The Moneychangers

by Arthur Hailey

  “Well, as a banker I profoundly disagree. The search for profit is not shortsighted. And, where this bank or any other is concerned, the social value of profitability is high.

  “Let me enlarge on that.

  “All banks measure profit in terms of earnings per share. Such earnings—which are a matter of public record—are widely studied by shareholders, depositors, investors, and the business community nationally and internationally. A rise or fall in bank earnings is taken as a sign of strength or weakness.

  “While earnings are strong, confidence in banking continues high. But let a few big banks show decreased earnings per share and what would happen? General disquiet, increasing swiftly to alarm—a situation in which depositors would withdraw funds and shareholders then investments, so that bank stocks tumbled with the banks themselves imperiled. In short, a public crisis of the gravest kind.”

  Roscoe Heyward removed his glasses and polished them with a white linen handkerchief.

  “Let no one say: this cannot happen. It happened before in the depression which began in 1929, though today, with banks larger by far, the effect would be cataclysmic by comparison.

  “This is why a bank like ours must remain vigilant in its duty to make money for itself and its shareholders.”

  Again there were murmurings of approval around the boardroom. Heyward turned another page of his text.

  “How, as a bank, do we achieve maximum profit? I will tell you first how we do not achieve it.

  “We do not achieve it by becoming involved with projects which, while admirable in intent, are either financially unsound or tie up bank funds at low rates of yield for many years. I refer, of course, to funding of low-income housing. We should not, in any case, place more than a minimal portion of bank funds in housing mortgages of any land, which are notorious for their low return of profit.

  “Another way not to achieve profitability is by making concessions and lowering lending standards as, for example, with so-called minority business loans. This is an area nowadays where banks are subjected to enormous pressures and we should resist them, not with racial motives but with business shrewdness. By all means let us make minority loans when possible, but let terms and standards be as strict as those for any other borrower.

  “Nor, as a bank should we concern ourselves unduly with vague matters of environment. It is not our business to pass judgment on the way our customers conduct their business vis-à-vis ecology; all we ask is that they be in good financial health.

  “In short, we do not achieve profitability by becoming our brother’s keeper—or his judge or jailer.

  “Oh, at times we may support these public objectives with our voice—low-cost housing, civic rehabilitation, improvement of environment, energy, conservation, and other issues which arise. After all, this bank has influence and prestige which we can lend without financial loss. We can even allocate token amounts of money, and we have a public relations department to make our contributions known—even,” he chuckled, “to exaggerate them on occasions. But for real profitability we should direct our major thrust elsewhere.”

  Alex Vandervoort thought: Whatever criticism might be leveled at Heyward, no one could complain later that he had failed to make his viewpoints clear. In a way his statement was an honest declaration. Yet it was also shrewdly, even cynically, calculated.

  Many leaders in business and finance—including a good proportion of the directors in the room—chafed at restrictions on their freedom to make money. They resented, too, the need to be circumspect in public utterances lest they draw fire from consumer groups or other business critics. Thus it was a relief to hear their inner convictions spoken aloud and unequivocally.

  Clearly, Roscoe Heyward had considered this. He had also, Alex was certain, counted heads around the boardroom table, calculating who would vote which way, before committing himself.

  But Alex had made his own calculations. He still believed a middle group of directors existed, sufficiently strong to swing this meeting from Heyward toward himself. But they would have to be persuaded.

  “Specifically,” Heyward declared, “this bank should depend, as it has traditionally, on its business with American industry. By that I mean the type of industry with a proven record of high profits which will, in turn, enhance our own.

  “Expressed another way, I am convinced that First Mercantile American Bank has, at present, an insufficient proportion of its funds available for large loans to industry, and we should embark immediately on a program of increasing such lending …”

  It was a familiar script which Roscoe Heyward, Alex Vandervoort, and Ben Rosselli had debated often in the past. The arguments which Heyward now advanced were not new, though he presented them convincingly, using figures and charts. Alex sensed the directors were impressed.

  Heyward talked for another thirty minutes on his theme of expanded industrial lending against a contraction in community commitments. He ended with—as he put it—”an appeal to reason.”

  “What is needed most today in banking is pragmatic leadership. The kind of leadership which will not be swayed by emotion or pressured into ‘soft’ uses of money because of public clamor. As bankers, we must insist on saying ‘no’ when our fiscal view is negative, ‘yes’ when we foresee a profit. We must never buy easy popularity at stockholders’ expense. Instead we should lend our own and our depositors’ money solely on the basis of the best return and if, as a result of such policies, we are described as ‘hard-nosed bankers,’ so be it. I am one who will be glad to be counted among that number.”

  Heyward sat down amid applause.

  “Mr. Chairman!” The steelman, Leonard Kingswood, leaned forward with a hand raised. “I’ve several questions and some disagreement.”

  From lower down the table the Honorable Harold Austin riposted, “For the record, Mr. Chairman, I have no questions and total agreement with everything presented so far.”

