involved. In this, too, he was right. News reporters, who in recent years had been motivated by the example of the Washington Post's Watergate heroes, Bernstein and Woodward, bored in hard.
Their efforts were successful. Within several days, newspeople had developed sources inside and outside Supranational, and exposes of Quartermain's sleight-of-hand began emerging, as did the conglomerate's shady 'Chinese accounting.' So did the horrendously high figure of SuNatCo's indebtedness. So did other financial revelations, including FMA's fifty-million-dollar loan.
When the Dow Jones news service tapped out the first reference linking FMA with Supranational, the bank's public relations chief, Dick French, demanded and was granted a hastily summoned top-level conference.
Present were Jerome Patterton, Roscoe Heyward, Alex Vandervoort, and the burly figure of French himself, the usual unlighted cigar in a corner of his mouth. They were a serious group Patterton glowering and gloomy, as he had been for days; Heyward seeming fatigued, distracted, and betraying nervous tension;
Alex with a mounting inner anger at being involved in a disaster he had predicted, and which need never have happened. 'Within an hour, maybe less,' the PR vice-presidentbegan, 'I'm going to be hounded for details about our dealings with SuNatCo. I want to know our official attitude and what answers I'm to give.' Patterton asked, 'Are we obliged to give any?' 'No,' French said. 'But then no one's obliged to commit hara-kiri either.'
'Why not admit Supranational's indebtedness to us,' Roscoe Heyward suggested, 'and leave it at that?' 'Because we won't be dealing with simpletons, that's why.
Some of the questioners will be experienced financial reporters who understand banking law. So their second query will be: How come your bank committed so much of its depositors' money to a single debtor?' Heyward snapped, 'It was not to a single debtor.
The loan was spread between Supranational and five subsidiaries.' 'When I say it,' French said, 'I'll try to make like I believe it.' He removed the cigar from his mouth, laid it down, and drew a note pad toward him.
'Okay, give me details. It'll all come out anyway, but we'll look a lot worse if we make this painful, like a tooth extraction.'
'Before we go on,' Heyward said, 'I should remind you we're not the only bank to whom Supranational owes money. There's First National City, Bank of America, and Chase Manhattan.'
'But they all headed consortiums,' Alex pointed out. 'That way, any loss is shared with other banks. So far as we know, our bank has the greatest individual exposure.' There seemed no point in adding that he had warned all concerned, including the board of directors, that such a concentration of risk was dangerous to FMA and possibly illegal.
But his thoughts continued to be bitter. They hammered out a statement admitting First Mercantile American's deep financial involvement with Supranational and conceding some anxiety.
The statement then expressed hope that the ailing conglomerate could be turned around, perhaps with new management which FMA would press for, and with losses minimized.
It was a wan hope and everybody knew it. Dick French was given some leeway to amplify the statement if he needed to, and it was agreed he would remain sole spokesman for the bank. French warned, 'The press will try to contact ad of you individually.
If you want our story to stay consistent, refer every caller to me, and caution your staffs to do the same.' That same day, Alex Vandervoort reviewed emergency plans he had set up within the bank, to be activated in certain circumstances.
'There's something positively ghoulish,' Edwina D'Orsey declared, 'about the attention that gets focused on a bank in difficulties
.' She had been leafing through newspapers spread around the conference area of Alex Vandervoort's office in FMA Headquarters Tower. It was a Thursday, the day after the press statement by Dick French. The local Times-Register bannered its page one story:
LOCAL BANK FACES HUGE LOSS
IN WAKE OF SUNATCO DEBACLE
With more restraint, The New York Times informed its readers:
FMA Bank Declared Sound Despite Sour Loan Problems The story had been carried, too, on last night's and this morning's TV network news shows.
Included in all reports was a hasty assurance by the Pederal Reserve that First Mercantile American Bank was solvent and depositors need have no cause for alarm. Just the same, FMA was now on the Fed's 'problem list' and this morning a team of Federal Reserve examiners had quietly moved in clearly the first of several such incursions from regulatory agencies.
Tom Straughan, the bank's economist, answered Edwina's observation. 'It isn't ghoulishness, really, that excites attention when a bank's in trouble.
Mostly, I think, it's fear. Fear among those with accounts that the bank might be forced out of business and they'd lose their money.
Also a wider fear that if one bank fails, others could catch the same disease and the entire system fall apart.' 'What I fear,' Edwina said, 'is the effect of this publicity.' 'I'm equally uneasy,' Alex Vandervoort agreed.
'It's why well continue to watch closely to see what effect it has.' Alex had called a midday strategy meeting
Among those summoned were heads of departments responsible for branch bank administration, since everyone was aware that any lack of public confidence in FMA would be felt in branches first. Earlier, Tom Straughan had reported that branch withdrawals late yesterday and this morning were higher than usual, and deposits lower, though it was too early yet to be sure of a definable trend.
Reassuringly, there had been no sign of panic among the bank's customers, though managers of all eighty- four PMA branches had instructions to report promptly if any were observed.
A bank survives on its reputation and the trust of others fragile plants which adversity and bad publicity can wither. One purpose of today's meeting had been to ensure that actions to be taken in event of a sudden crisis were understood, and communications functioning.
Apparently they were. 'That's all for now,' Alex told the group. 'We'll meet tomorrow at the same time.' They never did. At 10:15 next morning, Friday, the manager of the First Mercantile American branch at Tylersville, twenty miles upstate, telephoned Headquarters and his call was put through immediately to Alex Vandervoort. When the manager Fergus W. Gatwick identified himself, Alex asked crisply, 'What's the problem?'
'A run, sir. This place is jammed with people more than a hundred of our regular customers, lined up with passbooks and checkbooks, and more are coming in They're withdrawing everything, cleaning out their accounts, demanding every last dollar.'
The manager's voice was that of an alarmed man trying to stay calm. Alex went cold. A run on a bank was a nightmare any banker dreaded; it was also in the last few days what Alex and others in top management had feared most. Such a run implied public panic, crowd psychology, a total loss of faith. Even worse, once news of a run on a single branch got out, it could sweep through others in the FMA system like a flash fire, impossible to put out, becoming a catastrophe.
No banking institution not even the biggest and most sound ever had enough liquidity to repay the majority of its depositors at once, if all demanded cash.
Therefore, if the run persisted, cash reserves would be exhausted and FMA obliged to close its doors, perhaps permanently.
It had happened before to other banks. Given a combination of mismanagement, bad timing, and bad luck, it could happen anywhere. The first essential, Alex knew, was to assure those who wanted their money out that they would receive it. The second was to localize the outbreak. His instructions to the Tylersville manager were terse. 'Fergus, you and all your staff are to act as if there is nothing out of the ordinary. Pay out without question it whatever people ask for and have in their accounts. And don't walk around looking worried. Be cheerful' 'It won't be easy, sir. I'll try.'
'Do better than try. At this moment our entire bank is on your shoulders.' 'Yes, sir.' 'We'll get help out to you as quickly as we can.
What's your cash position?' 'We've about a hundred and fifty thousand dollars in the vault,' the manager said. 'I figure, at the rate we're going, we can last an hour, not much more.' 'There'll be cash coming,' Alex assured him.
'Meanwhile get the money you have out of the vault and stack it up on desks and tables where everyone can
