Now that Joe L. Allbritton has consolidated his control of the daily operations of Riggs National Bank, directing damage control may be the first order of business if he is to restore confidence in the bank.
By dumping former chairman and chief executive officer Vincent C. Burke Jr. and by assigning former president Daniel J. Callahan III to limbo as president of the bank's holding company, Allbritton clearly showed his unhappiness with the management team that had been in charge for the past six years.
Resignations of other senior Riggs officials are expected to follow shortly, and lower-echelon employes are complaining about low morale in the wake of the shakeup at the District's largest bank.
On the surface, it would appear that the Riggs board supports Allbritton's decision to run the bank. Although one director earlier this week suggested "there may be a little fur flying" in the boardroom if there were a full-scale purge, there is no clear sign that Allbritton doesn't have the board's support.
There are signs, however, that some board members are agonizing over recent developments at the bank. "I view this with much concern, a great deal of concern," one director said.
But the changes made by Allbritton should not have come as a surprise to anyone who has followed the Riggs saga since Allbritton bought a big block of stock from former director Jorge Carnicero two years ago.
Indeed, one director acknowledged earlier this week, "None of this is surprising and much of it predictable."
With few exceptions, this is the same board that approved a resolution in 1981 opposing any attempt by Allbritton to buy more than 15 percent of the bank's stock. It would not be in Riggs' best interests for one shareholder to own that much stock, the board said at the time.
It is essentially the same group that authorized management to file a suit, which ultimately failed, to block Allbritton's tender offer, which gave him control of more than 40 percent of the bank's stock.
Riggs' board, perhaps more than any other in the city, epitomizes the establishment and the "old boy" network in Washington business.Most of the directors' ties to Burke and Callahan and the bank go back many years.
Any significant departures from the board could have substantial impact on the bank, something Allbritton hardly wants at a time when profits are declining and confidence has been shaken.
It is possible, however, that the bank's performance last year -- lower earnings and problem loans -- may have raised sufficient concern among directors to prompt them to go along with Allbritton.
It isn't difficult to understand Allbritton's concern. He has about a million reasons -- shares for which he paid about $70 million -- to be concerned about the bank's performance.
One of the more intriguing questions is how did Riggs, which Allbritton described as a "first-class operation" after praising management in 1981, encounter so many problems with Allbritton as chairman of the new holding company? And what management decisions went awry after receiving board approval?
Several major banks are experiencing loan problems as the result of downturns in the domestic and world economy, so Riggs is not unique in that regard. Whether Allbritton overreacted or whether management miscalculated is yet to be determined.
A source close to Allbritton said the decisions approved by the boards of the bank and holding company this week "are intended to strengthen the bank's position for the future."
Riggs' net income increased in each of the past five years, rising from $15.3 million in 1977 to $24.4 million in 1981. But two unusual transactions last year had an adverse impact on earnings, the bank said in a statement Wednesday. The sale of the losing Central Charge subsidiary and an increase in loan-loss reserves cost the bank $5 million after taxes last year.
Shortly after being named chairman of Riggs National Corp. -- the holding company that he reluctantly agreed to support -- Allbritton expressed confidence that with leadership of the company and its only asset (the bank) firmly in place, the corporation was "strongly positioned to maintain and expand our traditional role of preeminence in Washington banking."
Not only has that leadership been altered drastically: Riggs' traditional role of preeminence is in doubt.