Aftershocks

In Cincinnati, nervous depositors formed lines up to a block long and even slept on sidewalks overnight while waiting to withdraw their savings last week. Ohio Governor Richard Celeste finally stepped in and declared a three- day bank holiday for 71 savings and loan associations, probably the most extensive closure of U.S. financial institutions since the Great Depression. In Memphis, board of education officials were anxiously checking their investments. Elsewhere, communities from Beaumont, Texas, to Pompano Beach, Fla., were badly shaken.

The rapidly growing storm was touched off by the March 4 collapse of E.S.M. Government Securities, a Fort Lauderdale, Fla., dealer in bonds, notes and bills. The failure left dozens of creditors out as much as $300 million. E.S.M. had beguiled investors by offering high interest rates for short-term loans backed by U.S. Government securities. But some of E.S.M.'s customers never actually took possession of the securities, many of which now cannot be found.

So far, Ohio has been hardest hit by the E.S.M. scandal. Within days of the collapse, Cincinnati's Home State Savings Bank (assets: $1.4 billion), which may have lost up to $150 million as an E.S.M. investor, was shuttered by state banking authorities after a run on its deposits. That triggered a statewide panic when depositors at other thrifts, which had no dealings with E.S.M., rushed to withdraw their money, fearing that their savings were in jeopardy. At mid-week, the Ohio legislature created a $90 mil- lion emergency fund to supplement insurance for the savings and loan associations, but even that soon seemed inadequate in the face of mounting withdrawals. When he declared the bank holiday on Friday, Celeste explained that legislators and federal and state banking officials were working round the clock to formulate a plan to restore confidence in Ohio's financial institutions.

Questions were also raised about the involvement in the E.S.M. failure of Marvin Warner, Home State's owner and a U.S. Ambassador to Switzerland during Jimmy Carter's presidency. Warner, a major investor in the Florida firm and an owner of the Birmingham Stallions of the U.S. Football League, liquidated his own holdings in E.S.M. in January. Yet he insists, "I am one of the biggest victims." Last week Warner resigned from his powerful position as chairman of the Ohio Building Authority in the wake of the Home State closing.