When the editor and publisher of American Banker set up this column slightly under a decade ago, they wanted to establish a dialogue between the paper and its readers in community banking.

We feel we have been reasonably successful. We have published many bankers' ideas, on many topics, offered in response to our contests to become president for a day of our Schmidlap National Bank.

But sometimes we receive valuable ideas that do not merit a full column. Some of these follow, and we will have other columns combining shorter ideas.

(Maybe the submitters should earn at least an hour as Schmidlap's president.)


We receive many aphorisms on lending. Some of these may strike home with readers.

My favorite is: "If someone borrows money and doesn't argue over the rate, beware. It probably means he doesn't plan to pay it back."

Michael H. Lyons 2d, senior vice president at Bank of Hawaii, sent us a list of the precautions he developed "over a long time as a simple country banker." Some of the Lyons' laws of lending are:

The longer the writeup, the weaker the credit.

Beware of the loan officer who says, "We've got to make this loan. The customer needs the money more than we do."

The same loan officer says, "If we don't make this loan, the customer will go bankrupt" or "What the heck are you worried about? He's good for it."

In lending on a gold mine, structure the deal properly, or the borrower winds up with the gold and you wind up with the shaft.

Success as a CEO

Expanding beyond lending to the full role of a CEO was the list, a la David Letterman, that I received from William Watson, a community banker for 37 years now who is president of Cross Keys Bank in St. Joseph, La. His list:

Read the comic strips every day. That will help keep you from taking yourself too seriously.

You don't have to gamble a lot, but find a bookie and make just enough bets so that you will become aware of his secret for success. It's pretty simple: He is always accessible.

Make the coffee several times a week. This tells your junior officers that they're not too important to do some menial tasks that need being done, and it inspires your employees to tackle any task you assign them.

Be active in analyzing and approving loans, but get out of the lending business. You, as CEO, are the bank's worst loan officer-but its best credit analyst.

Forget about rubber bands around your wrist, touchy-feely retreats, and all the psychobabble about influencing behavior. Use common sense. Fuss at people who respond to having their comfort zone disturbed, and give pats on the back to those that have good attitudes.

Pay your people the most you can afford to, not the least you can get by with. You'll be surprised how overpaid people will increase their productivity to soon earn what you pay them.

Though any organization must have policies, make them pretty flexible, and don't hesitate to violate them when it makes sense.

Always tell the truth and stand behind your word.

When thinking about making some change in operations or policy, ask your employees and customers what they think.

Though some long-range planning may be appropriate from time to time, simply try to do a little better every year. If you do this for a lot of years in a row, the long term will take care of itself.

Still Sound After 135 Years

Finally, Dan Roads, first vice president of Firstar Credit Card Bank of Waukegan, Ill., sent us this list of lending principles drafted in 1863 by Hugh McCullough, the first comptroller of the currency.

Do nothing to encourage speculation.

Make your facilities available only to legitimate and prudent transactions.

Make your loans as short as the business of your customers will permit, and insist upon payment at maturity whether you need the money or not.

NEVER renew a note merely because you may not be able to loan the money at equal advantage elsewhere.

Distribute your loans rather than concentrate in a few hands.

Treat your customers liberally, but never allow them to dictate policy.

If you doubt the propriety of making a loan, give the bank the benefit of the doubt and decline it.

If you have reason to doubt the integrity of a customer, close his account.

Never deal with a rascal under the impression that you can prevent him from cheating you. The risk in such cases is greater than the profit.

I remembered my amazement at how accurate these principles are today, and how clear they are to follow if one needs an outline of how to run a "clean shop."

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