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The three Government regulators decided to go ahead largely because the alternative to a takeover was a potentially dangerous bank failure. Moreover, the FDIC stressed that its ownership of Continental is temporary; it intends to sell out as soon as the bank is healthy once again. That process may take several years, however. After the rescue plan was announced, the White House issued a lukewarm statement supporting it.
Continental's takeover marks the end of a valiant struggle by Chairman David G. Taylor to keep the bank afloat. "This is not the go-it-alone path we aspired to, but at this point it is the best course open to us," he told employees last week in a press conference carried on closed-circuit TV. Taylor, who was named head of Continental last February, became one of the first victims of the takeover. Both he and President Edward S. Bottum were ousted, although they will remain for an interim period as vice chairmen. The FDIC immediately named new top officers and asked for the resignations of the bank's board of directors. Other resignations of Continental officials are expected to follow.
Taylor's successor will be John E.
Swearingen, 66, who retired last September as chairman of Standard Oil of Indiana. His partner in running Continental will be William S. Ogden, 56, a former vice chairman of Chase Manhattan.
Swearingen was chosen for his high profile in Chicago civic affairs and his tough management style; Ogden was selected for his expertise in international lending. Said Swearingen last week: "It is impossible to overestimate the importance of Continental to the country and to Chicago."
The takeover deal must be approved by Continental shareholders, who still hold 20% of the bank stock and stand to be major losers under the plan. Continental stock has already fallen from 25¼ to 4½ since last September. They are expected to endorse the agreement because the only alternative is bankruptcy, which would wipe out the entire value of their shares. Approval is expected in September.
Depositors and employees of Continental greeted the rescue with relief, even though it was the last thing they wanted a few months ago. While many customers have fled the bank, others have stuck with it out of loyalty. Says Donald Romans, vice president of Bally Manufacturing, a billion-dollar customer: "We will support Continental as long as it is able to support our business." Some fallen-away depositors like the Kemper Money Market Fund, which last May stopped buying Continental's certificates of deposit, are thinking about returning. Said Kemper Portfolio Manager Frank Rachwalski:
"Continental will have essentially no bad loans. They're probably in better shape than any U.S. bank."
The bailout is expected to boost mo rale inside the bank, which has lost a host of key employees by resignation. Observed Stuart Greenbaum, a finance professor at Northwestern University: "The loss of self-respect and pride among people at the bank has been enormous." Now that a comeback could be under way, he adds, many employees will want to stick around and try to redeem their reputations along with that of the bank's. Continental may soon rekindle its archrivalry with crosstown competitor First Chicago.