Carefree Collapse

Who cares what banks fail in Yonkers Long as you've got a kiss that conquers? --George and Ira Gershwin's Who Cares, 1931

Or what banks fail in Texas, as long as the Federal Deposit Insurance Corporation protects us? That would be a fitting refrain these days in the Lone Star State, where five small, state-chartered banks have collapsed since April.* Their fatal maladies were, variously, loose lending policies, lax management, land speculation, declining rural communities and, in one instance, alleged embezzlement. Perhaps it only reflects the new permissive attitude of the times, but Texas depositors have taken the closings with carefree jollity. Says Robbie Ferguson Jr., cashier and vice president of the failed Big Lake State Bank: "At first I was so embarrassed that I didn't come out of the house for two days. Then I got up the courage and came out, and everybody was laughing and joking about it."

The reason, of course, is that the F.D.I.C. guarantees all deposits of member banks up to $15,000. Thus when the First State Bank of Aransas Pass (pop. 8,000) failed to open last week, the F.D.I.C. moved in with what by now has become a familiar operation to many Texans. The bank had speculated in land adjoining the site of a planned metallurgical plant, and lost heavily when the plant did not materialize. The price of failure was borne by First State's shareholders, who do not enjoy any Government protection and who suddenly found their $860,000 of shares worth nothing. The F.D.I.C. sold the bank's remaining assets under sealed bids, and this week the bank will reopen under new ownership.

Matter of Trust. When the Citizens State Bank of Alvarado collapsed in April, the F.D.I.C.'s chore was somewhat more complicated. The federal agency is suing the bank's president, Jack Park, who has been mayor of the town since 1954, for $512,000 that it says he embezzled. But the F.D.I.C. seems alone in taking offense. "I've never heard such nice things about me as people said after the trouble started," says Park. In fact, when the Pioneer and Old Settlers Association held its annual meeting last month, its members elected Park treasurer to guard the association's $10,000 in cash.

No less trust attended the closings in Lovelady, a sleepy town in the piney woods of East Texas, and Big Lake, though there the faith was on the other side. The State National Bank of Lovelady (pop. 644) used to advertise that "we love people, particularly people to whom money is a mystery." President Jim Grady Waller lived up to his ads. "If a man needed money, Waller would give it to him, even if he didn't have collateral," says Mayor W. T. (for William Thomas) Bruton. "A man's word was good enough." The debtors still owe the F.D.I.C. but if they cannot pay, Washington will have to absorb the loss. "The bank understood the people," mourns Mayor Bruton, summing up what seems to be the prevailing philosophy of his town. "The inspectors just didn't understand the bank."

Pray for Rain. The inspectors were no more understanding at the First State Bank of Dodson, which simply followed that Panhandle community in decline, or at Big Lake, an oil and ranch town on the flatlands of West Texas, where billboards exhort passers-by to "pray for rain." Horace B. Rees, 64, president of the Big Lake State Bank, "let his heart overload his sense." as one customer says, and tried to lure industry to the town by loaning seed capital to dubious ventures. Big Lake, however, was deprived of banking services for only a week. Three groups bid for the charter, and a wealthy consortium of local oilmen and ranchers won out. Last week the new Reagan State Bank (named for the county) opened on the same premises with the same personnel--except for the overenthusiastic Rees and his two top officers.

* There have been eight bank failures nationally for the year so far. The other three were in Michigan, Colorado and Illinois.

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