Bullet-Biting Booster

Georgia's biggest bank on the losing side

Atlanta, golden city of the "New New" South, has been showing big veins of pyrite lately. First came the fall from grace of Famous Local Banker Bert Lance. In February a group of banks headed by Manhattan's Morgan Guaranty Trust Co. announced one of the biggest foreclosures in U.S. history; it prepared to take over the Omni, a glittering Atlanta complex of offices, swank shops, hotel and ice rink, because the Omni's owners were failing to pay off $90 million in debts. And last week Richard Kattel, boy-wonder chairman of Georgia's largest bank, Citizens and Southern National (assets: $3.5 billion), quit in frustration. His reason: Comptroller of the Currency John G. Heimann, the chief U.S. banking regulator, had just forced C & S to reclassify as questionable an additional $11 million in loans, mostly on real estate. That will convert the skimpy $3.2 million profit that the bank reported for 1977 to a $7.8 million loss.

The bluff, square-jawed Kattel had been something of a symbol of Atlanta's expansive spirit. A youthful president of the city's Chamber of Commerce, he was hand-picked to head C & S five years ago, when he was only 35, by Mills B. Lane

Jr., a legendary go-go banker. At just about that time, a mood of boundless growth infected Atlanta. Beginning in the late 1960s, the number of apartment building permits swelled 133% in three years; first-class hotel-room space doubled in 18 months; downtown office footage grew 30% in a single year. Lane, now 66 and retired, reflects: "It was a boom city that hadn't felt a recession since the war and thought it never would. And then all of a sudden in 1973 it happened."

What happened was that Atlanta simply became overbuilt. New buildings failed to fill up, and high-cost real estate loans went unpaid. Late in 1976 the huge Colony Square commercial-residential redevelopment went bankrupt; last August Lance's National Bank of Georgia skipped a dividend. That same month, C & S cut its own quarterly dividend from 13-c- a share to 6-c-. In January it omitted the dividend for the first time since 1906, an alarming step for a bank of its stature. Then the Comptroller of the Currency ruled that even the slim profits C & S had reported for 1977 were illusory.

Kattel by no means deserves all the blame. The troubles can be traced largely to Lane's overly liberal lending policies. Lane grants the point, conceding that he forgot all the lessons his banker father drummed into his head about the collapse of the Florida real estate boom of the 1920s. But Kattel had made himself vulnerable through overoptimism; he long refused to write down the value of loans in the bank's faltering portfolio. As C & S head, he had developed the boyish habit of sending symbolic bullets to Atlantans who made tough decisions. He dispatched one to Lance, whom he had helped to raise money for Jimmy Carter's Inauguration, when Lance was grilled by a Senate committee about his banking affairs. More important, Kattel made numerous statements that recovery for Atlanta and C & S was just around the corner. When the Comptroller of the Currency questioned loans Kattel had thought sound, Kattel concluded that he had to bite the bullet himself. Said he: "We misjudged both the severity [of the problem] and the timing of the recovery. The frustration to me personally has been immense, and the credibility of the bank and its spokesmen must be restored."

Atlanta and the bank doubtless will survive. The Comptroller judged C & S to be "well-capitalized and sound." Meanwhile, Kattel, like Lance, has been deluged by job offers. As Poet Stephen Vincent Benet wrote about one of Georgia's founding families in John Brown's Body, there is a "melancholy pride/ In never choosing the winning side." -

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