The man behind the merger.

MANY THOUGHT RICHARD D. PARSONS WAS on top of the world when with little bank experience he landed the prime spot as CEO of Dime Savings Bank, a regional New York City thrift institution. But then bank regulators discovered that the Dime was saddled with $1 billion in bad debts.

Before he turned around, Parsons was busy fending off unhappy regulators, and then the real tough stuff hit. Faced with a "fix this or else" situation, Parsons, who grew up in Queens, N.Y., rolled up his shirt-sleeves and got to work.

That was in 1990. In short order, Parsons set up a separate "bank" within the bank to manage and eventually write or sell off much of the bad debts, most of them home mortgages.

That wasn't the end of it. Parsons, who turned out to be a no-nonsense strategist, then set out to slash the thrift's workforce, laying off 2,000 of its 4,000 employees, practically eliminating middle management.

The moves helped the Dime fend off the worried regulators, and helped reduce the thrift's total nonperforming assets to $335 million. Parsons' swift and decisive action also put the Dime in a position to merge with Anchor Savings Bank, another formerly troubled thrift.

In January, the 46-year-old Parsons will get to reap the rewards. That's when he's due to become CEO of the new Dime Bancorp, the fourth largest thrift in the nation and the biggest on the East Coast, with $20 billion in assets. Clearly, with those kinds of dollars, the new Dime will command a good deal of market clout, particularly in the Northeast.

Of course, that doesn't mean Parsons gets to keep the gold yet. Financial analysts are maintaining a decidedly "wait and see" attitude about the strength of the new merged thrift, since both the Dime and Anchor are far from being debt free, and there are other problems.

Nonetheless, the events since 1990 have turned Parsons into a force to be reckoned with over the next few years. The man who once wanted to be a fighter pilot but gave it up because he was too tall is now poised to become one of the most powerful players in U.S. business.

The merger has also set off speculation about the future of many other smaller thrifts in the Northeast, since Parsons and Anchor's CEO, James M. Large Jr., have made no secret of their interest in acquiring additional savings institutions. Speculation is also rampant about Parsons' own career, since the Rockefeller Republican has maintained powerful political and corporate ties throughout the years.

The old Dime was a big name in New York, but not a national player. Dime Bancorp, however, is now in a position to compete with industry giants for retail customers. Says Parsons: "We feel we have put ourselves on a level to compete toe to toe with the larger commercial banks."

Initially, Parsons says, Dime Bancorp "will not go into interstate banking," even though the merged thrift already has a branch in neighboring New Jersey.

There are differing opinions on what the next logical move for Dime Bancorp should be, but Parsons says the new thrift will focus on solidifying its presence in New York City and surrounding suburban communities.

Analysts say the merger between Dime and Anchor Savings Bank is unusual because it involves two equals, as opposed to a larger bank swallowing a smaller one.

Anchor brings $9.9 billion in assets and 65 branches, while the Dime has $9.4 billion in assets and 34 branches. Both have concentrated on financing home mortgage loans, using money from consumer accounts.

They are also said to have accrued sizable debt loads the old-fashioned way, through customer defaults on mortgage loans.

Such consolidations are always tough, but analysts and insiders alike believe that if anyone can pull off this kind of corporate marriage, it will be Parsons and Large. "I think the chemistry is very good," says Thomas Theurkauf Jr., vice president of equity research for Keefe, Bruyette & Woods, and there are warming relations between the two executives.

Parsons and Large have already divided the turf. Parsons will be handling external communications and long-term planning, while Large, who will become president and chief operating officer, will be responsible for Dime Bancorp's day-today operations.

RISE OF A ROCKEFELLER REPUBLICAN

It is Parsons, though, who's been credited with being the driving force behind the merger--just as he's been seen as instrumental in the turnaround at the Dime Savings Bank. Ironically, when he first took over as president at the Dime in 1988, many in the banking industry questioned whether he had the background to run a bank at all. After all, it was Parsons' political connections to Rockefeller and other prominent Republicans that helped him get started in banking.

