Con. Illinois rescue plan

Press, 25 July 1984, Page 28

Con. Illinois rescue plan

NZPA-Reuter Washington Continental Illinois National Bank and the US Government have broadly agreed on a $3 billion rescue plan tantamount to nationalisation of the bank, the “Washington Post” has reported. The “New York Times” said the Government’s Federal Deposit Insurance Corporation was planning to make a $4.5 billion investment in the bank. Congressional sources have told Reuters that terms of the rescue operation are expected to be announced very soon by the FDIC, which insures bank deposits. The “Post” quoted unnamed banking sources as saying details of the plan could change but the bank directors had agreed to sell the FDIC $3 billion dollars worth of the bank’s loans

for $2 billion dollars in cash.

The sources said the FDIC agreed to buy up to another $1.5 billion worth of the bad loans in the future if necessary. The “Post” reported the sources as saying the Government would also buy $1 billion worth of newly issued Contintental securities now, in effect giving it control of America’s eighth largest bank. The Government hopes by buying most of the bank’s bad loans to create a healthy but smaller bank able to earn money quickly on its good loans and so able to attract depositors on its own, the banking sources said. Congressional sources say the FDIC will try to liquidate the Continental loans it buys, either by selling them at a discount or finding ways to collect on them.