FAILURE OF BANK OF NEW ENGLAND WILL COST U.S. $2.3 BILLION
WASHINGTON — Federal regulators seized the Bank of New England Corporation's three bank subsidiaries in a failure they said will cost the government's dangerously depleted Bank Insurance Fund $2.3 billion. The banks, part of the nation's 33rd largest banking company, reopened Monday under federal ownership, and will be open for business as usual while a buyer is sought, says L. William Seidman, chairman of the Federal Deposit Insurance Corporation (FDIC).
Mr. Seidman also says former members of Bank of New England management ``are under investigation for questions of malfeasance and fraud'' but added that, in an unprecedented move, the current management would be kept on to run the company. The problems are the fault of the earlier management, Seidman says.
In a rare, hastily called Sunday night press conference, Seidman said the government would pump $750 million into the three troubled banks: Bank of New England in Massachusetts, Connecticut Bank and Trust Company in Hartford, Conn., and Maine National Bank in Portland, Maine.
Under federal control, all deposits will be federally insured, including accounts exceeding the FDIC $100,000 limit, the bank's top management told a Boston press conference.
The company is by far the biggest casualty yet in the deepening New England real estate crash and resulting banking crisis.
It is the third costliest commercial bank rescue, according to FDIC records. The other most expensive bailouts include: First RepublicBank Corporation, Dallas, $2.9 billion; MCorp, Dallas, $2.7 billion; Continental Illinois, Chicago, $1 billion; First City Bancorporation, Houston, $979 million.