Parsons, who was profiled in BE's "Under 30 & Moving Up" series in 1975, took a job as an assistant counselor to New York Governor Nelson A. Rockefeller after graduating from law school. When Rockefeller became vice president, Parsons went to the White House as his deputy counsel.

"He was widely regarded at that stage as a great member of [Rockefeller's] staff," says Harry Albright Jr., who served as Rockefeller's executive assistant in Albany and later as chairman of the Dime.

Of all the qualities that Parsons demonstrated there and later in his career, Albright says that "the most important [talent] he has is good judgment and leadership. And those combined make him a really outstanding leader and everything he's done has shown those qualities of leadership."

But it was during those years with Rockefeller that Parsons was first identified as a man who was going places. Fast.

Parsons later became associate director of the Domestic Council, a position he held until he left the White House in 1977 and joined the Wall Street law firm of Patterson, Belknap, Webb & Tyler.

A NEW JOB AND NEW HEADACHES

In 1988, Parsons, at the urging of Albright, agreed to become the Dime's president and chief operating officer. Two years later, he became the bank's CEO.

"I never thought I'd be in banking until [Albright] came to me and said, 'You'd be a great next chairman of the Dime,'" Parsons recalls. "My wife talked me into it," he adds. "She said I needed a change."

Albright may have paved the road for Parsons, but he left him in control of a bank that turned out to be dying. Besides the $1 billion in bad debt, the Dime's nonperforming assets were nearly 11% of total assets by year-end 1991.

Colleagues say Parsons' management style helped smooth the painful layoffs that he had to make. They credit him with keeping employees informed every step of the way, at one point even producing several videos that were distributed to employees.

Jenesta Marlin, a senior vice president at the Dime, was considering leaving the thrift when she met Parsons. She was so impressed with what she saw in him that she decided to stay. Eventually, Parsons put Marlin in charge of the bank's special bad debt division.

"There was a clear recognition on his part," says Marlin, "that there was a need to deal with the troubled assets in a way that would not take away from the good part of the bank."

Marlin describes herself as a strong, independent person who prefers to run her own show. "He is not intimidated by [that], and he's a very secure person," Marlin says of Parsons. "I think it's a real credit to him."

Parsons says bank management has traditionally consisted of a few people making decisions and everyone else implementing them. He prefers to work with more proactive people, so when he slimmed down the Dime, he chose assertive types wherever he could. "What we needed was people who could think," Parsons says, "who could understand what the problem was, formulate a solution and execute--as opposed to waiting around for me to come and say what to do."

His analytical ability and strategic vision have also made him a coveted member of several major boards, including Time Warner, Philip Morris and Howard University. "We're very lucky to have him," says William Murray, chairman of Philip Morris. "He's good for our bottom line."

"He has also demonstrated broad knowledge and good policy judgment [on the Fannie Mae board]," says Fannie Mae chairman and CEO James Johnson. "The reason he's been a great benefit to us is the quality of his judgment," Johnson says. "It's not uncommon that you see people with expertise that are not able to give you broad advice or superb judgment."

Gerald Levin, chairman and CEO of Time Warner Inc., says he doesn't expect his board members to spend much time at the company, but adds "I am often amazed when I talk to somebody in the company and they say, 'Yeah, I just had lunch with Dick and he was very helpful.'"

Parsons has the rare gift of bringing the human touch to everything he does, while at the same time taking a serious, handson approach to solving strategic business problems. It is not a quality that has gone unnoticed by his employees.

David Totaro, senior vice president and chief marketing officer at the Dime, says Parsons isn't hesitant to voice opinions, but he is willing to back away from them if he's shown a better way. "I find that to be a very strong element of somebody's personality when they can do that," Totaro says.

