BOSTON -- The Bank of New England Corp. filed for bankruptcy, one day after federal regulators seized three subsidiaries with $22 billion in assets in the third-largest bank failure in U.S. history.
The Chapter 7 filing in U.S District Court Monday sought liquidation of the company under a court-appointed trustee. But it didn't involve the three failed banks -- Bank of New England in Massachusetts, Connecticut Bank & Trust Co. and Maine National Bank -- closed Sunday by the Federal Deposit Insurance Corp.
The FDIC took over the banks to halt a run on deposits and restore confidence in the region's banking system, undermined by crashing real estate prices and rocked by a credit union crisis in neighboring Rhode Island.
Regulators also hoped to stabilize the region's sagging economy by enabling banks to resume lending to credit-starved New England businesses.
The FDIC seizure of the Bank of New England's operating units was expected to cost the agency at least $2.3 billion. The FDIC said all deposits of the banks were insured -- including those exceeding a normal $100,000 limit.
A spokesman for the banks, James Dorsey, said the seizure 'reversed' the deposit run experienced last week, and that six large corporate customers, 'major area employers,' had reopened accounts since the FDIC took control.
Monday, some worried customers withdrew deposits or emptied safe- deposit boxes. But most went calmly about their business at banks now officially owned and operated by the Federal Deposit Insurance Corp.
'I don't want to lose what little I have left because of someone else's mistakes,' said unemployed Bostonian Charles Heffner, 21. He closed an account Monday at the Bank of New England's headquarters branch.
Retired postal worker Harold Vigoda said he had changed his mind about taking out his money. 'I was worried but I calmed down,' he said.
Meanwhile, Banc One Corp., a Columbus, Ohio superregional bank which already has one failed-bank takeover under its belt, emerged as a leading candidate to take the three failed bank units off the FDIC's hands.
FDIC Chairman L. William Seidman said when announcing the seizures that there were two active bidders in play for the banking units.
'We will be interested in looking at Bank of New England,' Banc One Chairman John B. McCoy told United Press International in a telephone interview. 'It doesn't say we'll buy it or we're going to bid (on it, but) when we're given an opportunity to (consider it), we'll do that.'
San Francisco-based BankAmerica Corp., which last year pushed into the No. 2 position among U.S. bank holding companies, said it is interested -- but that a deal would require 'substantial FDIC assistance.' Another West Coast money center bank, Wells Fargo & Co., was believed to be looking.
Bank analysts also cited NCNB Corp. of Charlotte, N.C., to which the FDIC has sold a failed Texas bank,and First Wachovia Corp, of Winston- Salem, N.C..
McCoy of Banc One, which bought Dallas's failed MBank, said the Bank of New England, with a strong branch network, was 'our type of bank.'
But he expressed reservations. When his company bought Dallas's failed MBank, 'the economy of Texas was down as far as it would go,' whereas in New England, 'we haven't hit bottom yet. So that is of concern to us.'
McCoy said he wouldn't go for a 'whole bank' deal, seeking to aquire only the deposit base and retail system, leaving in federal hands the huge portfolio of nonperforming real estate loans that killed the institution. That would mean that the FDIC would bear most costs of the collapse.
New England bank analyst Gerard S. Cassidy said Banc One looked like the top contender to pick up the pieces. The Midwest institution is financially strong and was circling the Boston-based bank even before the failure.
Cassidy, who works for the New York investment bank Tucker, Anthony & R.L. Day, said Bank of New England could be a fine acquisition.
'If you believe New England is not sinking into the Atlantic, here is an opportunity to buy merchandise at a very depressed price that will eventually come back and shine,' the Portland, Maine-based analyst said.
For the New England region, such an acquisition deal could stitch a silver lining into the dark bank failure cloud.
'You're essentially going to have clean banks operating in New England, and these banks will be able to go out and seek new, creditworthy customers,' he said. 'In essence it is a rebirth of the banks.'
Monday's bankruptcy filing concerned only the holding company, which lost its subsidiaries after it effectively disclosed its insolvency. Also concerned are stockholders, bondholders and creditors of the institution.
The New York Stock Exchange suspended trading in Bank of New England Corp. stock and said it would seek Securities and Exchange Commission permission to permanently delist that stock and a related bond issue.
The institution's collapse was the third largest U.S. bank failure in terms of assets and in anticipated cost to the troubled FDIC.
The two larger failures were those of Continental Illinois National Bank in Chicago, with $33.6 billion in assets, on Sept. 26, 1984, and First Republic Bank in Dallas, with $32.9 billion in assets, on July 29, 1988.
Losses to the FDIC were greater only at First Republic, $2.9 billion, and at MBank-Dallas in Dallas, which cost $2.7 billion each to mop up.