  Laughter erupted and a fresh voice—that of Philip Johannsen, president of MidContinent Rubber—added, “I’m with you, Harold. I agree it’s time we took a harder line.” Someone else injected, “Me, too.”

  “Gentlemen, gentlemen.” Jerome Patterton rapped lightly with his gavel. “Only part of our business is concluded. I’ll allow time for questions later; as for disagreement, I suggest we save that until our discussion when Roscoe and Alex have withdrawn. First, though, let’s hear Alex.”

  “Most of you know me well, as a man and as a banker,” Alex began. He stood at the boardroom table casually, shoulders slightly hunched as usual, leaning forward momentarily to catch sight of those directors on his right and left as well as others facing him. He let his tone stay conversational.

  “You also know, or should, that as a banker I am tough—hard-nosed, if anyone prefers that word. Proof of this exists in financing I’ve conducted for FMA, all of it profitable, none involving loss. Obviously in banking like any other business, when you deal from profitability you deal from strength. That applies to people in banking, too.

  “I’m glad, though, that Roscoe brought up this subject because it gives me an opportunity to declare my own belief in profitability. Ditto for freedom, democracy, love, and motherhood.”

  Someone chuckled. Alex responded with an easy smile. He pushed the chair behind him farther back to give himself a few paces of free movement.

  “Something else about our profitability here at FMA is that it should be drastically improved. More about that later.

  “For the moment I’d like to stay with beliefs.

  “A belief of my own is that civilization in this decade is changing more meaningfully and quickly than at any other time since the Industrial Revolution. What we are seeing and sharing is a social revolution of conscience and behavior.

  “A few don’t like this revolution; personally I do. But like it or not, it’s here; it exists; it will not reverse itself or go away.

  ‘For the driving force behind what’s happening is the determination of a
majority of people to improve the quality of life, to stop spoliation of our environment and to preserve what’s left of resources of all kinds. Because of this, new standards are being demanded of industry and business so that the name of the game is ‘corporate social responsibility.’ What’s more, higher standards of responsibility are being achieved and without significant loss of profits.”

  Alex moved restlessly in the limited space behind the boardroom table. He wondered if he should meet another of Heyward’s challenges head on, then decided, yes.

  “In the matter of responsibility and involvement, Roscoe introduced the subject of his church. He told us that those who have—as he puts it—’regained control’ are opting out and favoring a policy of non-involvement. Well, in my opinion, Roscoe and his churchmen are marching resolutely backwards. Their attitude is neither good for Christianity nor banking.”

  Heyward shot up straight. He protested, “That’s unpleasantly personal and a misinterpretation.”

  Alex said calmly, “I don’t believe it’s either.”

  Harold Austin rapped sharply with his knuckles. “Mr. Chairman, I object to Alex’s descent to personalities.”

  “Roscoe dragged in his church,” Alex argued. “I’m simply commenting.”

  “Maybe you’d better not.” The voice of Philip Johannsen cut sharply, unpleasantly, across the table. “Otherwise we might judge the two of you by the company you keep, which would put Roscoe and his church way out ahead.”

  Alex flushed. “May I ask exactly what that means?”

  Johannsen shrugged. “The way I hear it, your closest lady friend, in your wife’s absence, is a left-wing activist. Maybe that’s why you like involvement.”

  Jerome Patterton pounded with his gavel, this time forcefully. “That’s sufficient, gentlemen. The Chair instructs there will be no more references of this kind, either way.”

  Johannsen was smiling. Despite the ruling, he had made his point.

  Alex Vandervoort, seething, considered a firm statement that his private life was his own affair, then he rejected the idea. Some other time it might be necessary. Not now. He realized he had made a bad mistake by returning to Heyward’s church analogy.

  “I’d like to get back,” he said, “to my original contention: How, as bankers, can we afford to ignore this changing scene? To attempt to do so is like standing in a gale, pretending the wind does not exist.

  “On pragmatic, financial grounds alone we cannot opt out. As those around this table know from personal experience, business success is never achieved by ignoring change, but by anticipating and adapting to it. Thus, as custodians of money, sensitive to the changing climates of investment, we shall profit most by listening, heeding, and adapting now.”

  He sensed that, apart from his lapse of judgment moments earlier, his opening gambit, with its practical emphasis, had captured attention. Almost every outside board member had had experience with legislation affecting pollution control, consumer protection, truth in advertising, minority hiring, or equal rights for women. Often, such laws were enacted over angry opposition from companies which these bank directors headed. But once the laws were passed, the same companies learned to live with new standards and proudly touted their contributions to the public weal. Some, like Leonard Kingswood, concluded that corporate responsibility was good for business and espoused it strongly.

  “There are fourteen thousand banks in the United States,” Alex reminded the FMA directors, “with enormous fiscal power in extending loans. Surely, when the loans are to industry and business, that power should involve responsibility on our part, too! Surely among criteria for lending should be the standards of public conduct of our borrowers! If a factory is to be financed, will it pollute? When a new product is to be developed, is it safe? How truthful is a company’s advertising? As between companies A and B, to one of which we have funds to lend, which has the better record of non-discrimination?”

