"Know thy borrower." That, of course, has been a central axiom of banking. But as banks get bigger, and as cost-cutting becomes increasingly important, it becomes enticing to cut corners. Unfortunately, a number of banks have done that, and are now paying the price.

Lending is hard work and demands a lot of time. But some banks seem to have thought they can save time and money by merely buying pieces of loans made to well-known names from big national syndicators.

Considering that the syndicators were large, sophisticated banks, it seemed that buying loans from them without putting too much effort into determining how creditworthy the borrowers were was an easy way to make money.

Unfortunately, it doesn't work that way, as many banks are discovering. A number of these large national credits are turning sour and the damage in some cases is so great that at least one CEO has lost his job because of it.

Ruchi Madan and her team of bank analysts at Salomon Smith Barney, Citigroup's investment banking arm, has estimated the degree to which some banks may be hurt.

According to her rough estimates, Bank of America Corp. could face $1.9 billion in credit costs; Bank of New York, $150 million; Bank One Corp., $875 million; Comerica, $220 million; and FleetBoston Financial, $545 million.

For First Union, she sees a possible $719 million in credit costs; Keycorp, $253 million; National City, $123 million, and PNC Financial, $183 million.

Estimates she gives for others include: State Street, $61 million; U.S. Bancorp/Firstar, $250 million; Wachovia, $243 million; Wells Fargo, $178 million.

These are large and painful numbers, but fortunately, not that large. Madan says these numbers are included in her earnings expectations, and the impact should not be as dire as many people expect.

If Madan's optimism proves to be well-placed, the banks will get through the period in not-too-bad shape.

But it should be a good lesson for the future.

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