QUESTIONS REMAIN ABOUT EXCHANGE BANK TAKEOVER

Within the last four years, three financial institutions have closed in Cape Girardeau. These closings have taken a toll on the economy and people of our community - but none was so great as the demise of the First Exchange Banks. Even after the issuance of bank fraud indictments, many questions remain about the closing of the Exchange banks.

Federal regulators took over control of First Federal Savings and Loan in April of 1989, and the Colonial Federal Savings and Loan in January of 1990. Both of those institutions were later sold by the Resolution Trust Corp., and absorbed into local banks. Last May, state and federal regulators took over the First Exchange Corp. and its subsidiary banks. Assets were subsequently purchased by other banks.

The collapse of the First Exchange Banks is far different than the savings and loan closings, and the bank shutdown took a far greater economic toll on Cape Girardeau County. Federal investigators have handed down indictments of alleged criminal wrongdoings in the bank. But a soon-to-be-published book written by a former Exchange Bank board member serves as an indictment of the regulators and the process.

Instead of working to save the banks, Dr. C.P. McGinty contends the regulators "drove them to extinction." McGinty claims that the banks went under because of an "onslaught" of regulatory actions. He feels investigators could have gone after those involved with the bank fraud without closing the institutions. He maintained board members tried to cooperate with regulators, unaware that the regulators were serving as judge, jury and executioner.

McGinty's book brings up an issue worth discussing. We count on our bank officials to manage our money with integrity and good sense. And when things go awry, we depend on state and federal regulators to straighten out the mess. But who watches over the regulators - to make sure they're doing the best job possible?

The First Exchange Bank in Cape Girardeau paid a dividend to its holding company in June of 1991 which would suggest things were in good shape. But only a few weeks later, Don Chilton head of the First Exchange Corp. was asked to resign by regulators, and 11 months later there was no Exchange Bank. How did things deteriorate so quickly?

The board of directors began hearing of problems in late 1990, when state and federal regulators began taking a hard look at the banks. In 1991, regulators said the financial problems had been going on at the banks since 1986. Why wasn't that revealed before 1991? Was closing the banks the only choice regulators had?

In all three cases, no money was lost by depositors.

But millions were lost by shareholders of the former First Exchange Banks. That wasn't the case with the two savings and loans, because neither were stock chartered, and both operated until being purchased by other financial institutions.

McGinty estimates bank losses at $100 million - most of that from Cape Girardeau County. It wasn't just the shareholders who lost big. Employees lost the majority of their pension plans, which were reinvested in bank stock. Some local businesses with loans at First Exchange found trouble in refinancing. Some businesses were forced to shrink; others had no choice but to declare bankruptcy. In addition to direct losses of money and property, there were indirect losses in jobs. In addition to financial losses, there was personal harm and damage to reputation as well.

The S&L and bank closings nationwide over the past decade have had a secondary impact as well. Many financial institutions are now choosing only absolutely "safe" loans, and are no longer willing to take a chance on some credit-worthy businesses. They simply don't want to face pressure from regulators, and it's easier not to make the loans in the first place. Today's multimillionaires who started on a shoestring years ago might have never made it in today's banking environment.

Some of our questions about the banks may be answered during the criminal trials of former First Exchange Bank officials Bill Chilton and Andrew Crawford. Some of the story may never be known - partly due to the suicides of Don and Pat Chilton on the day they were indicted on bank fraud and conspiracy charges.

But one thing is crystal clear: This region has suffered a catastrophic loss from the forced closings of the Exchange banks.