Gov. Richard F. Celeste today closed 70 state-chartered savings and loan associations for at least three days in an attempt to halt a multimillion-dollar run on the Ohio institutions touched off by the shutdown of the Home State Savings Bank.
The governor, invoking emergency powers, said savings and loan associations whose deposits are guaranteed by the private, state-chartered Ohio Deposit Guarantee Fund--but not by the federal government--will be closed at least through Sunday.
Celeste said he would not rule out the possibility that the associations would remain closed longer.
The run was touched off by the closing of Home State Savings, of Cincinnati, last week in the face of massive demands for withdrawals. The closing of Home State followed the collapse of ESM Government Securities Inc. of Fort Lauderdale, Fla., with which Home State had a complicated loan arrangement.
Runs on Other S&Ls;
Reports that the Ohio Deposit Guarantee Fund might not be able to cover all of the Home State depositors' funds led to runs this week at a number of S&Ls;, where millions of dollars were withdrawn.
Celeste said the closure "provides a cooling-off period that conserves funds and is fair to depositors until concern subsides and until we can convincingly demonstrate the soundness of our system."
Celeste, accompanied at news conferences in Cincinnati and Cleveland by state officials and Karen Horn, president of the Federal Reserve Bank of Cleveland, said they will try to develop a plan to federally insure institutions now covered by the state fund.
Federal Talks Set
He was expected to meet for much of the weekend with Federal Reserve officials from Cleveland.
The moratorium on transactions was intended to stop the snowballing run on S&Ls; throughout the state touched off when Home State, with 33 branches, closed last week in the face of demands for millions of dollars by customers.
Thousands of people lined up at Home State branches last week after learning the institution could suffer losses as the result of the collapse of ESM in Fort Lauderdale.
Home State borrowed $670 million from ESM and used government securities from Home State as collateral. Home State, owned by Cincinnati financier Marvin Warner, reportedly stands to lose as much as $100 million in the deal.
The FBI has begun investigating the relationship between Home State and ESM, FBI spokesman David Lichtenfeld said. "We are looking to determine if there were any violations over which we would have jurisdiction," he said.
Celeste said he decided to take the "serious and critical step" of closing the state-insured institutions only after it was requested by several Ohio banking officials.