The Budget Chief's Balance Sheet

Bert Lance, the amiable Georgia banker and longtime friend of Jimmy Carter who is director of the White House's Office of Management and Budget, has become one of the new Administration's strongest advocates for conservative fiscal policies. But Lance's own financial position is far from conservative; he is, in fact, hip deep in debt. Says Dan Pattillo, one of Lance's banking and personal friends in Georgia: "I couldn't sleep nights if I had to service debts like Bert's."

Before Lance was confirmed as OMB chief by the Senate in January, he filed a statement with a Senate committee listing his "direct liabilities" as $5,343,797. He valued his assets at $7,968,354 and thus his net worth at $2,624,557. That looked like a comfortable cushion. But the value of some of Lance's holdings has suffered a sharp decline. At the same time, his income has been cut drastically since he took his Washington job. How he can meet the estimated $370,000 in interest payments on his various loans this year and maintain his lavish living style mystifies his friends. It may turn out, says Pattillo, that "Bert just can't afford to stay in Washington."

The most serious problem facing Lance, report TIME Correspondents Rudolph Rauch and Philip Taubman, is his commitment under the Administration's conflict-of-interest guidelines to divest himself of the 190,000 shares he holds in the National Bank of Georgia, of which he was president before going to OMB. He had borrowed heavily to buy 164,228 shares of that stock in June 1975. He had paid $17.74 per share, or $2.9 million, as part of a move with two partners--Pattillo, a construction company president, and John Stembler, a Georgia movie-theater chain owner--to gain majority control of the bank. Lance's entrepreneurial acumen helped to almost double the bank's assets. However, the prospect of his large block of stock going on sale, plus his own departure and the bank's falling profits, have caused the stock's market value to drop to $14 a share. If at year's end Lance is forced to sell his stock at its present price, he will lose about $614,000 on the 164,228 shares and more than $60,000 on the other 26,639 shares that he bought last September at $16.87 a share. This would mean that Lance would have to find nearly $700,000 from some other source to pay off the loans he used to buy the stocks.

At the same time, Lance's other assets apparently are also shrinking, mainly because of the general market decline since January. Back then, he listed his stock holdings (including shares in the Georgia bank and 135 other companies) as being worth $5,649,000. That figure is certainly less today, given the state of the market. And he is not making what he was a year ago. Where he had drawn $150,000 in salary and severance pay from his bank and picked up another $20,000 in consulting fees, he now earns $57,500 as OMB director. He may continue to get about $150,000 in dividend income and perhaps another $125,000 in capital gains, which would bring his income to an estimated $335,000. But that is at least $35,000 short of his 1977 interest obligations alone.

Blind Trust. Lance, of course, has more financial responsibilities than merely paying interest on loans. His rent is at least $12,000 a year for his house in Georgetown. He owns a 40-room mansion in Atlanta, a $100,000 house in Calhoun, Ga., and a vacation home on Georgia's exclusive Sea Island.

Where will the money come from?

As required by Carter of all his Cabinet-level appointees, Lance's stock and other holdings have been put in a blind trust--an arrangement under which a person's holdings are managed for his benefit by a trustee, but without his knowledge. Lance's trustee, Thomas Mitchell, a Dalton, Ga., businessman, offers one answer: "I'll either have to increase the debt or liquidate assets."

Borrowing has never been a problem for Lance. Charles Presley, chairman of the Georgia Railroad Bank and Trust Co. and a longtime friend, admits that he loaned Lance $651,000 in 1976 in a deal that was "somewhat casual." As in some other Lance loans, there was no maturity date set; as long as he met interest payments there was no need to repay the principal. And being a banker, Lance got favorable interest rates on his loans; probably about 7%.

Lance brings an expert banker's dexterity to refinancing his personal debts. One example: a loan of $3,425,000 from the First National Bank of Chicago, originally a $2.7 million loan drawn in 1975 from New York's Manufacturers Hanover Trust Co. to buy his 21% interest in National Bank of Georgia. The Chicago bank took over Lance's loan from Manufacturers Hanover in December. The additional $700,000 in the loan, explains Lance, covered "accumulated interest and debts."

Taking Risks. Other Lance debts include: the $651,000 Georgia Railroad Bank & Trust Co. loan used to buy shares in another Georgia bank; $443,466 from the United American Bank of Knoxville, used to buy 26,000 shares in his bank; $240,000 from Roswell Bank of Georgia, used for Lance's unsuccessful campaign for Governor of Georgia in 1974; $185,000 from C & S National Bank in Atlanta, used to buy real estate. He also owes $340,000 on a mortgage on his Atlanta house and 8 1/2 acres of land, which he valued at $500,000.

Lance stoutly defends his aggressive method of handling his financial affairs. "The only way you can build an estate is by borrowing money and working at it," he says. "A lot of people would say they weren't willing to take those risks, and a conservative fellow wouldn't take that sort of risk. I was willing."

Lance scoffs at the idea that he is overextended. "I'm not vulnerable as long as I've got assets that can be used to pay those debts off," he says, "and I do happen to have assets that can be used in that regard." He contends "it's sheer speculation" that his bank stock will be worth far less than he paid for it by year's end. But if it is, he says, "I wouldn't hesitate to ask the President for some relief" --meaning a waiver of his pledge to sell the stock. Lance's trustee, Thomas Mitchell, says flatly: "I am not going to dispose of that stock at current market value come Dec. 31 or any other time. I'm not going to drop Bert a million dollars for going to Washington. He'll have to get another trustee to do that."

If Lance asks Carter for a waiver, it would pose a problem for the President. It is Lance's contention that as long as all his debts and assets are fully disclosed, there is no possible conflict of interest at issue.

At the least, Lance's financial position contrasts sharply with the balanced-budget goals Carter has set for his Administration. Says Lance's Georgia friend Presley: "There were some smiles down here when Bert was selected to run OMB. That's not the Bert we know. He'll have to change his philosophy."

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