J. Howard Laeri, executive vice president of the American Bankers Association a couple of decades back, used to lament, "It takes four years to train a jet pilot, and we take five years to train a lending officer."

Of course the response of lending officers was, "I can train someone to lend money in 10 minutes. The rest of the time is taken training them to lend it so we get it back."

Never having loaned money myself, this response is about the most important item I mention when I teach bank lending. After all, if you yourself don't lend, how can you teach others to do it?

But there are a few lessons in bank lending -- good and bad -- that I have learned through the years, and I find some of them have been useful not only to my students but even to practitioners of the lending art.

Taking risks. Good lending officers are willing to take risks. There is the classic story of A.P. Giannini, the founder of Bank of America, asking a lending officer how many bad loans he had made in his career. When the officer replied, "None," Mr. Gianinni said, "You're fired. Think of the good loans you have turned down to get this record."

Attitude of lenders. The above story brings up the question of what is the proper attitude for those who have the authority to make loans. All bankers know about money risk, credit risk, and covariant risk, but what about a key factor, career risk?

Career risk simply means that people make decisions based on what it will do for their careers rather than on what they feel will be best for the bank.

Take, for example, the lending officer who is sent overseas. He lives in a bank-owned home and has memberships in the best clubs and top social status in the country to which he is assigned.

The last thing he wants to hear is: "Come home." But if there are no loans worth making and he reports that, he may be told to pack up. So he may judge dubious loans as bankable in order to avoid this career risk.

An "I'll show them" attitude. I know of a bank that fired a man for poor judgment in lending but that let him stay on for several weeks to clean up his affairs.

In that time he made twice as many bad loans as he had made before he was fired -- trying to show by volume that he was an important lender who had been misjudged.

Similarly, people passed over for top jobs at major banks often go to smaller institutions and take on heavy lending risks in an effort to show their former employer how good they are and what the bank missed by not promoting them.

The 3 C's of credit and a C minus. All bankers have learned the 4 C's of credit: character, capacity, conditions, and collateral. I have revised these to the 3 C's and a C minus.

A bank seldom can get anywhere near as much when liquidating collateral as the value assigned to it in backing a loan. On top of this, courts frequently make it difficult to foreclose on collateral in the first place.

Moreover, most community bankers place character at the top. They admit that almost any potential borrower can make up a story that sounds good. Some bankers try to pierce this veil by asking the borrower to repeat his spiel in detail more than once in the hope that some inconsistency will show up.

But when you can trust someone to repay regardless of conditions, this trust is golden.

Finally, I find bankers respond positively when the suggestion is given that a young lending officer be allowed to go through with a loan even when the supervisor feels it is likely to fail -- at least if the amount is within reason.

Having been there and watched your loan go sour is really the best education a lending officer can have, no matter what he has heard in a classroom or from his superiors and trainers.

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