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 others 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 with all its ramifications, 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 activity on our part would lose us importent 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 FMA. 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 ~banks like ours. But it doesn't mean we should stay away forever.'
Heyward shrugged. 'I've already given my opinion. I'll say one thing, though I dislike the entire idea of storefront branches.'
Alex snapped, 'they'll be money shops the branch banks of the future.' Everything, he realized, was coming out contrary to the way he had intended. The subject of the branches themselves he had planned to get to later. Well, he supposed it made no difference now.
'From their description,' Floyd LeBerre said he was reading an information sheet Tom Straughan had circulated 'those branches sound like laundromats.'
Heyward, also reading, shook his head. 'Not in keeping with our style. No dignity.'
'We'd do better to shed some dignity and add more business,' Alex declared. 'Yes, storefront banks resemble laundromats; just the same, they're the kind of branch banks which are coming in. I'll make a prediction to the board: Neither we nor our competitors can go on affording the gilded sepulchers we have as branch banks now. The cost of land and construction make it senseless. In ten years, half at least of our present branch banks will have ceased to exist as we know them. We'll retain a few key ones. The rest will be in less expensive premises, totally automated, with machine tellers, TV monitors to answer queries, and all linked to a computer-center. In
