When Bert Lance came before the Senate Governmental Affairs Committee last January for confirmation as President Carters' budget director, he sailed through easily.
There were few indications of any troubles to come.
Several questions were asked at the hearing about Lance's prior banking activities, including reports of a Justice Department Investigation into possible illegal campaign contributions by Lance and a bank he headed to his campaign committee.
But the panel quickly moved on to Lance's views on economic and budget policies.
Later this week the comptroller of the currency will make public the results of a far more detailed and searching inquiry into Lance's personal finances and his stewardship of two Georgia banks.
When the Senate committee met in January to consider Lance's nomination only a few issues had been raised concerning his finances.
The case goes back to 1975 when the comptroller fo the currecny, in a routine examination of Lance's Calhoun First National Bank, uncovered overdrafts on the bank by Lance in his 1974 gubernatotial primary. There were also reports of overdrafts by Mrs. Lance
The findings were turned over to the Justice Department. But the case was closed on Dec. 2, 1976, a day before Carter announced that his friends and confidant Lance was his choice for the key budget post.
John W. Stokes, the U.S. attorney in Atlanta, a Republican, said he ended the investigation because there wasn't enough evidence to prosecute and that the timing was coincidence.
"It should have been disposed of a long time back," Stokes said at the time.
The Senate panel, when it convened on Jan. 17 and 18, relied heavily on a letter from Robert Bloom, then acting comptoller of the currency, which gave Lance a clean bill of health.
"Mr. Lance enjoys a very good reputation in the banking community and it is my opinion based upon all the facts available to me that Mr. Lance is well qualified to serve as the Director of the Office of Management and Budget," Bloom concluded.
A "full investigation" by his office into the campaign overdarfts was conducted with the conclusion that "no violations" had occurred, wrote Bloom. And when the case was turned over to the Justice Department for its own determination, "the file was closed as not warranting further action," he added.
"I consider that letter a very important element in this hearing, and assuming it says what we are informed it says, I would have no further questions," said Senate committee member Jacob K. Javits (R-N.Y.)
"I understand the investigation of the alleged campaigns fund violations has now been totally and completely cleared up fully to the satisfaction of the comptoller and the Justice Department," said Sen. Charles H. Percy (R-III.) adding. "That certainly totally satisfies me on that."
Meanwhile, as a voluntary condition of his confirmation, Lance agreed that by Dec. 31, 1977 he would dispose of a controlling block of 190,000 shares in the National Bank of Georgia, where he had gone as president, after leaving Calhorn. The reason was to avoid any potential conflicts with his new role as budget director.
Lance on Jan. 7 had also filed a detailed financial statement - in line with an increased disclosure policy that President Carter has set for his appointees - which revealed $7.97 million in assets, mainly in the form of stock, and $5.34 million in liabilities, primarily five bank loans, for a net worth of $2.62 million.
At the confirmation hearing, the question of his bank loans, wich were eventually to loom much larger, came up only briefly.
On Jan. 20 Lance was easily confirmed by the full Senate, with only Sen. William Proxmire (D-Wis.) objecting, saying Lance lacked enough experience for a job that requires a thorough knowledge of the federal budget.
In the following months, Lance came to be perceived as one of the President't key advisers, seeing the President several advisers, seeing the weighing in heavily, as in the cancellation of the $50 tax rebate plan, when it came to domestic economic policy.
With an image as a conservative Southern banker, Lance was also the administration's main emissary to the country's business community and the man most responsible for carrying out Carter's pledge to achieve a balanced budget by fiscal 1981.
But Lance's fiscally conservative credentials began to be questioned after a Time magazine article in May detailed the extent of his personal debts and noted that the value of some of his holdings had declined sharply since his arrival in Washington.
"I couldn't sleep nights if I had to service debts like Bert's," commented Daniel B. Pattillo, a director of the National Bank of Georgia and its largest shareholders.
Lance's problems in balancing his own personal budget soon became more acute.
NBG shares, which Lance had purchases at an average price exceeding $17 each, had dropped to half that price. The reason was a sharp deterioration in the bank's earnings, on top of the budget director's commitment to sell his sizable block in an inactive market by the end of the year.
For the first six months of 1977, NBG reported a loss of $1.25 million, mainly as a result of write-offs on bad loans, and its officers disclosed a suspension of the bank's dividend - which had been supplying Lance with $160,000 in annual income - was in the offing.
If Lance were forced to keep his commitment and sell his stock by year's end, he faced a loss exceeding $1 million. So on July 13, exactly six months after Lance made his pledge, President Carter asked the Senate Governmental Affairs Committee to extend the deadline because of the drop in price of the stock.
Reports of the earnings problems at NBG and the reopening of Lance's stock sales commitment meanwhile led to questions about Lance's capabilities as a bank manager and to renewed press scrutiny of the extensive bank debts that Lance took on to finance his stock holdings.
Resulting disclosures have in turn triggered the inquiry of the comptroller of the currency, whose report is expected to address, if not resolve, the following questions:
Did Lance receive favored treatment in obtaining multimillion-dollar personal loans from banks where the National Bank of Georgia had opened correspondent accounts?
Specifically, the comptroller is looking at a $2.6 million loan Lance obtained from Manufacturers Hanover Trust Co. to purchase his NBG opened a correspondent account with Manufacturers and deposited $250,000. It is perfectly normal for a smaller bank to establish a correspondent relationship with a larger bank to expand services available to its customers. But it is considered a misapplication of bank funds if the correspondent account serves as a compensating balance so a bank officer can obtain a personal loan at more favorable terms. The comptroller has a memo from Manufacturers Hanover indicating there may have been a tie-in.
Lance subsequently moved his stock loan to the First National Bank of Chicago just before he became budget director. There the size of the credit was increased to $3.4 million and NBG opened a correspondent account with the Chicago bank a month before Lance received his personal loan.
The budget director also has personal loans from two other banks where NBG has established correspondent relationships.
Why was the Justice Department's case against Lance for the campaign overdrafts dropped on the day before he was nominated as budget director? Was any improper influence exerted? And was any information improperly withheld from the Senate Governmental Affairs Committee?
Was any political influence exerted to obtain an $18 million Teamsters Central States Pension Fund trust account for the National Bank of Georgia in 1976 when Carter was running for President?
Was there anything improper when the Calhoun bank honored overdrafts by Mrs. Lance, even if they were eventually repaid? Acting comptroller Bloom in his letter referred to these transactions only as a "violation of good banking practice."
Why was a probe by the comptroller's office of these overdrafts and into the general management of the Calhoun bank completed a day before Lance's nomination was announced? On that same day a management agreement with the comptroller to correct alleged operating deficiencies at the Calhoun bank was also allowed to lapse.
Did NBG make adequate disclosure of its condition before it sold a new issue of stock to the public last year? The question has risen as a result of the recent loan write-offs, leading to the losses that have also caused the bank to drop its quarterly dividend.
Did Lance repay the Georgia banks for any personal and political trips he made on aircraft owned by two banks?