The Federal Deposit Insurance Corp. has ousted most directors of Continental Illinois Corp., the big Chicago bank company that was saved from failing last summer in the largest federal business rescue in history.
Banking sources said the ouster is meant to bring home to other directors that they must take a more forceful role in overseeing the bank corporations on whose boards they serve.
Federal regulators say privately that they think Continental's board gave too free a hand to former chairman Roger B. Anderson, who formulated a growth strategy that ended in the bank's de facto failure. Anderson finally was pushed out by Continental's board last February, nearly two years after it was disclosed that Continental, in an attempt to expand its energy lending, bought more than $1 billion in bad loans from a small bank in Oklahoma.
Sources here and in Chicago said the regulatory agency demanded that 10 of the 14 nonmanagement directors of the bank leave the board next spring -- when they otherwise are due to stand for reelection.
Former Standard Oil of Indiana chairman John E. Swearingen and William S. Ogden, former vice chairman Of Chase Manhattan Bank -- whom the FDIC brought in last summer to run the failing institution -- round out the 16-member Continental Illinois board.
Chicago financial sources said yesterday that Swearingen was not pleased with the FDIC's insistence that the bulk of the company's directors be replaced. A number of the bank company's directors, who include chief executives of several of the nation's most important corporations, will be hard to replace, Swearingen reportedly told FDIC Chairman William M. Isaac.
But federal government sources said that Isaac, whose agency pumped $4.5 billion into the big banking institution, was adamant that all directors elected before 1980 be forced out. He apparently believed those elected after 1980 were not responsible for formulating and launching the fast-growth strategy that sunkthe bank.
Among those who reportedly will be forced to resign are Robert H. Malott, chairman of FMC Corp.; James F. Bere, chairman of Borg-Warner Corp.; and William B. Johnson, chairman of IC Industries Inc.
The Rev. Raymond C. Baumhart, S.J., president of Chicago's Loyola University, also was forced to leave the board.
The bank company is expected to announce early next week, possibly as soon as Monday, that most of its board of directors will not stand for re-election next spring at the annual meeting.