Bank runs are supposed to be a thing of the past, from a time before federal deposit insurance was adopted.
But yesterday, a run developed at Metro North State Bank in Kansas City, Mo., caused in part by depositors' fears that bank insurance can no longer be completely trusted.
"This is a classic for the textbooks on rumors," J. Webster Hull, chairman of Metro North, a $550 million institution, said in a telephone interview. He blamed an "unsubstantiated rumor" that regulators were on the verge of closing the bank.
As depositors lined up to withdraw money, filling lobbies and causing long lines of cars outside drive-up windows, employees passed out a memorandum from Mr. Hull addressed to "valued customers" and saying regulators had assured the bank that "this rumor is not true."
The memo noted that "as usual, deposits up to $100,000 are insured by the FDIC," a reference to the Federal Deposit Insurance Corp. The memo also said the bank was well capitalized.
Metro North is controlled by Frank Morgan, a real estate developer who had controlled Home Federal Savings, until it was taken over by the Resolution Trust Co. last year. Last week, the RTC closed Home Federal.
Earlier yesterday, the bank's Metro North Mall branch was robbed, prompting a brief closing of that branch. The locked doors may have intensified the rumors of an impending closing of the bank.