How It Feels to Be Naderized

THE intense, dark-haired man visiting the office of Walter B. Wriston, chairman of the First National City Bank of New York, crisply announced that he was interested in looking into several of the bank's activities. Consumer credit, for example. The visitor suggested that "Citibank's" credit standards might be so restrictive that many black applicants are automatically ineligible for loans. On the other hand, he added, the standards might well be too loose, thereby encouraging people to go dangerously into debt. Wriston, who is rarely without a sense of humor, piped up wryly: "Do I have a third choice?" The visitor did not smile back. He was Ralph Nader.

That was how Wriston, head of the nation's second largest bank, learned a year ago that he was about to join a growing list of corporate and public executives in a bracing experience: being "Naderized" by the nation's leading consumer activist. Nader arranged the visit to declare that Citibank had been chosen as the target of one of his encyclopedic studies. He wanted Wriston to open up to 16 young Raiders, mostly first-year law-school students, who would conduct the probe. Citibank's chief agreed to cooperate. To colleagues who worried about the project, Wriston cheerfully remarked: "We're getting a free management survey."

The first part of a two-part study was published last week, and TIME Correspondent John Tompkins interviewed Citibank officials about their experience with Nader's Raiders. Tompkins' report:

The prudent bankers naturally felt that they had to put some limits on the extent of their help, and in setting those limits they may have developed a kind of counterguerrilla guide for "raided" businessmen. Shortly after Nader's visit, Wriston told his officers that the investigators should be given the same information as stockholders and newsmen. In particular, he warned them against saying anything that would help the bank's competitors or violate a customer's privacy. Bank attorneys noted that the latter precaution was a legal necessity.

Some matters were painstakingly negotiated. Nader Lieutenant David Leinsdorf, a 28-year-old former antitrust-trial assistant in the Justice Department, originally asked to interview no fewer than 750 Citibank officials and employees; the list was finally arbitrated to 53. Each interview was taped and conducted in the presence of a senior bank officer, an attorney and a public relations man--a team that usually outnumbered the two or three student interviewers.

Term-Paper Material. After being questioned by the students for one to three hours each, the bankers were nearly unanimous in giving them high marks for intelligence and zeal. But most doubted that anyone in the Nader group knew enough about banking to make valid judgments on the more complex issues. Says Thomas C. Theobald, a senior vice president: "It was like two college students looking for term-paper material." He was surprised that the interviewers overlooked several obviously controversial topics, including Citibank-managed investments in South Africa and in companies that are polluters.

Senior Vice President Robert P. Graham "enjoyed talking about my job," but Corporate Planner John W. Heil-shorn "had a very real feeling when I walked in that I was guilty before I took the witness stand." Heilshorn found that the interviewers generally assumed that his institution is "a big, fat New York bank hoarding capital" and held "a clear bias toward centralized Government control" of private business. Says Wriston: "Most of the Nader team saw the experience as an adversary proceeding. Whatever you told them, they acted like you were trying to mislead." The investigators turned down an offer from the bank for each of its division heads to give an hour-long lecture on his own job. They also declined an invitation to an informal lunch with top management, feeling that it might appear to compromise them.

Ask the Customer. The investigators proved adept at making end runs. At one point, they set up a table outside the bank's Park Avenue headquarters and asked customers there to fill out questionnaires rating the bank's services. (Sample questions: "Are there enough tellers?" "Have you ever been refused a loan?") From court records they obtained the names of loan customers who had been judged in default and interviewed dozens of them. They also conferred with ex-employees, banking scholars and Government regulators. Somehow, the investigators got hold of three secret studies, which the bank itself had commissioned, on the subjects of employee and customer attitudes about Citibank. Nader estimates that only 10% to 15% of the report was drawn from official interviews within the bank.

The Raiders' final report turned out to be, by Nader's stern standards, a fairly non-vengeful indictment. Leinsdorf declared that the bank was "innovative, aggressive, growing and profitable." Even Nader smilingly admitted that "we got the impression that there were real human beings in this corporation, unlike others." Nevertheless, the investigators made serious charges against Citibank, most of which were promptly disputed by Wriston. Samples: -- The sharpest accusation was that the bank has aggravated New York City's housing crisis by not putting back into neighborhoods, in the form of mortgage loans, nearly as much as it takes out of them in the form of savings deposits. Although Citibank holds $2 billion in individual savings, the Nader group noted, only $500 million is invested in residential mortgages. In view of the social blight sweeping most great U.S. cities, especially in slum areas, the investigators' point is not unreasonable. The bank's retort--perhaps inadequate --is that Citibank handles more mortgages than other major New York banks. However, the principle that banks must invest close to home is not one that the highly mobile U.S. has followed in the past.

-- The report noted that for each loan it makes, Citibank is twice as likely as any other New York bank to go to court for a default judgment against borrowers who fall behind in their payments. As a result, it ranks as the city's "No. 1 plaintiff." Bank officers do not dispute the Raiders' figures, but they point out that the bank makes more non-collateral loans, which require court action in the event of a default, than its four nearest competitors combined. >Other allegations focused on the bank's Master Charge credit-card service. While Citibank takes care to check on the credit rating of merchants who offer the plan, the report declared, it does not investigate a firm's advertising practices or the quality of its merchandise. The Nader group cited one example of a Master Charge merchant who sold sewing machines through phony advertising. Bank officials reply that they simply cannot patrol the ethics of every store owner who offers the plan, but that they investigate complaints from cardholders and have dropped merchants who were found to defraud. The Nader group also alleged that Citibank has violated the federal truth-in-lending law. On Master Charge bills, the report noted, Citibank gives special prominence to the minimum amount due for any given month, leaving the rest subject to interest charges. If the customer paid the amount of total charges, which is printed less conspicuously, he would incur no interest charge. As a result, the investigators contended, cardholders are often lured into paying credit charges that they might avoid. Citibank denies the charge without explanation.

Things Don't Work. Overall, the encounter between Nader's Raiders and the Citibankers was an instance of two cultures meeting and being unable to communicate. In making loans today, the American banker is under pressure to seek more than profit and security, but it is still unclear just how far society--and the stockholders--expect him to depart from those traditional goals. Should he favor the poor borrower over the rich one? The black over the white? The local community over the far-off one? And who is to decide? The Raiders believe that, for example, the bankers have an obligation to finance slum housing, even if they have to offer special mortgage rates so low that they lose money. When confronted with that argument, one Citibanker asked: "What does that do to the U.S. banking system?" Replied a Raider: "I'm worried primarily about the cities in the U.S."

Wriston acknowledged that there were some points in the report "which appear to have merit and which we will seriously consider," but he found that most of it was based "on serious misconceptions about the banking system." He believes, for instance, that the investigators think that banks are somehow not subject to ordinary market pressures and often control the day-to-day business of firms to which they lend funds. As for the experience of being investigated by a self-appointed commission, he says--a bit wearily--that he would be willing to undergo it again. Why? "We're all consumers, and a lot of things don't work." But for the most part, he maintains, Citibank is one that does.

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