THE ROAD AHEAD

Regionally, few analysts doubt that Dime Bancorp will lock in some local markets. "The benefit of these banks merging is [Dime Bancorp] will have a much deeper customer base to advertise and market to [regionally]," Theurkauf says.

In Brooklyn alone, the new Dime will be the No. 1 bank, with a 17% market share, and in affluent Nassau County, it will command a No. 2 position, with an 8.8% share.

However, while Dime Bancorp will "be a very competitive, large institution," Theurkauf points out that this does not necessarily mean it will be "a dominant one" in the banking industry in general.

A number of analysts also point out that while both the Dime and Anchor have done a good job of trimming bad debt and cutting expenses, both still carry a high level of debt relative to the size of their asset base.

The other reality is that Dime Bancorp faces the task of consolidating its operations while continuing to reduce the debt loads of the two merged thrifts. "The challenge now is to put both corporate cultures and people together, make a smooth, seamless operation, and actually achieve the [$50 million a year in] savings projected," says Anchor's Large.

The projected savings is based on the fact that when a merger occurs between two banks in overlapping markets, they can save "a substantial 15% of operations costs and benefit from enhanced revenues, products, and distribution," points out Peter Peracca, a managing director of Salomon Brothers, which represented Anchor during the merger negotiations.

Translation: Dime Bancorp is expected to close at least six branches and cut at least 500 jobs.

A WASHINGTON ADDRESS?

While the next step for Dime Bancorp may be unclear, Parsons is now identified as a man with quite a few options. The qualities that have made him an excellent corporate executive and board member are the same qualities that fuel talk about him returning to government in some role, elected or otherwise.

Harold R. Tyler Jr., who worked in the Ford administration with Parsons, says that if he "were a guessing man," he'd bet Parsons would eventually run for governor or take a presidential cabinet seat. "Richard Parsons has an unusually good balance of brains, good judgment and a great sense of people," says Tyler, who recruited Parsons to the Wall Street law firm where Parsons worked prior to joining the Dime.

The political connections that started with Rockefeller have continued, further aiding the speculation that Parsons will eventually return to Washington.

Parsons recently served as chairman of New York City Mayor Rudolph Giuliani's transition team, and now chairs the city's Economic Development Corp.

Although he has known Giuliani for 20 years, Parsons insists he doesn't volunteer his opinions. Still, he makes little effort to distance himself from Giuliani's policies. Giuliani has been harshly criticized for dismantling programs designed to aid blacks.

Parsons says Giuliani's problem is not his political philosophy, but rather his poor "communication" with the black community. "He [Giuliani] is a bright and thoughtful man," Parsons says of his longtime friend.

On being a Republican--Parsons' parents were Democrats--he says: "I wasn't born a Republican, I became a Republican...I became increasingly close to [Rockefeller] and began to understand his philosophy. It seemed to make sense to me."

Parsons equates Rockefeller's philosophy to equipping people with skills to get jobs, while he characterizes Democratic politics as taking from one group to give to another. "It doesn't work in practice," Parsons says of his interpretation of Democratic politics. "You can't give something to somebody to have. Then, they don't value it. Value is associated with hard work."

On the set-aside programs that Giuliani dismantled, Parsons says, "There isn't anything wrong with set-asides or quotas, [but] they are tools that should be a component of a larger, more fundamental approach."

Parsons, who has a three-year contract at Dime Bancorp, prefers to downplay talk about political philosophies and his own aspirations to focus on his new banking position.

"My job in the merged institution," Parsons says, "will be to look at what we will do next to grow the institution."

He says he won't reevaluate his own future until he turns 50, four years from now.

"What motivates me is a sense of accountability to people who are important in my life," Parsons says, referring to his family. "There are a lot of people I can't let down."

He says his rules for success include believing in yourself, acquiring necessary skills, and outworking the next guy. "That's what makes you different from your competition," he maintains.

What's next for Parsons? "I have a real driving ambition." Half seriously he adds, "I wish I knew what I want to be when I grow up."