A large part of what I know about banking comes from teaching and listening at some of the nation's bankers schools.
I have spoken at five or six of these, and for 31 years I've lectured at the American Bankers Association's Stonier Graduate School of Banking.
Without question, the top bankers and regulators feel honored to come to these schools, speak for free, and sleep on cots they have not had to endure since college or the military.
But some major banks no longer send employees to these schools. The bank executives do not want to sacrifice the time of their people away from the bank for a week or two for two or three years. And they feel their own people can teach more useful and pertinent material at less costly in-house schools.
I think that is shortsighted. At bankers schools, employees can meet people from banks of similar or different sizes and learn from them.
They can also glean important lessons from the faculty. Bankers and regulators are usually so thrilled to be teaching there that they present their best material and experiences.
One of the most important lessons I learned at bankers school was a warning that when a customer comes in for a loan and doesn't argue over rates and terms, watch out. It often means that he or she has very little intention of paying it back.
Another lesson was that there is no harm in exchanging ideas and new methods with other banks-even close competitors. As one speaker put it, "The one thing I can't fight is when the competition gives away the bank."
I also recall hearing a speaker talking about how to make loans on the West Side of Manhattan.
Most New York bankers know the West Side as the textile and fur district. Money is scarce there, and banks are likely to turn down a loan, fearing default.
Knowing this, potential borrowers often come to the bank with beautiful stories of sales and cash flows.
How do you find out if the stories are phonies or if the bank would be losing a good opportunity in turning this customer down?
One West Side banker told his secret:
"No matter what a customer tells me about the potential loan, I always respond: 'I'm not too bright. Would you mind going through the numbers again for me?'
"When the story is phony, the retelling is invariably inconsistent with the original version."
Another speaker told what lending in the fur district is like.
Fur retailers are always short of cash, so they often sell coats on credit, using the coat as collateral. In this system, the fur dealers should have as many coats as they have loans.
But instead of reporting each sale and paying off the associated loan, they simply use the cash. So when bankers come to nose around, they find furriers holding more loans than coats.
Another thing I learned at bankers schools: Let new people make mistakes. Even if you see that a loan is headed for trouble, don't interfere. Such trouble teaches the lending officer a lesson that could save the bank a fortune later.
Finally, it is sad to report that until recently no women were admitted to many banking schools, including Stonier.
The philosophy that brought this about is evident in the response of one Philadelphia bank personnel officer when confronted with the complaint that banks discriminate against women in hiring.
"What do you mean, discriminate against women?" he responded. "Why, we never waste a man when a woman can do a job."
Happily this is one aspect of bankers schools that has disappeared. Mr. Nadler, an American Banker contributing editor, is a professor of finance at Rutgers University Graduate School of Management.