WASHINGTON -- The nation's senior banking regulator, L. William Seidman, came under heavy attack yesterday at a congressional hearing on the plight of bank workers who lost their jobs and benefits after their institutions collapsed.
The case under examination was that of the National Bank of Washington, which was sold to the Riggs National Bank in August at an expected cost to the federal bank insurance fund of $300 million.
When Riggs took over, it dismissed hundreds of employees and denied them severance benefits, accrued vacation time and insurance.
Tellers, clerks and other employees at hundreds of failed banks and savings and loan associations have encountered similar difficulties.
The case of the National Bank of Washington is a focus of lawmakers' attention partly because it was the largest failure in the nation's capital and because all of the bank's depositors -- including those who had accounts at a branch in the Bahamas and those with more than $100,000 on deposit -- received insurance protection.
National Bank of Washington was also one of the few major banks whose employees had a collective bargaining agreement and wereunionized.
Four former employees of the bank told members of the Government Operations Subcommittee on Employment and Housing yesterday that they had been dismissed with no notice and had lost their benefits.
Seven months earlier, the chairman of the bank, Luther Hodges Jr., who was forced to resign, had received a $1.5 million %J severance agreement.
Under a new law, the government can challenge such agreements, known as "golden parachutes," but not retroactively.
Desiree Cameron, a teller at Washington National for almost five years, testified yesterday that she was out sick while the bank was being closed.
Ms. Cameron said she learned that not only was she out of work, but also that the bank's insurance would not cover surgery that she had had.
Other employees said they had not been hired by Riggs because they had been union members at NationalBank of Washington and Riggs was not unionized.
A spokesman for Washington-based Riggs, David R. Palombi, denied those accusations.
At the emotional hearing, Mr. Seidman, the chairman of Federal Deposit Insurance Corp., was questioned aggressively.
He conceded that the treatment of the Washington National workers had been "exceedingly unfair" but added that the bank's employees were being treated no differently from workers at any other business that fails.
"We are not charged with curing the unfairness in the world," Mr. Seidman said.
Representative Tom Lantos, D-Calif., the subcommittee's chairman, responded, "You are far too nice a guy to give these cold-blooded answers."
Mr. Lantos estimated that the cost to Riggs of giving the employees their benefits and severance pay would have been about $3 million, a figure that Mr. Seidman did not dispute.
But Mr. Seidman and officials of Riggs, which is expected to send a representative to testify before the subcommittee next week, insisted that there was little they could do.
Mr. Palombi, the spokesman for Riggs, said that since the bank had prevailed in legal proceedings brought by workers, it did not intend to take further action.