Bank Bust Brewing?

If you think Dallas is still immune from the ill effects of this monster economy, think again. Sources in the business community indicate at least two major Dallas banks/savings and loans are on extremely shaky ground.



This is not such shocking news if you review what’s been happening to banks in other parts of the country lately. Who’d have thought U.S. National in San Diego, the 20th largest bank in the nation, and Franklin National in New York, would be forced into reorganization by the money squeeze?

Franklin’s collapse illustrates the bind the average depositor can be in if banks start bellying up. One armchair accountant calculated that had the FDIC (Federal Deposit Insurance Corporation) been forced to pay off all eligible depositors at Frankln, the FDIC would have gone bankrupt. Fortunately, the Federal Reserve System has already poured more than a billion dollars into Franklin to keep it afloat. But the Fed has indicated that it cannot be counted on to take the same action in future bank crises.

Which means that if other banks get into serious trouble in the future, that FDIC or FSLIC (Federal Savings and Loan Insurance Corporation) “guarantee” may not help the average depositor much. FDIC and FSLIC, in fact, are not wholly backed by government money. The insurance you get through these corporations is backed almost entirely by reserve funds contributed by member banks and S&L’s. A rough tally shows those reserves total less than two per cent of the deposits they are insuring.

All of which means it pays to look beyond the FDIC or FLSIC sticker on the window when depositing. These days, it’s smart to take a close look at the institution’s latest financial reports. One rough guide to a safe deposit is the percentage of deposits that the institution has loaned out. The closer that percentage is to 100 per cent, the less safe your deposits there may be.



Even as talk about troubled banks is floating around downtown, banking growth is still a hot speculation game in the business community.

The prevailing theory on the burgeoning growth of bank holding companies such as 1st International Bancshares goes something like this: Within five years or so, Texas will go to statewide branch banking, which will set off a whole new Texas-style financial free-for-all. But it won’t stop there, say the financial prophets.

The next stage will be national branch banking, which many believe will be a reality by the mid-1980’s. All of which suggests an interesting scenario: If indeed banking goes national, 1st International and Republic of Texas, which now look like giants, may be pretty small fish in the Dallas financial pond. National branch banking would allow the real biggies-Bank of America, Citicorp, Chase Manhattan and Morgan to move in, and most think Republic and First would really have to hustle to compete successfully.