Business almost as usual after S&L jolt

News of trouble in financial institutions travels fast these days. Last Monday, the first working day after 71 Ohio savings and loans were suddenly closed, a savings bank in Iowa opened its doors to half a dozen worried customers.

All had lived through the Great Depression. All wanted -- and got -- reassurance that their deposits were safe.

``We consider ourselves a solid bank,'' says Richard Hixson, vice-president of the Iowa State Savings Bank in Knoxville, Iowa, which unlike the Ohio thrifts, is federally insured. ``But in times like this, it makes you wonder'' about the overall financial system, he says.

Interviews with depositors and bankers around the country show that the Ohio situation is raising questions but is not causing immediate changes in the way most Americans go about their banking. On the other hand, experts who track consumer confidence or who keep close tabs on financial institutions say the Ohio crisis is causing regulators and the public to wonder, as Mr. Hixson does, about the general soundness of these institutions.

Some bankers, such as Carl Wohlbier, president of federally insured Junction State Bank in northern Wisconsin, say they are getting questions for the first time on private vs. federal insurance. But he and others say it is leading to no major changes in depositor behavior. Bankers and customers around the country remain basically confident.

``There's been a general atmosphere of calm,'' says Mark Clark, a spokesman for the US League of Savings Associations.

In California, for instance, the news bureau of the 630-branch Security Pacific National Bank received only two queries in response to the Ohio situation. And in New York, Jim Capellupo, Rochester district manager of the Empire Bank of America, says: ``We thought we might have some repercussions, but we really haven't.''

In states where private savings and loan insurance is common, such as Massachusetts, consumers have been much more inquisitive. But even in Ohio itself, the reaction has been restrained.

``We've had questions daily,'' says Terry Tracy, president of the First Federal Savings and Loan Association of Lakewood, Ohio, outside Cleveland. But he says that deposits have increased each day since the Ohio S&L crisis began.

And in Chicago, the scene of last year's turmoil at the Continental Illinois National Bank, many customers of banks and savings institutions appear similarly unconcerned. The news from Ohio ``is interesting,'' says a local medical student as he leaves Bell Federal Savings and Loan Association, ``but I don't really worry about it.''

``This is a safe place for me,'' says Kimberly Johnson of her account with another Chicago savings institution.

Despite such apparently widespread nonchalance, some customers and many who monitor public opinion say they notice signs of growing public concern about the health of the nation's financial system. They see it as the cumulative effect of news about the near-failure of Chicago's Continental Bank last year, continuing large US bank loans to financially strapped developing countries, and the collapse of a growing number of rural banks.

``Every time you read something in the papers, you get a little edgy -- I remember the Continental thing,'' says Jeanette Vangel, a legal secretary in Chicago.

Indeed, recent American Bankers Association surveys indicate there has been some decline in overall confidence in the nation's banking system. ``Where it's been tracked, there's been a little erosion,'' admits ABA spokesman Fritz Elmendorf.

ABA president James G. Cairns Jr., who also heads the People's National Bank of Washington in that state, says that part of the problem is that many people make no distinction among different kinds of financial institutions and the varying rules and risks that go with each one.

``Often perceptions are more important than reality -- and if you think all financial institutions are the same and hear that one's in trouble, it's easy to conclude they're all in trouble.''

But ABA surveys also show people tend to give highest marks to their own banks, just as they tend to think more warmly of their own congressman than of Congress in general.

Mr. Clark of the savings association suggests that the continuing nature of financial institution problems may even be breeding confidence among consumers. They are realizing that despite the crises, no one whose desposits are federally insured has yet lost money.

Also, bankers say, depositors are less shocked and more informed as each story unfolds. William Stone, manager of the First Interstate Bank of Utah (a state where all bank and savings institutions must now be federally insured), says many citizens there got a crash education of sorts in the insurance field a few years ago, when a state-insured thrift and loan went bankrupt.

``People get kind of immune to these things unless they're directly affected,'' adds Roy Linde, vice-president and manager of People's Bank of Tacoma in Washington. ``They feel like they've heard this story before.''

For the moment the worst of the Ohio turmoil appears to have passed. Most of the closed savings and loans will be open again by today, but for limited withdrawals.

Still, many consider the Ohio experience singularly important. A number of analysts say they think it is only a matter of time before all states require banks, credit unions, and savings and loans within their boundaries to be federally insured.

``It's a question of standing up and demanding that everyone play by the same rules,'' says University of Missouri economist Walter L. Johnson.

Dr. Johnson says the Ohio incident may fuel the drive to require financial institutions to make more complete disclosures of their investments. It is sure to be resisted.

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