Word: bailouts
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After the bailout of Mexico, the next major challenge for Volcker came in the summer of 1984, when Continental Illinois, once the seventh largest bank in the U.S., suffered a relentless run on its deposits after word got out about its immense pile of bad loans. To stave off a crisis, Volcker helped assemble a package of $4.5 billion in fresh commercial-bank loans for Continental. "This is a very historic thing," remarked a New York City banker. "This is the first time the Fed has been party to any kind of statement that 'nobody is going to lose.' " While...
...billion in the capital markets. But in their rush to adjourn before next week's elections, the lawmakers neglected to reconcile the two different versions of the legislation. Edwin Gray, the chairman of the Federal Home Loan Bank Board, which oversees the FSLIC, had warned the lawmakers that a bailout was urgently needed. Gray said he was "deeply disappointed" by the impasse but vowed that his agency would "do its level best" to manage without the help...
Despite its huge size, Bank America can lose money for only so long before needing an injection of outside investment. Many experts think the bank will struggle along without needing any bailout from the FDIC. A more likely possibility would be a merger with another bank, perhaps even with one of the Japanese institutions that have gained a foothold in California in recent years. "Stranger things have happened," says Chairman Leland Prussia. "If someone comes up with a good proposal, we would consider it seriously." Time could be running out for the bank's president and chief executive, Samuel | Armacost...
...strain on BankAmerica and banks in the Southwest, experts see no significant threat of failures that would overwhelm the FDIC. The agency's bailout fund, now more than $18 billion, has grown every year recently despite a surge in bank failures. Profits in the overall banking industry are growing at an estimated 10% or better annually, and last week four of the major New York City institutions reported robust quarterly earnings. Along with the painful contraction taking place in the steel industry, the regional banking woes are the natural result of the ebb and flow of economic tides. While some...
...recent weeks, though, bad loans in the U.S. oil patch have joined the long-standing Mexican problem at the top of bankers' worry lists. Energy loans gone sour have already forced the federal bailout of one major U.S. bank, Continental Illinois, in 1984, and the latest surge of bankruptcies in the energy belt could at least cause some smaller institutions to collapse. The top U.S. banks have an estimated $40 billion in oil and natural gas loans on their books, and more than half of the money has been lent to vulnerable small companies...