Newspaper article THE JOURNAL RECORD

Comptroller: First National Bank `Just Ran out of Gas'

Newspaper article THE JOURNAL RECORD

Comptroller: First National Bank `Just Ran out of Gas'

Article excerpt

First National Bank & Trust Co. of Oklahoma City would have failed last week - even if the Federal Reserve Bank of Kansas C ity had not demanded that First National repay $300 million in loans - according to Robert Clarke, the U.S. Comptroller of the Currency.

"The bank just ran out of gas," Clarke told The Journal Record, in a telephone interview from his Washington, D.C. office.

The $1.6 billion bank, once considered Oklahoma's largest and strongest bank, was declared insolvent by the comptroller late on Monday, July 14.

First Interstate Bancorp. of Los Angeles paid $1.2 billion to buy the good remains of First National and reopen the Oklahoma City bank on Tuesday, July 15, as First Interstate Bank of Oklahoma City, N.A.

When Clarke was asked whether the Fed's $300 million demand was the major reason for his decision to close First National on July 14, he replied:

"It was a combination of things. . .

"They were about to announce a large operating loss for the second quarter," Clarke said. "That would have wiped them out of equity capital. So they would have run virtually out of primary capital."

Primary capital includes equity capital and a bank's reserves to pay debt.

First National's second-quarter loss would have surpassed its record first-quarter loss this year of $45 million, Clarke said.

"When a bank can't fund itself," Clarke said, "it meets both insolvency tests."

The scramble to save First National - by trying to find a suitable buyer - began on Friday, July 11, according to U.S. Rep. Mickey Edwards, R-Okla.

"I was in touch with Robert Clarke," Edwards said. " I begged him to do whatever he could to save First National. I told him that psychologically, Oklahoma can't handle another Penn Square."

Penn Square Bank of Oklahoma City had to be liquidated four years ago when it collapsed, because no buyer could be found. …

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