Around the table there was a restless stirring and exclamations of annoyed surprise. Faces which had turned toward Alex betrayed a lack of friendliness.
Jerome Patterton advised curtly, 'You'd better lay the whole thing out.'
'Yes, I will.' Alex reached into the file folder he had brought and extracted a single page of notes..~
'To begin with, I object to the extent of the commitment to a single account. And not only is it an ill-advised concentration of risk, in my opinion it is fraudulent under Section 23A of the Federal Reserve Act.'
Roscoe Heyward leaped to his feet. 'I object to that word 'fraudulent.'' 'Objecting doesn't change the truth,' Alex said calmly.
'It is not the truth! We have made plain that the full commitment is not to Supranational Corporation itself, but to its subsidiaries. They are Hepplewhite Distillers, Greenpastures Land, Atlas Jet Leasing, Caribbean Finance, and International Bakeries.' Heyward snatched up a blue folder. 'The allocations are spelled out specifically in here.'
'All those companies are controlled subsidiaries of Supranational.'
'But also long-established, viable companies in their own right.'
'Then why, today and all other times, have we been speaking solely of Supranational?' 'For simplicity and convenience.' Heyward glowered.
'You know as well as I do,' Alex insisted, 'that once the bank's money is in any of those subsidiaries, G. G. Quartermain can, and will, move it around any way he chooses.'
'Now hold everything!' The interruption came from Harold Austin who had leaned forward, slapping a hand on the table for attention. 'Big George Quartermain is a good friend of mine. I won't sit quietly hearing an accusation of bad faith.'
'There was no accusation of bad faith,' Alex responded. 'What I'm talking about is a fact of conglomerate life. Large sums of money are transferred frequently between Supranational subsidiaries; their balance sheets show it. And what that confirms is we'll be lending to a single entity.'
'Well,' Austin said; he turned from Alex, addressing other members of the board, 'I'll simply repeat that I know Quartermain well, and Supranational too. As most of you here are aware, I was responsible for the Bahamas meeting between Roscoe and Big George where this line of credit was arranged. In view of everything, I say it's an exceptionally good deal for the bank.'
There was a momentary silence which Philip Johannsen broke.
'Could it be, Alex,' the MidContinent Rubber president inquired, 'that you're just a little sore because Roscoe, and not you, was invited to that Bahamas golf game?'
'No. The point I'm making has nothing to do with personalities. '
Someone else said skeptically, 'It sure doesn't look that ways,
'Gentlemen, gentlemen!' Jerome Patterton rapped sharply with his gavel.
Alex had expected something of this kind. Keeping his cool, he persisted, 'I repeat, the loan is too big a commitment to one borrower. Furthermore, pretending it isn't to a single borrower is an artful attempt to circumvent the law, and, all of us in this room know it.' He threw a challenging glance around the table.
'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 argument was virtually unknown.
For the first time Leonard L. Kingswood spoke his voice was conciliatory. 'Alex, I'll admit there's some substance to 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 with this same kind of inbreeding: 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 being 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.'
