Holiday in Chicago

Clarence and Henry Beutel are brothers who learned the banking business together in Chicago, then went their separate ways. Last September, Clarence took a leave from the presidency of his own Chicago bank, South East National, to become acting Deputy RFC Administrator in Washington. Brother Henry stayed on in private business as president of three small banks. Last week both brothers were in trouble for the same reason: they were too easy with their credit.

Clarence, along with his boss, RFC Administrator Harry MacDonald, was under fire for approving a group of RFC loans against the advice of RFC's top credit review board. Henry was in much hotter water: all three of his banks were closed, leaving 40,000 depositors cut off from $42 million in savings and checking accounts. Illinois' State Auditor Orville Hodge had shut them up--the first such action in Illinois since the bank holiday of 1933. Smarting from the blow, Henry promptly blamed his brother. Said he: Clarence and Hodge were trying "to drive me out of the banking business." Not so, said Clarence; the closing was due to "Henry's obstinacy" in refusing to make some changes asked by State Auditor Hodge.

Nevertheless, Clarence thought the shutdowns "pretty rough," and went to work to see if he could help get his brother's banks open again.

Henry's woes stemmed from what the Federal Reserve Board called "unsafe or unsound" practices. Last February, he sold control of two of his banks (Devon-North Town and Elmwood Park's First State Bank) to Dallas' Bankers Discount Corp. for $900,000. He agreed to take over $4,000,000 in discount paper, equal to about 50% of the Dallas firm's outstanding loans. After he had taken over $2,800,000 in the installment loans, the Federal Reserve Board asked him to "show cause" why his member bank should not be dropped from membership for overextending its credit holdings. Then, Auditor Hodge moved in and closed the banks, "because it appears that there may be violations of the Illinois Banking Act."

This week, as FRB had demanded, Henry Beutel resigned from two of his banks, and seemed ready to resign from the third. One of them (West Irving State) reopened under new management. But the two controlled by Bankers Discount would remain closed until 1) Bankers Discount and Henry Beutel sell their stock, and 2) all the Dallas discount paper is sold. Said Henry: "They've driven me out of the banking business."

This file is automatically generated by a robot program, so reader's discretion is required.