CINCINNATI — Gov. Richard F. Celeste on Friday ordered 70 Ohio savings and loan institutions insured by a private company to close for three days after depositors made runs on several of the S&Ls.
At least two institutions initially defied the order but closed their offices later Friday. Celeste's emergency order was welcomed by some S&Ls but caused confusion and criticism at others.
"I think it was not only hasty but entirely uncalled for," said Donald McKay, president of Home Savings & Loan Assn. of Youngstown, which is federally insured and not affected by the order.
Regulators and industry analysts said that they could not remember such an extensive closing since the Depression.
Celeste issued the order Friday morning after customers, alarmed by the closing a week ago of the Cincinnati-based Home State Savings Bank, camped overnight outside at least two other Cincinnati savings and loans to withdraw their money.
The closings, until Monday, froze accounts at S&Ls whose deposits are insured by the private, Cincinnati-based Ohio Deposit Guarantee Fund. Ohio's approximately 125 state-chartered savings and loans protected by the Federal Savings and Loan Insurance Corp. were not affected.
In Columbus, Celeste and other state officials met privately with Federal Reserve Bank officials in efforts to obtain federal insurance for the 70 state thrifts.
Federal Insurance Sought
"It's very difficult to talk about any details of that effort because there are many tacks being undertaken simultaneously," he said after the meeting. "What will create confidence is to have these institutions reopen as viable financial institutions. Our goal in that effort--if it's at all possible--would be some sort of federal insurance."
Celeste said he could not guarantee that the closed institutions would be reopened Monday.
"I think it's a time when we need to take forceful action," Celeste said at a news conference at Cincinnati's Lunken Airport, where he announced the closings.
"Financial institutions really don't run on cash as much as they run on confidence. There is no amount of cash delivery in the end that will do the trick," said Karen N. Horn, president of the Federal Reserve Bank of Cleveland, who accompanied Celeste. "It must be a plan that will regain user confidence in these institutions."
Celeste said that officers of some of the thrifts had urged him Thursday to impose temporary closings or other measures while the state tries to obtain federal deposit insurance.
Depositors Camp at S&Ls
On Thursday, Cincinnati-area customers began lining up at Molitor Loan & Building Co. and Charter Oak Savings Assn. offices to withdraw their money. Some camped outside overnight waiting for the offices to open Friday morning.
Outside Molitor's suburban Delhi Township office, savings department manager Bob Nave, flanked by two police officers, relayed the closure order to depositors camped in the parking lot.
"I've got my entire savings here," said Ella Bowman, adding that she would return Monday to get her money.
In Steubenville, officers of Jefferson Building & Savings Assn. closed their institution after learning of Celeste's order, but then reopened, only to close again at mid-afternoon.
'Didn't Need to Close'
"We decided to reopen because we didn't need to close. We don't have anything in writing that would tell us we had to close," Vice President Bill Garman said.
In Bellaire, board Chairman George Hazlett of Buckeye Savings & Loan Co. said that his organization opened Friday because it is financially strong. It closed around noon. Friday's business was not unusual, he said.
"This thing isn't warranted," said Bill Connelly, vice president of Century Savings Bank in Cincinnati, which obeyed the order. "But, since it's here, what you've got to do is allay the people's fears."
Firm Closed for Week
The closed Home State Savings Bank drew out an estimated $40 million of the $130 million that had been in the Ohio Deposit Guarantee Fund, which is supported by 2% of the assets of each member bank, state officials said.
Home State's 33 offices have been closed for a week while state officials negotiate to sell the institution. Its closing followed last week's run of at least $20 million on its funds, withdrawn by nervous depositors after they learned of the court-ordered closing March 4 of ESM Government Securities Inc. of Fort Lauderdale, Fla. Home State had lent ESM $670 million, securing the loan with securities held by ESM.