If the State Department is looking for new diplomats, it could do worse than attend a joint meeting of chapters of RMA, the trade association of bank and credit officers, and the Turnaround Management Association.

I have longed admired RMA but had not heard of the TMA before a recent visit to Detroit to address their local chapters. I found that both groups' members must be agile and delicate and that their biggest enemy is the pack of lawyers looking for lawsuit fodder.

RMA, which until June was known as Robert Morris Associates, is a fascinating group. It was founded by lending officers of banks to exchange information that could help individual members avoid making loans that will go sour.

For the lenders, RMA membership is a win-win situation. If a bank wants to lend to someone new in town, it can get information about the potential borrower from an RMA chapter member in the borrower's previous town.

Of course, there have been cases in which RMA members have recommended a potential borrower in the hope that the borrower would use the new loan to pay old debts, but that's the exception.

The major problem that RMA members have is the fear of being sued if they say something adverse about a potential borrower. We live in a litigious society, and few bankers are willing to make formal adverse statements if it could lead to a loan rejection.

As a result, much recommending is done informally. A question asked over the phone can draw a pregnant silence, and written queries can get vague responses. A statement such as, "I can recommend this company with no qualification whatsoever" can be interpreted negatively by the RMA member receiving it, but it can also be offered by lawyers as sterling praise. The loyalty of RMA members to each other is so strong that officers of adjoining chapters almost always show up at each other's meetings to "show the flag."

The Turnaround Management Association has a different legal problem: Its members fear being sued under lender liability statutes. The members of this group generally are invited in when a company needs a serious shakeup to avoid bankruptcy.

The TMA is largely made up of financial consultants whose biggest strengths are common sense and a willingness to listen - something the heads of many troubled companies fail to do.

Members at the meeting told me that their benchmarks for trouble are simple: cash flow drying up, inventory turnover falling, third-generation managers more interested in spending their salaries than in staying at the plant to manage it, as their fathers and grandfathers did.

The turnaround professionals usually find the money to help set the company to rights once operating procedures have been changed. But here again the lawyers make the task more difficult than it already was.

Say, for example, that after adopting a consultant's major suggestion - reducing the number of employees or making basic changes in operating procedures - the company remains in trouble. The lawyers might say that the consultant has become, in effect, a manager of the company and therefore liable in any lawsuit against management.

So again the turnaround manager must be a diplomat - trying to help out effectively but without getting into a situation where he or she could be considered a manager.

Mr. Nadler, an American Banker contributing editor, is professor of finance at Rutgers University Graduate School of Management.

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