Bank Failures Take Heavy Toll on Employees Too
WASHINGTON (AP) _ Bank teller Desiree Cameron was recuperating from an operation to remove her gallbladder when she learned that National Bank of Washington, her employer of five years, had failed.
Federal regulators seized it Aug. 10 and turned its branches and deposits over to a competitor, Riggs National Bank.
Legally, National Bank of Washington, the capital’s oldest financial institution, had ceased to exist.
Also evaporating in the collapse were Cameron’s 400 hours of accumulated sick leave and her medical benefits. Seven months later, she has been unable to pay $7,900 in hospital bills.
″I still owe them. I guess it will take me the rest of my life to pay it all off,″ she told the House Government Operations subcommittee on employment Monday.
As in the other 1,000 bank failures over the past six years, deposits were protected, but employees, stockholders and creditors were not.
FDIC Chairman L. William Seidman told the panel he sympathized with those who lost their jobs but said his agency was legally responsible for protecting depositors and holding down costs to its insurance fund. The transaction cost the fund $300 million.
The National Bank of Washington transaction was a so-called ″too big to fail″ rescue, protecting all deposits, even those in excess of the $100,000 insurance limit and some $40 million in a branch in the Bahamas.
But the contract that protected Cameron and the 371 other members of Local 2 of the Office and Employees Professional Union instantly became worthless. Employees lost not only their jobs but also their health benefits, severance pay and accrued vacation and sick leave.
Carmen Pow, a retired bank employee who had helped organize the union in 1972, said she now must spend $205 of her $560 monthly pension check to replace health and life insurance the bank once provided to pensioners.
Helen Desper, a senior account clerk with 17 years at the bank, told the panel, chaired by Rep. Tom Lantos, D-Calif., that she has not found a fulltime job yet. Her oldest son could not return for his senior year at college and she has to explain to her younger children why they must do without.
″It seemed cruel the way it was done. There was no warning at all,″ she said. ″Everybody felt dazed and stunned. I still hate to even recall it.″
Riggs offered temporary jobs to many National Bank of Washington employees but refused to hire more than a handful permanently.
″It was obvious Riggs had blacklisted the union-represented employees,″ charged John Kelly, president of Local 2.
Last week, the union asked the executive board of the AFL-CIO to withdraw union money from Riggs and place the bank on labor’s ″Don’t Buy″ list, he said.
Riggs officials are scheduled to reply to the charges at a separate hearing Thursday.
Riggs Senior Vice President David Palombi said the union’s blacklisting allegations were ″absolutely false″ and had been dismissed by both the U.S. District Court for the District of Columbia and the National Labor Relations Board.
He said Riggs spent $3 million to hire National Bank of Washington workers temporarily and then paid them $560,000 in severance. But, he said, Riggs could not afford to keep them on.
″The deal only made economic sense if we could fold their operations into our own,″ he said. ″I don’t think Riggs treated the employees other than fairly and reasonably.″
Lantos offered to write legislation giving the FDIC more flexibility to protect employees of failed banks. But Seidman said bank employees should be treated no differently from employees of any other bankrupt business that must be liquidated.