President Carter knew of Bert Lance's problems with overdrafts at the Calhoun First National Bank in Georgia before he announced his selection of Lance to head the Office of Management and Budget, administration officials said yesterday.
Lance, at a luncheon with reporters, said he had discussed the situation with Carter before his appointment was announced last Dec. 3.
"Everything was on the table," Lance said. "I told him about the Calhoun circumstances - there was no effort to withhold."
White House press secretary Jody Powell said the then-President-elect was also briefied on Lance's overdraft problems last Dec.3.
"Everything was on the table." Lance said. "I told him about the Calhoun circumstances-there was no effort to withold.
White House press secretary Jody Powell said the then-President-elect was also briefied on Lance's overdraft problems last Dec.1 by John Moore, a lawyer working for the Carter transition team and that he knew at least some aspects of the situation to that time.
What was not clear, from either Lance or Powell, was when the President first learned of the situation and the extent of his knowledge before he announced his selection of his old friend to head the OMB.
NOr is it clear why the government terminated two inquiries into Lance's affairs just after Carter offered him the OMB post, and just before the appointment was officially announced. This is the subject fo an investigation by the Internal Revenue Service which - a spokesman said yesterday - should be completed by Sept.7.
Carter was asked Tuesday whether any of his aides discussed these government inquiries into Lance's financial affairs with government officials last November or December. Carter said he did not know of any such discussions.
Powell was pressed on this point at the White House press briefing yesterday. That was what led him to discuss the role of Moore, the transition team attorney who briefed Carter on some of Lance's difficulties last Dec. 1.
Powell said that Moore participated in a conversation about Lance with Robert Bloom, then the acting comptroller of the currency, last Dec. 1, the same day Moore briefed Carter about the situation.
Powell gave this version of what led up to the conversation:
Around November, 1976, Bloom received a question about Lance and the Calhoun bank from a newspaper reporter. Forbidden by regulation from discussing the situation without permission from the bank, Bloom called Lance, who referred him to Sidney O. Smith, an Atlanta lawyer who represented Lance and the bank.
On Dec. 1, Bloom and Smith discussed by telephone what could be said publicly in response to press inquiries about the Lance situation. At Smith's suggestion, Moore, who was for the Carter transition team, listened in on the conversation.
Bloom and Smith agreed on a statement that could be released both by comptroller and the bank. It never was made public, however, because the reporter never called back.
Later that same day, Moore informed Carter of the latest information available concerning Lance's private business dealings. Two days later, Lance's appointment was announced.
Powell said Moore was invited to participate in the conversation "strictly to be aware of the facts of the situation so he could inform the President."
Moore and yesterday he had no other discussions with government officials about aby inquiries into Lance's financial affairs.
The question of inquiries by Carter aides to government officials about Lance's financial dealings is important because of what happened just before the Lance appointment was announced.
In December, 1975, the comptroller's office entered into a written agreement with the Calboun First National Bank in which the bank agreed to cease the practice of allowing its officers and members of their families to overdraw on their accounts.
The agreement was triggered by, among other things, overdrafts that reached $152,000 by Lance on a campaign account be maintained at the bank in 1974 during his unsuccessful race for governor of Georgia.
The comptroller also referred the matter to the Justice Department for a possible criminal prosecution.
On Nov. 15, 1976, less than two weeks after Carter's election, Lance visited the President-elect at his home in Plains. Ga. According to later press reports, it was at this meeting that Carter offered Lance the budget director's post.
One week later, on Nov. 22, the written agreement between the comptroller's office and the Calhoun bank was terminated. According to a spokesman for the comptroller, such agreements are terminated when bank examiners become convinced a bank is no longer engaging in the questionable practices that lead to such agreements. In effect, the termination said the Calhoun bank was then engaging in sound banking practices.
On Dec. 2, the day before the Lance appointment was announced, the Justice Department dropped its inquiry with a finding there were no grounds for a prosecution.
Powell stressed that the only contact between Carter aides and the comptroller's office occurred after the comptroller had decided to terminate the potentially embarrassing agreement with the Calbhoun bank. He said there were no contacts between the Carter transition team and the Justice Department concerning the Lance inquiry.
Lance told reporters yesterday that the kinds of overdrafts that he, his wife and other family members had at the Calhoun bank were "typical of Southern banking practice," and he paid back with interest at prime rate plus 1.5 per cent."
Both these contentions are implicitly or explicitly challenged in the report on Lance issued last week by the comptroller of the currency, John G. Heimann.
That report showed that the overdrafts Lance described as "typical" of Southern banks were explicitly forbidden in an agreement reached between the comptroller's office and the Calhoun bank in December, 1975. In that pact the bank pledged not to allow anymore overdrafts to Mr. and Mrs. Lance.
Until then the Calhoun bank had permitted large overdrafts to Lance and his wife, some running well over $100,000 for weeks at a time.
"At times," according to the report on Lance's affairs released last week by the comptroller, "the overdrafts of Mr. Lance exceeded the limits placed on extensions of credit to bank executives.C. 375A of the limits on the amounts nationally chartered banks can lend their own officers. The law permits loans to bank officers of $30,000 secured by a first mortgage on real property, $10,000 for the education of children and $5,000 for other purposes. Any such loan must have the prior, specific approval of the bank's other directors.
Lance did not treat his repeated overdrafts of more than $100,000 as loans in the sense of this section of law. But after 52 days of overdrafts in excess of $110,000 he paid interest to the Calhoun bank as if the overdrafts were in fact a loan.