May 24, 1976 12:00 PM

At 60, the youngest of the four surviving Rockefeller brothers, David Rockefeller likes to think of himself as a self-made man. And indeed he is the only Rockefeller to go into banking, becoming in 1969 the chairman of Chase Manhattan, the nation’s third largest bank (behind Bank of America and Citibank). In this position, he has become the recognized spokesman for the banking world. With an annual salary of $279,000 (and an estimated worth of over $200 million), Rockefeller divides his off-hours among his spacious five-story townhouse in Manhattan’s fashionable East 60s and family homes in Maine and outside New York City. “DR” (as he is referred to by associates) and his wife, Peggy, have two sons, four daughters and two grandchildren. Investor, art collector, philanthropist, linguist—he speaks French, German and Spanish—and, according to Peggy, “the dreamiest dancer,” Rockefeller talked about the current state of banking with Christopher P. Andersen of PEOPLE.

Last year, more banks failed than at any time since World War II, and a record $3 billion was written off as bad debts. The government even keeps lists of “problem” banks that have overextended themselves. In light of all this bad news, how healthy are America’s banks?

The banking system has managed to come out of the biggest recession in 40 years in a strong position. Yes, there have been a few bank failures. But nothing like the Great Depression, when many banks went under and even the largest ones suffered such a serious loss of capital that it took them until the late 1940s and early 1950s to fully recover. On the whole, our banks are very sound indeed.

How, then, do you explain the steep decline in earnings reported by several major banks, including Chase Manhattan?

People have a misconception about bank earnings. They may be lower than in the past, but they are still pretty good. Our earnings in 1975 were down 13.9 percent over the previous year, but they were still the third highest in our history.

What about this year’s first-quarter drop of 56 percent in Chase earnings?

There are a number of negative factors—especially the lagging recovery of the real estate industry—that have dampened earnings.

How do you explain the staggering loan losses banks are now experiencing?

We keep forgetting that we’ve just gone through a tough period in our economic history. Of the $58 million worth of loans Chase wrote off in the first quarter of this year, about three-quarters involved real estate loans. Of course, that doesn’t mean we’ve given up on collecting these loans. We just thought it prudent to write them off.

Haven’t many banks been too eager to extend loans in recent years?

It’s always easy to make those judgments in hindsight. It’s certainly fair to say bankers did not anticipate as serious a recession as we had. If we had foreseen this, we would have been more cautious.

It was recently disclosed that Chase loaned more than $732,000 to an individual without any credit checks, and that the loan was bad. How could this have happened?

The New York Times ran that story on its front page, six years after it happened and four years after the officer involved retired from the bank. The loan probably shouldn’t have been made. But for the press to hold this up as an example of the kind of loans banks are making is utterly ridiculous. It’s not typical at all. I think the media and some members of Congress are trying to use the banks as a scapegoat for this country’s economic difficulties.

Why do you think that is so?

There are certain people in Congress who want to control the banks. Not that they are actually coming right out and proposing it, mind you. But I think some would like to see banks nationalized, as they are in many European countries. That would be a disaster.

The current system of control whereby banks, depending on their charters, are regulated by a variety of federal and state agencies has been called too lax. Shouldn’t we have unified federal control of the banks?

This is merely a move to get banks more under control of Congress. Many congressmen want banking to be a very regulated industry, and they want to exercise control. There are distinct advantages to the present regulatory system. In pure theory, a unified system may make sense. But that doesn’t take into account human frailties. A single authority would be more bureaucratic. Congress would then have control not only over spending, but monetary policy, which is now in the hands of the Federal Reserve. I’m convinced more control is not good for the banking system or for the country.

Shouldn’t decision-making by banks be more open to the government?

One of the great threats to the banking system is excessive disclosure. If banks are required to disclose information on the financial condition of the people we loan money to, this could be very embarrassing and seriously hurtful to our customers. It could make banks so cautious that we wouldn’t loan money to anybody except to the triple-A, blue-chip customers.

Couldn’t you live with any of the proposals designed to strengthen controls?

By tying the hands of the banks, you prevent them from doing the important job they have always done for the economy. Banks are here to help the people who want to come up in the world. The people who are likely to be hurt most by tougher controls on loan practices are the young entrepreneurs who have not yet had enough time to build up a good profit record. People tend to forget that banking is a risk business. Banks take risks, and because they do, many businesses are thriving today that wouldn’t be here otherwise.

Several of the REITs—real estate investment trusts—in particular Chase Manhattan’s, are in serious trouble. Why is this?

The real estate industry experienced tremendous expansion for about 30 years, with only one or two mild setbacks. This led to a degree of optimism that eventually turned out not to be justified. Inflation caused building costs to rise faster than in any other industry. As it stands now, about $11 billion is owed to banks by the REITs because of the plunge in demand for commercial construction. Although most sectors of the economy are turning around, the real estate market is lagging. Our real estate losses will probably continue. But we’ve seen the worst.

Aren’t foreign loans to developing nations proving to be a big problem?

This is a red herring. These nations have had some economic problems. But these are pretty modest loans we’re talking about. If this was all we had to worry about, we’d be in pretty good shape.

What about the African nation of Zaïre, which owes Chase and several other U.S. banks $1 billion?

In the case of Zaïre, the price of copper has dropped, and their economy was affected sharply by that. A big loan was put together to develop their resources. As a matter of policy, we will continue to make such loans.

Is the era of aggressive, expansionist go-go banking coming to an end—at least temporarily?

The Holding Company Act of 1969 enabled banks to get into financial services—real estate, for example—that banks had never been involved in before. Competition made it necessary for all the major banks to get into the act. During this time of expansion, assets grew much faster than capital. Now the pace of growth has slowed down. Loan demand has fallen sharply. The banks are consolidating their holdings and building up capital. This is a healthy period—a much needed time to sit back and take stock of where we are going. But it is wrong to say that banks no longer want to grow. We do, at a slower pace.

Is fully computerized, checkless banking the wave of the future?

I’m not sure we’ll ever have a check-less society. But it will probably be standard for people to transact much of their bank business without ever having to go through a teller. Instead, there will be computer terminals in supermarkets, department stores, on the street. This is going to have a drastic impact in the future, not just in the way computers handle customers and checks. It will be difficult to keep banks operating within state lines, as many do now. There will also be a reduction in the number of branches.

Where is the economy going?

The prospects are brighter for the economy now than I would have predicted at the beginning of the year. It’s just a matter of time before loan demand catches up with growing retail sales. Interest rates—the prime rate has been at 6¾ percent for the past few months—will start to move up and then level off.

Do you think the image of bankers will ever improve?

I hope so, though I don’t suppose bankers have ever been terrifically popular. The personal relationships between most bankers and their customers are often very warm. The days of the glassy-eyed banker with stiff collar and high hat are a thing of the past.

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