Word: bailouts
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...addition, Government regulators put 817 of the 14,700 U.S. banks on their "problem list." The worst problem was Continental Illinois, which started the year as the seventh largest U.S. bank. It would have collapsed under its bad loans if the U.S. Government had not provided a $4.5 billion bailout in July. Federal regulators took control of the bank, installed new management and fired most of the directors...
...FDIC, which staged a $4.5 billion bailout of the failing institution last September, made the sweeping ouster at Continental partly to remind bank directors across the U.S. of their supervisory responsibilities. The FDIC dismissed all the directors elected to Continental's board before 1980 because it was during the late 1970s that the bank made most of the $3 billion in reckless loans that led to its near collapse. The agency contends that the directors should have monitored more carefully what was going on at Continental. Ideally, corporate directors are wise and prudent overseers of an institution...
...action is part of a campaign by regulators to bolster big U.S. banks. They intend to ward off any possibility of a near catastrophe like last July's $4.5 billion federal bailout of Continental Illinois...
Critics in Congress continue to question the regulators' handling of the Continental bailout. Last week Rhode Island Democrat Fernand St. Germain, chairman of the House Banking Committee, charged that federal regulators had drummed up support for the bailout by exaggerating the number of banks that would have fallen in a domino effect if Continental had been allowed to fail. As a result of congressional pressure to avoid such rescues, bankers believe First Chicago, because of its fundamental soundness, presented an opportunity for the Comptroller to clamp down without causing a widespread scare...
...facing liquidity problems. Last month institutional investors, worried by the company's lower earnings and regulatory problems, withdrew $1.4 billion in deposits, forcing F.C.A. to borrow emergency funds from the Federal Home Loan Bank in San Francisco. Coming just three weeks after the $4.5 billion federal bailout of Chicago's Continental Illinois Bank, the troubles at F.C.A. were particularly unsettling to financial circles. After Knapp's press conference last week, the Dow Jones industrial average dipped more than 15 points. F.C.A., the most heavily traded stock of the day, was the biggest loser, falling 21A points...