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NEWS ÜVERVIEW
UnderstandingWorld Events and Trends
When
Big
Banks Totter
T
he Orwellian year 1984
ends not with a world
dominated by socialistic
countries, but with a Western
Hemisphere filled with jittery
capitalists.
And it is all so strange.
Rising shakily from deep
recession, the United States'
economy hit full stride by
early spring with surprisingly
high employment and
production figures.
Oespite an enormous
federa l deficit, the economy
gainsaid doomsaying
economists and financia!
forecasters whose faces
reddened with
embarrassment. But the
1982-83 worldwide
recession took its toll.
Officials of the U.S.
Federal Oepostt lnsurance
Corporation (FOIC) told
The
Plain Truth
that bankruptcy
caused an average of one
January
1985
bank a week to close its
doors permanently, in 1983
and 1984 in the United
States.
Near the beginning o f the
recession Penn Square Bank
in Oklahoma tottered on the
edge of bankruptcy. Amid
shaky and questionable
banking practices (mostly
concerning energy-related
loans), the large state bank
finally slipped over the edge
and the financia! cadaver
was carved up by officials of
the U.S. Treasury and
Federal Reserve System.
Continentallllinois Bank of
Chicago absorbed about
US$1 billion of Penn Square's
loans.
Government officials
weakly asserted that the
affair preved that the Federal
Reserve safety net would
work. But the debacle
rocked the banking world.
To those only vaguely
familiar with high ñnance, the
phrase "sound as a bank"
began to take on a new,
derogatory meaning.
Then the impossible
happened. In May, the
aforementioned Continental
lllinois Bank in Chicago-one
of the largest-was reported
to be in trouble. Within hours,
a spectacle not seen since
the days Qf the Great
Oepression ensued. For the
next three months,
depositors drained away an
incredible US$1Obillion from
Continental's $30 billion in
deposits. To stem the
financia! hemorrhage, the
U.S. government and prívate
banks rushed in with an
unprecedented loan of $7.5
billion, dwarfing the
controversia! $1 .2 billion
Chrysler bailout loan of
1979.
The situation slowly
stabilized. Since a prívate
buyer could not be found,
the Federal Oeposit
lnsurance Corporation. which
Safe Nuclear
Storage?
T
he National Advisory
Committee on Oceans
and Atmosphere has
proposed that the United
States reconsider dumping
low-level radioactive wastes
into the oceans.
Most U.S. nuclear garbage
is stored on land. Ocean
dumping, however, is less
costly. The committee
believes that , if carried out
properly, ocean dumping is
no more dangerous !han
land storage.
insures deposits in a
federally chartered institulion
lo $100,000, agreed lo
absorb more !han $4.5 billion
of Continental's loans (about
8 percent of Continental's
loans were classified as
"nonperforming"). They also
announced that the FDIC will
hold more than 80 percent of
Continental's common stock ,
thus giving the agency full
control over Continental's
future.
U.S. Federal Reserve and
FOIC officials interviewed by
The Plain Truth
claim that the
U.S. banking system is still
reasonably healthy. One
official pointed out that
" over 90 percent of the
14,800 lbankingj institutions
have very healthy ratings and
are well managed." But the
same official admitted that
the Continental affair
bordered on
"catastrophe."
•
For severa!
countries- including Britain,
Switzerland and
Belgium- ocean dumping of
radioactive material has
been a familiar task. Britain's
Windscale nuclear
reprocessing plan! pours 1.2
million gallons of mildly
radioactive water into the
lrish Sea every weekday.
Windscale disgorges more
nuclear waste into the ocean
than any other plan! in the
world.
Whether ocean dumping
poses a serious threat lo
human health is a tapie of
continuing debate.
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