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Franklin National Is Bankrupt, International Group Takes Over

Franklin National Is Bankrupt, International ( Group Takes Over No problem is expected for depositors, but common stock is reported to be practically worthless TEMPORARILY ACOSED OP AM 8 At a Franklin National written sign tells only from the Federal Deposit the bank's headquarters GIFT BONANZA FREE GIFTS FOR NEW ACCOUNTS ASK FOR DETAILS Bank branch part of the Insurance in Westbury. Newsday Photo by Naomi Lasdon in Franklin Square, a terse handstory. Below, two unidentified men Corp. carry boxes of papers into Newsday Photo by George Argeroplos By Avery Hunt Franklin National Bank, once the largest bank on Long Island and the 20th largest in the nation, was declared insolvent yesterday and its assets were taken over by the European-American Bank & Trust Co. With its $1.7 billion in deposits, Franklin is the largest bank in U.S. history to go bankrupt. European-American planned to open all 104 of the former Franklin branches under its own name this morning for business with no interruption of services to its customers. The successor to Franklin is a privately held consortium of six major European banks with assets of $518.000.000. The precisely timed takeover, which ended five months of efforts to keep Franklin afloat, started the moment Franklin closed its doors to business at 3 PM yesterday. The Controller of the Currency declared that Franklin was insolvent. The bank was then immediately put into receivership and its assets frozen. The Federal Deposit Insurance Corp. was named receiver. Earlier yesterday morning, the details of the purchase of Franklin's assets by European-American had been hammered out. With Franklin declared insolvent, the FDIC, was able to formally accept European-American's bid and to move for final judicial approval of the sale. At 4:30 PM, Judge Orrin G. Judd of the U.S. District Court in Brooklyn handed down a 10-page legal decision that ended with an order authorizing the sale. Finally, the State Banking Board met in emergency session to give its approval to the takeover. At 5 PM, representatives of all the regulatory agencies involved held a press conference at the Federal Reserve headquarters in New York to announce the details of the agreement. Wall Street reaction and a history of the Franklin National, Page 37. What really went wrong, Page 55. had moved into the shuttered branch offices of Franklin National to check all assets and to literally count the cash. By morning, all former Franklin depositors had become EuropeanAmerican depositors, and their savings continue to be insured by the FDIC, of which European-American is a member. The new bank has no public stockholders, and therefore does not file disclosure information on its financial operations with the Securities and Exchange Commission. EuropeanAmerican is chartered by New York State. Basically the terms of takeover are as follows: European-American assumes bank liabilities totaling $1.704 billion, mostly in Franklin's deposits. Its bid for the purchase was $125,000,000. As receiver of Franklin's assets, the FDIC also "sold" European-American $1.579 billion of Franklin's loans and securities. In essence then, the $125,000,000 reverts to the FDIC and EuropeanAmerican takes on exactly that much more of Franklin's total liabilities. No cash exchanged hands. European-American has 180 days in which to choose what liabilities and what assets it wants to assume. The FDIC, in turn, will purchase the rest of Franklin's assets, which amount to $2.083 billion. It has also assumed Franklin's $1.7 billion debt to the Federal Reserve Bank, which will be paid -Continued on next page
Article from 09 Oct 1974Newsday (Suffolk Edition)(Melville, NY)
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