New Era in Banking

Report Outline
Troubled Industry
Recent Changes
Consumer Issues
Special Focus

Troubled Industry

Recent Crises Despite Economic Recovery

Granite, windowless structures adorned at most with oversized Corinthian columns have for years identified banks as secure, unchanging institutions where people could safely deposit their earnings or take out loans. The local bank stood as a pillar of strength in the community, encouraging thrift by offering many of its services free of charge.

But all that is changing now. Bank failures are increasing at an alarming rate: the near-failure last year of the giant Continental Illinois National Bank and Trust Co. of Chicago was only the most spectacular incident in a growing list of crises in financial institutions that have been allowed to fail or been saved only by takeover by larger concerns. Until recently such failures were sporadic, and the banking system was widely considered safe from widespread runs.

That confidence was rudely shaken in March when Ohio Gov. Richard F. Celeste temporarily closed 71 privately insured savings and loans associations following a run on their deposits. For the first time since the Great Depression a large number of depositors—70,000—distributed across an entire state were denied access to their funds.