Word: fdic
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...corporate customers, whose deposits are above the $100,000 FDIC insurance limit, are quicker to pull their money out of a troubled bank than small depositors, who are usually insured. That situation made Continental vulnerable to the runaway rumors...
...week in a press conference carried on closed-circuit TV. Taylor, who was named head of Continental last February, became one of the first victims of the takeover. Both he and President Edward S. Bottum were ousted, although they will remain for an interim period as vice chairmen. The FDIC immediately named new top officers and asked for the resignations of the bank's board of directors. Other resignations of Continental officials are expected to follow...
They soon became a self-fulfilling prophecy. The rumors, first published by the Commodity News Service and then repeated around the world, prompted many foreign depositors to begin taking their money out of Continental. The FDIC arranged emergency infusions of cash and pushed Continental to find a merger partner. A number of leading banks, including New York's Citicorp and Chemical Bank and First Chicago, examined Continental's books; they were unwilling to take over the ailing bank without large amounts of financial help from the FDIC, which the agency was unwilling to give...
That forced the FDIC to become a rescuer of last resort...
...ominous implication of the Continental bailout is that nationalization might become a common way to salvage large banks that run into trouble. FDIC Chief Isaac, a lawyer who favors deregulation of banks, argues that the rescue is a long way from nationalization. He contends that his agency will not be come involved in the day-to-day running of Continental. If the Chrysler case is any precedent, however, the Government can easily be tempted to involve itself in a company's affairs. While federal watch dogs were scrutinizing Chrysler, Washington bureaucrats were even deciding whether the company could keep...