What's past is prologue - recalling a Cape Girardeau bank failure

It's been a rough March for the financial community.

The Federal Reserve Board Wednesday raised interest rates for a ninth time in the latest attempt to curb inflation.

Just two weeks ago, the nation received news of the failure of two banks: Santa Clara, California's Silicon Valley Bank, with $209 billion in assets, on March 10; and New York City-headquartered Signature Bank, with assets of $110 billion on March 12.

To those who might suggest such a collapse can't happen locally, the facts say otherwise.

Such a foundering, due to fraud, did occur 30 years ago.

A plaque indicating the limits of FDIC coverage is displayed in the lobby of the Bank of Missouri branch at 3427 William St. in Cape Girardeau.Submitted

A plaque indicating the limits of FDIC coverage is displayed in the lobby of the Bank of Missouri branch at 3427 William St. in Cape Girardeau.Submitted

In May 1993, First Exchange Corp. failed in Cape Girardeau County, leading to the closing of its banks in the cities of Cape Girardeau and Jackson -- at the time, the biggest such collapse in Missouri history.

"(First Exchange officials) were giving loans to friends that they knew would never be paid back, which resulted in millions in losses to local investors," said Frank Nickell, who was teaching history at the time on SEMO's Cape Girardeau campus. "The First Exchange collapse is recent enough that there are still people in town who were part of that whole episode, either as victims or villains."

Donald R. Chilton, 45, who was chair of First Exchange Corp., was found dead at a country club near Palm Springs, California, along with his wife, Patricia, 37, a bank corporate vice president, at around the same time a fraud indictment was handed up by a grand jury in February 1993.

An FBI spokesman would later characterize their deaths via handgun as "a mutual suicide."

The U.S. Attorney's office in St. Louis announced the Chiltons had been accused of cheating First Exchange out of more than $15 million.

"(First Exchange) was a small insolvency in comparison to more recent failures," Nickell said, recalling specifically Seattle's Washington Mutual, which fell apart in 2008 a year after reporting to the U.S. Securities and Exchange Commission assets totaling nearly $328 billion.

FDIC

Federal Deposit Insurance Corp. was formed June 16, 1933, to supply insurance to protect depositors following multiple bank failures during the Great Depression.

One of President Franklin D. Roosevelt's initial actions upon entering the White House was to declare a bank "holiday" March 6, 1933, shutting down the nation's banks for four business days after an estimated 4,000 U.S. banks with $140 billion in assets failed.

FDIC promises, according to informational plaques displayed inside American banking institutions, "each depositor (is) ensured to at least $250,000."

The quarter-of-a-million dollar figure noted will cover most bank deposits -- but not all.

Aaron Panton

Aaron Panton

"More than 90% of deposits at Silicon Valley Bank and Signature Bank were uninsured or did not have FDIC insurance coverage," said Aaron Panton, regional bank president, The Bank of Missouri, whose office is in Cape Girardeau. "This is an anomaly and not typical of most financial institutions. The data point alone is a great reminder of how important it is to have a conversation with your bank to understand how to fully protect your deposits with insurance coverage."