The Nation: How Bankers View Bert

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Most condemn him, but they fear reform more

For weeks the American Bankers Association in Washington has been swamped with irate letters and phone calls from members. Their gripe: Bert Lance's flamboyant ways have given the business a black eye, and could subject it to far more intense Government scrutiny than now exists. Said ABA Spokesman Edward Smith: "The practices Lance is supposed to have followed cannot be considered normal or widespread. They just aren't tolerated in most banks."

Nonetheless, when officials at one of New York City's biggest banks tried to write an internal memo explaining to their employees exactly what Lance had done and why it was wrong, they finally gave up. Reason: they could not decide, on the basis of the facts available, whether many of Lance's freewheeling practices should be regarded as illegal, unethical, stupid—or none of these.

This murky area of what is proper and improper is at the heart of the banking industry's worries about the Lance affair. As Comptroller of the Currency John Heimann declared in his report last month, the OMB director's finances raised "unresolved questions as to what constitutes acceptable banking practice." Bankers fear that congressional reformers will seize on the nationwide hue and cry over Lance to resolve those questions by further tightening of federal banking laws.

Last week Democratic Representative Fernand St Germain, chairman of a House banking subcommittee, sounded a battle cry for the reformers as he opened hearings on bank law enforcement, including the Lance case. St Germain called for "a serious and vigorous effort to improve the nation's banking codes," particularly in such back-scratching areas as "insider lending, tie-ins among banking institutions and the ease with which changes in bank control are financed." Said he: "The evidence I have seen to date leads me to believe that Bert Lance, his family and friends regarded the Calhoun First National Bank as their playpen—to be used as they pleased." Another hearing on bank regulation starts this week before the Senate Banking Committee, chaired by Wisconsin Democrat William Proxmire.

Bankers are worried that the hearings will lead to more red tape in a business that they feel already has too much of it. The nation's nearly 14,700 commercial banks and their 250,000 employees are overseen by state or federal agencies—the Comptroller of the Currency, the Federal Reserve Board and the Federal Deposit Insurance Corporation—which over the years have issued hundreds of regulations. Complained an official of the Federal Reserve: "We've got so many goddam rules now, there aren't enough hours in the day to keep them alphabetized, much less working." The regulations tightly limit the way in which banks can do business—for instance, by setting a 5% ceiling on the savings-account interest that they can pay and prohibiting them from refusing loans because of a prospective borrower's race, color or sex. Other provisions govern bankers' personal business affairs. An example: they must share details of large debts with their banks' directors.