Despite assurances from federal banking officials, hundreds of anxious depositors waited for the second day in a row outside the First Public Savings Bank to withdraw their money Saturday after rumors that the bank was failing continued to sweep through Chinatown.
Donald Alexander, a spokesman for the Federal Home Loan Bank Board, said the panic appeared to be a cultural phenomenon. "We had this experience with a Chinatown bank in San Francisco," he said.
"These rumors are absolutely untrue," James M. Cirona, principal supervisory agent of the Federal Home Loan Bank Board, said in a statement in English and Chinese distributed as a leaflet at the bank at 800 N. Hill St. A smaller crowd gathered at First Public's Monterey Park branch at 757 W. Garvey Ave.
No Problem Seen
And Peter K. Yue, senior vice president of the 6-year-old bank, said the run on the bank, which began with scattered phone calls Thursday and was in full force by Friday afternoon, would not cause a problem. "We've got all the cash we need," he said.
Although bank officials said they do not know how the run started, First Public Chairman Jack Lee said at an evening news conference that someone may have distorted an earlier announcement by a neighboring bank that it is merging its Chinatown branch next month into its main office in Los Angeles.
Donald McCormick and nine other employees of the Federal Home Loan Bank Board was on hand to calm the anxious crowd--to little avail.
Nervous depositors formed into such a crushing mass outside the Hill Street bank office that as many as 15 police officers, who closed off streets to traffic, repeatedly had to force them back. Special lines were set up for customers withdrawing money. More than 20 employees came in to work on their days off at the two branches.
The first woman in the line arrived by 4 a.m. By mid-morning, about 500 people were jostling for position along the wall of the bank. One woman briefly became hysterical.
But McCormick said the institution, the fourth largest Chinese-American savings bank in California, is financially healthy, according to a review by independent auditors that was just completed. The audit said the bank's net worth is 7.5% of its $100-million assets--more than twice what federal banking regulations require.
In addition, McCormick said, the audit showed the bank had 35% of its money in assets that could readily be converted into cash. A financial statement given to reporters showed the bank's profit last year rose 45% to $1.76 million from 1984.
Lee said many depositors are Chinese and Vietnamese immigrants who lack understanding of the U.S. banking system.
"No question, they are scared. They do not have the system that we have here. I tell them to be calm, that we have $100,000 in insurance from the United States government. They ignore it. They believe the rumor more than the government or the bank," he said.
Ronald R. Lake, a supervisory agent with the Federal Home Loan Bank Board, said rumor-inspired runs on savings and loans or savings banks are rare in the agency's 11th District--which includes California, Nevada and Arizona--and have nearly always involved Chinese-American banks. He said that four of the five rumor-caused runs in the 19 years he has worked in the district involved Chinese-American institutions.
Lee said he plans to speak to FBI agents Monday to investigate the source of the rumors. But Lake said it is "virtually impossible" to find the source of such rumors.
Starting false, derogatory rumors about the condition of a savings bank is a felony punishable by up to one year in prison and a fine of up to $1,000.
Many of those waiting at the bank were reading Saturday editions of Chinese-language newspapers, which carried prominently displayed accounts of a Friday run on the bank prompted by rumors that began to hit Chinatown the day before. All three newspapers stressed the bank's stability, said the rumors were unfounded and sought to explain the Federal Deposit Insurance Corp. system of insuring individuals accounts up to $100,000.
On Friday, depositors withdrew $2.7 million from the two branches. Bank officials said the withdrawals slowed Saturday to $2.2 million.
Jenny Lee, 40, a clerk who left China 10 years ago, said she wanted to withdraw $4,000 in savings. "Some people say they are bankrupt, that is why," she said.
Farther down the line, a UCLA student, who refused to identify himself, said he wanted to withdraw his $2,500 guaranteed student loan. He said he first heard the rumor through word of mouth. "The phone was ringing all night long," he said.
Sin Lam, 60, was one of the trickle of depositors slowly emerging from the bank with money.
Lam, an ethnic Chinese resident of Saigon who escaped from Vietnam in a boat five years ago, withdrew his life savings of $7,000. He said he would redeposit it at First Public in 15 days once the excitement died down.
Times staff writers David Holley and James Bates contributed to this story.