Senate Banking Committee Chairman William Proxmire (D-Wis.) announced yesterday that his panel will investigate the "ethics and soundness" of banking practices in light of budget director Bert Lance's financial dealings.
Proxmire said the investigation will delve into a number of areas - compensating and correspondent bank balances, loan collateral, overdraft polices, failure of bank officials to file reports on borrowings and business ventures and varying interest rates charged different customers.
"The report of the comptroller of the currency on budget director Lance raises a number of serious questions about both the ethics and soundness of banking practices," Proxmire said.
His statement gave no indication that the Banking Committee plans to probe Lance's activities. The Senate Governmental Affairs Committee has scheduled the beginning of that investigation Sept. 7.
Though the comptroller of the currency said last week that Lance's complex banking practices did not involve any criminal wrongdoing, Proxmire said the report raised a number of questions:
Was there an understanding that Lance would get a loan from the Manufacturers Hanover Trust Co. of New York in return for Lance's Bank's - the National Bank of Georgia - leaving 20 per cent of the loan amount in the New York bank?
Why were neither of Lance's loans, from Manufacturers Hanover and First National Bank of Chicago, fully collateralized or insured with pledged collateral?
Why were overdrafts in Lance's account and that of his family in his own bank larger than the certificates of deposit on file with the bank, and why did the accounts remain interestfree for a considerable time?
Why was Lance allowed not to report 50 loans to either the National Bank of Georgia or the Calhoun First National Bank while he was an officer of the banks?
Why could Lance borrow large sums of the prime interest rate plus a small premium when such interest rates are not routinely available even to affluent borrowers with fully collateralized loans?
"These examples from the report indicate that present bank practices may give special advantages to bankers either from their own banks as insiders or from other banks with whom their banks have a correspondent relationship," Proxmire said.
"These practices go to the very heart of the ethical, efficient and sound conduct of the American banking system," he said. "Our committee with attempt to find out both how widespread these kings of practices are and what regulatorand/or legal reforms are needed to end the abuses."