Crackdown No. i

Crackdown No. 1

Hanging near the teller's wicket in most of the nation's banks is a little bronzed plaque announcing that accounts are insured up to $5,000 by the Federal Deposit Insurance Corp. Bankers complained bitterly about having to buy those little plaque's (costing 15-c-), the idea of deposit insurance being thoroughly obnoxious to them. Once the bankers had the plaques, however, the idea of having them taken away seemed even more obnoxious. Until last week none had been withdrawn. Then Chairman Leo T. Crowley of FDIC announced that North Bergen (N. J.) Trust Co. would lose its plaque May 1. Reasons: operating with impaired capital, lending in excess of the legal limit, unwarranted concentration of loans, extension of credit to people and companies in which the bank's principal stockholders were interested. "It was also found," said FDIC, "that the management of the bank by its principal stockholders constituted a hazard to its depositors."

All this sounded even more like boom times when Bergen Trust's Vice President F. H. Dieckman declared: "The whole thing resulted from the failure of the New York group of stockholders who control the institution to meet the demands of the FDIC. Local officers of the bank have attempted to handle its affairs conscientiously, but the power lies with the group of New York interests." The New Jersey Banking Commissioner chimed in that "certain alleged irregular practices" had been under "surveillance."

Led by one Donald P. Kenyon, the "New York Group'' has apparently been at odds with the New Jersey stockholders for some time. At week's end it was reported that control had returned across the Hudson River to New Jersey, that after a cleanup the bank would apply for reinstatement. Financially, the whole affair was distinctly small time. Bergen Trust's deposits were about $1,000,000. But FDIC's crackdown did remind bankers that its supervisory function is almost as important as its insurance function. After a warning a bank is allowed 120 days to mend its ways. Some 50 institutions have been warned in the past but all except Bergen Trust complied with FDIC's demands before the deadline.

When Bergen Trust passed the deadline, FDIC promptly notified all depositors, thus broadcasting the bank's shortcomings to those best able to bring the management to heel. Insurance on present deposits continues two years after cancellation but new deposits are unprotected.

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