Banking Takes a Beating

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worthiness of borrowers. Result: a portfolio that included $2.3 billion in bad loans. At some other ailing banks, problems can be traced further down the organizational ladder. Inexperienced traders at Chase Manhattan lost some $285 million in 1982 by lending U.S. Treasury bonds, notes and bills to Drysdale Government Securities, a renegade Wall Street firm that had parlayed $5 million in capital into as much as $4 billion in holdings before it failed. The tiny company had bought securities in expectation that interest rates would go higher. When they did not, Drysdale lost its gamble.

The fundamental reason that many banks face problems is that they were simply unprepared for the rapid growth and change they faced after deregulation. Says Southeast Banking's Zwick: "There are not enough good bankers to accommodate the proliferation of the industry. We've allocated the limited number of qualified people we have." Some banks are now reaching out to consulting firms for expertise and training. Lawrence Darby, a former bank president, this year started a firm called Bankers Training & Consulting in St. Louis. One of its most successful educational tools is a video called The Worst Loan I Ever Made. Actors in the video portray bankers who deliver admonitions like "If the crooks don't get you, your friends will." The film, which costs $375, has so far been shown to more than 6,000 bankers. Says Darby: "There are more changes going on in banking than in Silicon Valley. There is a tremendous amount of confusion out there."

The financial revolution is now giving birth to a new breed of banker, perhaps best symbolized by Citicorp's Reed, 45. The boyish-looking chairman, who was appointed last June as Wriston's successor, is a consumer-banking specialist with an affinity for long-shot risks. Reed's hits and misses during his career have both been spectacular. In 1980 and 1981 he showered the country with 26 million letters inviting consumers to apply for Visa cards. Many of them fell into the wallets of poor credit risks, and Citicorp rang up some $75 million in bad debts. Nonetheless, Reed's bold push into consumer banking, which included blanketing New York City with ATMs, was ultimately successful. The bank's consumer division went from a loss of $79 million in 1980 to a profit of $202 million last year.

The new bankers often do not fit the button-down mold traditionally associated with high finance. Says Donald Waite, a director of the management consulting firm of McKinsey & Co.: "Bankers are no longer bankers. They are a whole lot of different things, and above all they are managers who can handle a group of disparate enterprises." At Citicorp, for example, Jesse Fink, 27, who studied forestry before receiving his M.B.A., heads the company's direct-mail program. Says he: "This organization is not very age conscious. You can get a lot of responsibility quickly." Says Vice President Jennie Schreder, 31, who used to conduct biophysics research and now manages the development of new products for Citicorp: "It's up to each person to make things work, so you have to be an entrepreneur."

Probably the trickiest aspect of managing a bank today is attracting a stable base of deposits. Loans are generally still made for long terms, but deposits have become increasingly