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."
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.