In little more than a week, New Englanders were shown a banking industry in turmoil.
On Dec. 28, the 28,000 depositors at the Capital Bank and Trust Co. of Boston were told that the bank was closed and that they would have to wait for checks to arrive in the mail before they could get their money. Deposits exceeding $100,000 were not protected.
Three days later, the newly elected governor of Rhode Island froze the accounts at 45 credit unions and banks after the institutions' private insurance was wiped out. Depositors were left wondering when they would get their money.
Three days after that, the Bank of New England collapse began. The announcement of a huge fourth-quarter loss spawned a run on deposits that drained nearly $1 billion out of the banking company. The Federal Deposit Insurance Corp. said all deposits, including those over $100,000, would be protected.
Three collapses in 10 days. Three different cases and three different levels of deposit insurance. Three troubling reminders that the promise of federal insurance is necessary but not necessarily enough to quell depositors' fears.
Is there any wonder depositors are anxious and confused?
"I think people are very shaky about where to keep their cash," said Huell E. Connor Jr., a Baltimore-area psychiatrist who works primarily with chief executives of small and medium-sized companies. "When we tend to get confused, which is the state of mind just before panic, we are prone to do things that we normally wouldn't do in a state of control."
Among federal regulators, bank executives and observers familiar with the psychology of depositors, the concern is that they are witnessing a growing loss of trust in an industry that offered little if not the promise of safety.
Though runs on banks are nothing new, concerns are increasing among those experts that people are losing confidence in a system that needs stability as much as anything else right now. Industry executives and Washington lawmakers are debating how best to restore the confidence of depositors.
Explaining why the FDIC chose to protect all depositors at the Bank of New England and not just those with deposits of less than $100,000, Comptroller of the Currency Robert L. Clarke told the Senate Banking Committee Wednesday that it was to "provide stability" in the area's economy.
"A further loss of confidence in the U.S. banking system could have induced additional bank failures, which would have cost the FDIC more than it would have saved by limiting coverage to insured deposits," he said.
Though there are no firm statistics available that would show to what extent depositors in Maryland have been moving their money from one bank to another in search of the safest vault, local banking executives mention intermittent flurries of withdrawals and deposits depending on the latest news report.
If Rhode Island's experience meant anything to Marylanders, it was to remind them of their past. In 1985, it was Maryland's turn to experience the worst.
The removal of Jeffrey A. Levitt, president of Old Court Savings and Loan, spawned runs that led to the thrift's failure and the collapse of the Maryland private insurance fund. In the aftermath, 102 savings and loans with more than 1 million accounts were affected. Six of the thrifts were placed in receivership, and it was more than four years before the nearly $1.3 billion in deposits in 123,000 accounts was repaid.
Indeed, about 3,000 accounts, representing more than $28 million in uninsured deposits, remain to be repaid, according to figures from the Maryland Deposit Insurance Fund.
Although the wounds are fresher in Rhode Island, few memories have faded in Maryland. And if people here remain skittish, it is understandable, experts say.
"It's kind of like putting your hand in a light socket. Once you've done it once, you're not going to do it again," said Robert D. Rieke, a vice president and former bank analyst at Rauscher Pierce Refsnes Inc., a regional brokerage house in Dallas.
In 1985, it was a private insurance fund that went bankrupt in Maryland, stranding the thrifts and depositors it was created to protect. But federal insurance works differently, regulators stress.
The federal government guarantees up to $100,000 in deposits at any institution protected by the FDIC. If a depositor has accounts at more than one institution or has separate accounts -- with a spouse or child, for example -- each account is insured up to $100,000.
And the FDIC insurance fund, though at its lowest level in history with a projected $4 billion balance this year, has access to an additional $5 billion from the U.S. Treasury, according to FDIC spokeswoman Caryl A. Austrian. Congressional debate continues about how to replenish the fund's dwindling assets.
Still, depositor jitters persist, and the flight for safety continues.