continued firmly, "I advise the board that if it ratifies the Supranational loan wit
h all its ramifi
cations, we'll regret it." He
leaned back in his chair. 'That’
s all."

As Jerome Patterton pounded with his gavel, the hubbub quietened.

Patterton, paler than before, announced, "If there is no further discussion we will record a vote."

Moments later the Supranational proposals were approved, with Alex Vandervoort the sole dissenter.

12

A coolness toward Vandenoort was evident when the directom resumed their meeting after lunch. Normally a two-hour morning session disposed of all board business. Today, however, extra time had been allotted.

Aware of the board's antagonism, Alex had suggested to Jerome Patterton during lunch that his presentation be deferred until next month's meeting. But Patterton told him curtly, "Nothing doing. If the
directors are in a surly mood,
you made them that way and you can damn well take your chances."

It was an extraordinarily strong statement for the mild
-
mannered Patterton, but illustrated the tide of- disfavor now running against Alex. It also convinced him that the next hour or so would be an exercise in futility. His proposals seemed certain to be rejected out of perversity, if for no other reason.

As directors settled down, Philip Johannsen set the mood by pointedly consulting his watch. "I've already had to cancel one appointment this afternoon," the MidContinent Rubber chief grumbled, "and I've other things to do, so let's keep it short." Several others nodded agreement.

"I'll be as brief as possible, gentlemen," Alex promised vLen Jerome Patterton had introduced him formally. "My intention is to make four points." He ticked them off on his fingers as he spoke.

"One, our bank is losing important, profitable business by failing to make the most of opportunities for savings growth. Two, an expansion of savings deposits will improve the bank's stability. Third, the longer we delay, the harder it will be to catch up with our many competitors. Fourth, there is scope for leadership which we and other banks should exercise in a return to habits of personal, corporate, and national thrift, neglected far too long."

He described methods by which First Mercantile American could gain an edge over competitors a higher savings interest rate, to the top legal limit; more attractive terms for one-to-five-year certificates of deposit; checking facilities for savings depositors as far as banking law allowed; gifts for those opening new accounts; a massive advertising campaign embodying the savings program and the nine new branches.

For his presentation Alex had left his usual seat to stand at the head of the boardroom table. Patterton had moved his own chair to one side. Alex had brought in, also, the bank's chief economist, Tom Straughan, who had prepared charts displayed on easels for the board to view.

Roscoe Heyward had eased forward in his seat and was listening, his face expressionless.

As Alex paused, Floyd LeBerre interjected, "I have one observation right away."

Patterton, his habit of politeness back in place, inquired~ "Do you want to take questions as we go, Alex, or leave them to the end?" "I'll take Floyd's now."

"This isn't a question," the General Cable chairman said unsmilingly. "It's a matter of record. I'm against a major savings expansion because if we do it we'll be ripping our own gut. Right now we've big deposits from correspondent banks…"

"Eighteen million dollars from the savings and loan institutions," Alex said. He had expected LeBerre's objection, and it was valid. Few banks existed alone; most had financial ties with others and First Mercantile American was no exception. Several local savings and loan institutions maintained large deposits with FMA and fear that these sums would be withdrawn had deterred other proposed savings activity in the past. Alex stated, "
I've taken that into account.

LeBerre was unsatisfied. "Have you taken into account that if we compete intensively with our own customers we'll lose every bit of that business?"

"Some of it. I don't believe all.
In any case, new business we’ll
generate should far exceed what's lost." "So you say." Alex insisted, "I see it as an acceptable risk."

Leonard Kingswood said quietly, "You were against any risk with Supranational, Alex."

"I'm not against risks. This is a far smaller risk. The two have no relation." Faces around the table mirrored skepticism. LeBerre said, "I'd like to hear Roscoe's view." Two others echoed, "Yes, let's hear Roscoe."

Heads turned to Heyward who had been studying his folded hands. He said blandly, "One doesn't like to torpedo a colleague."

"Why not?" someone asked. "It's what he tried to do to you."

Heyward smiled faintly. "I prefer to rise above that." His face went serious. "I do, however, agree with Floyd. Intensive savings activ
ity on our part would lose us im
portent correspondent business. I do not believe any theoretical potential gain is worth it." He pointed to one of Straughan's charts indicating the geography of proposed new branches. "Board members win observe that five of the suggested branches would be in locations close to savings and loan associations
who are large depositors with F
MA. We can be sure that that win not escape their attention either."

"Those locations," Alex said, "have been carefully chosen as a result of population studies. They're where the people are. Sure the S&Ls got there first; in many ways they've
been more farsighted than ~bank
s like ours. But it doesn't mean we should stay away forever."