A former bank chief who blames himself for unleashing Charles H. Keating on the financial world is warning bankers not to be blinded by economic euphoria like in the go-go 1980s.

Robert H. Smith has written a memoir, which went on sale late last week, about his days as chairman and chief executive officer of Security Pacific Corp. - the fifth-largest banking company in the nation a decade ago. The book, "Dead Bank Walking," chronicles the demise of the overly aggressive Los Angeles-based institution and its merger with Bank of America Corp. while teetering on the brink of failure.

The onetime wheeler-dealer, who confesses to arrogantly ignoring red flags raised by examiners, blames himself in the book for Security Pacific's downfall.

"You can get caught up in the momentum of banking at the time and jump on the bandwagon," he said in an interview with American Banker. "There's always an important message in sitting back and assessing where it's going to go, which I don't think we did well."

Bankers today are in danger of repeating the overconfidence of commercial lenders 10 years ago, Mr. Smith says, particularly in connection with financing speculative Internet companies.

"When we get into this e-commerce, we get into what the earnings might be in the future," says Mr. Smith, who is now a principal in the investment banking firm of Smith & Crowley in Southern California. "The banks are coming in and lending to these e-commerce companies to take them to the next level. That's fine, if they get to the next level."

He recalls a similar enthusiasm for commercial real estate and other risky loans to business leaders in the 1980s that ended up unpaid. These deals were often attractive, he says, because of the personalities behind them rather than any realistic business plans. "It was fascinating to interact with not only people who had worldwide recognition - Trumps, Hemeters, Campeaus, Ueberroths - to then reflect back on them as rogues or promoters or leaders of their time," he says. "You find a reason or rationale to do business with them because they are so glamorous."

Mr. Smith rues the day Mr. Keating, a commercial loan client, came by to say he was interested in purchasing a thrift. In response, Mr. Smith says, he brought Mr. Keating together with the owners of Lincoln Savings and Loan Association, who were looking for a buyer. Under Mr. Keating, the Arizona S&L would become a tattered symbol of the thrift crisis.

But Security Pacific's problems were legion.

Congress' tightening of accounting rules for real estate assets, an economic downturn, and other problems caused Security Pacific's capital to shrivel to $1.6 billion by the time it merged with Bank of America in 1992, down two-thirds from 1989. The bank had been among the highest leveraged lenders in real estate, especially California real estate.

"Of course, there are all the rationalizations: 'I have plenty of reserves. I know my borrowers,' " he says. "The cycle kind of repeats itself."

Security Pacific was also brought down by its habit of expanding aggressively into new businesses, including an expensive foray into merchant banking overseas in the late 1980s. Mistakenly assuming that Congress would soon eliminate the barriers between commercial and investment banking, the banked developed a securities underwriting and distribution business in Canada and the United Kingdom that it planned to transfer later to the United States. The cost of dismantling the far-flung merchant bank when it failed to make money was $200 million.

Examiners angered him at the time, but he concedes their aggressive supervision was warranted. "They were pounding us," Mr. Smith says. "We were a seriously deteriorating institution."

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