Special effort said under way to save two BCCI banks

November 08, 1991|By New York Times News Service ... ..

Spurred by both financial and political concerns, the Federal Reserve Board is engaged in an extraordinary effort to try to make sure the two U.S. banks that were secretly owned by the Bank of Credit & Commerce International do not fail, according to government officials and others familiar with the assistance program.

The two banks -- the Independence Bank of Encino, Calif., and First American Bankshares Inc. of Washington, D.C. -- are linked only by their association with BCCI, which the government alleges illicitly bought both institutions acting through front men.

Their operations are separate, and their financial problems are quite different.

But the government regards the possible collapse of either bank as "political dynamite, especially given the criticism of the administration's handling of the BCCI investigation," according to one person familiar with the rescue effort.

The political sensitivity of the issue is heightened by the approach of a presidential election and the possibility that tax money might have to be used to repay depositors if a BCCI-related bank failed.

The Federal Reserve, like other agencies, has been criticized in Congress for not recognizing quickly enough that BCCI had secretly purchased U.S. banks.

Independence, not First American, is the bank in trouble at present, and the Federal Reserve's work on its behalf has been the most unusual. Senior Fed officials, for example, have spent long hours trying to help save it.

Fed officials concede the bank is getting special treatment but say their main concern is the basic business of the Fed: to save banks and strengthen the financial system.

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