  He leaned forward, glancing around the elliptical table to meet, in turn, the eyes of each board member.

  “It is true these questions are not always asked, or acted on, at present. But they are beginning to be asked by major banks as matters of sound business—an example which FMA will be wise to emulate. For just as leadership in any enterprise can produce strong dividends, so leadership in banking will prove rewarding, too.

  “Equally important: It is better to do this freely now than have it forced on us by regulation later.”

  Alex paused, took a pace from the table, then swung back. Now he asked, “In which other areas should this bank accept corporate responsibility?

  “I believe, with Ben Rosselli, that we should share in improving the life of this city and state. An immediate means is through financing of low-rental housing, a commitment this board has already accepted with the early stages of Forum East. As time goes on I believe our contribution should be greater.”

  He glanced toward Roscoe Heyward. “Of course, I realize that housing mortgages are not a notably high profit area. Yet there are ways to achieve that involvement with excellent profits, too.”

  One means, he told the listening directors, was through a determined, large-scale expansion of the bank’s savings department.

  “Traditionally, funds for home mortgages are channeled from savings deposits because mortgages are long-term investments while savings are similarly stable and long-term. The profitability we shall gain by volume—far greater than our savings volume now. Thus we will attain a threefold objective—profit, fiscal stability, and a major social contribution.

  “Only a few years ago large commercial banks like ourselves spurned consumer business, including small savings, as being unimportant. Then, while we dozed, savings and loan associations astutely seized the opportunity we ignored and forged ahead of us, so now they are a main competitor. But still, in personal savings, gigantic opportunities remain. It’s likely that, within a decade, consumer business will exceed commercial deposits everywhere and thus become the most important money force existing.”

  Savings, Alex argued, was only one of several areas where FMA interests could be dramatically advanced.

  Still moving restlessly as he spoke, he ranged through other bank departments, describing changes he proposed. Most had been in a report, prepared by Alex Vandervoort at Ben’s request a few weeks before the bank president’s announcement of his impending death. In the pressure of events it had remained, so far as Alex knew, unread.

  One recommendation was to open nine new branches in suburban areas through the state. Another was for a drastic overhaul of FMA organization. Alex proposed to hire a specialist consulting firm to advise on needed changes and he advised the board, “Our efficiency is lower than it should be. The machinery is creaking.”

  Near the end he returned to his original theme. “Our banking relationship with industry should, of course, continue to be close. Industrial loans and commercial business will remain pillars of our activity. But not the only pillars. Nor should they be overwhelmingly the largest. Nor should we be so preoccupied with bigness that the importance of small accounts, including those of individuals, becomes diminished in our minds.

  “The founder of this bank established it to serve those of modest means to whom other banking facilities were denied. Inevitably, the bank’s purpose and operations have broadened across a century, yet neither the founder’s son nor grandson ever lost sight of those origins or ignored the precept that smallness multiplied can represent the greatest strength of all.

  “A massive and immediate growth in small savings, which I urge the board to set as an objective, will honor those origins, enhance our fiscal strength and—in the climate of the times—advance the public good, which is our own.”

  As they had for Heyward, board members applauded as Alex sat down. Some of the applause was merely polite, Alex realized; perhaps half of the directors seemed more enthusiastic. He guessed that the choice between Heyward and himself could still go either way.

&nbs
p; “Thank you, Alex.” Jerome Patterton glanced around the table. “Questions, gentlemen?”

  The questioning occupied another half hour, after which Roscoe Heyward and Alex Vandervoort left the boardroom together. Each returned to his office to await the board’s decision.

  The directors debated through the remainder of the morning but failed to reach agreement. They then adjourned to a private dining room for lunch, their discussion continuing over the meal. The outcome of the meeting was still inconclusive when a dining-room steward quietly approached Jerome Patterton, carrying a small silver tray. On it was a single sheet of paper, folded.

  The vice-chairman accepted the paper, unfolded and read it. After a pause he rose to his feet and waited while conversation around the luncheon table quietened.

  “Gentlemen.” Patterton’s voice quavered. “I grieve to inform you that our beloved president, Ben Rosselli, died a few minutes ago.”

  Soon after, by mutual consent and without further discussion, the board meeting was abandoned.

  16

  The death of Ben Rosselli attracted international press coverage and some news writers, reaching for the nearest cliché, labeled it “an era’s end.”

  Whether it was, or wasn’t, his departure signaled that the last major American bank to be identified with a single entrepreneur had moved into mid-twentieth century conformation, with committee and hired management control. As to who would head the hired management, that decision had been postponed until after the Rosselli funeral when the bank’s board of directors would convene again.

  The funeral took place on Wednesday in the second week of December.

  Both the funeral and a lying-in-state which preceded it were garnished with the full rites and panoply of the Catholic Church, suitable to a papal knight and large cash benefactor which Ben Rosselli was.