When the nation's capital lost its oldest financial institution last week -- the National Bank of Washington -- a small but important part of Washington history was lost, too.
Founded in 1809, just nine years after Washington itself was established, NBW attracted such depositors as Presidents Madison and Monroe. Francis Scott Key, author of "The Star-Spangled Banner," put his money in the hands of the banks' directors, as did pioneer and legend Davey Crockett.
For the first 150 years of its existence, NBW mirrored the District's other large, establishment banks, serving Washington's wealthy. It helped rebuild the city after the ravages of the War of 1812, and it helped finance the construction of the Washington Monument.
"This is a proud, old institution ... which has obviously seen better days," said William Ogden, just hours after he was appointed by federal regulators to manage NBW's affairs. "This is sort of sad day for the Office of the Comptroller of the Currency and for a bank with such a proud heritage."
The decline of NBW actually began 40 years ago, under the direction of the United Mine Workers, which secretly bought a 76 percent controlling interest in the bank in 1949. As with other unions that went into the banking business, ownership was more than simply a point of pride: The union needed a ready source of funding that it could not always obtain from other banks. Soon, however, the union was abusing NBW for its own internal political purposes. Insider loans eventually forced the union in 1980 to give up all influence over day-to-day management.
That year, Luther H. Hodges Jr., a banker then with the Commerce Department, agreed to take the helm. Hodges ultimately formed an investment group to buy out the mine workers in 1985.
After Hodges arrived, there were a few bright spots, a few hints of turnaround. But for the most part, financial and legal problems have kept NBW's boardroom in a state of siege.
The latest round of difficulty began in 1987 when Arab investor Wafic Said, who owned the largest stake in the bank company, attempted to oust Hodges as chairman. For the next two years, bitter power struggles and legal battles embroiled the banks' executives. The fighting culminated in January, when Hodges, having failed to find a buyer for the bank, was forced to resign his post.
In the first six months of this year, NBW has gone through two chief executives and has lost $86 million from troubled real estate loans. Those mammoth losses derailed a takeover attempt by attorney Robert B. Washington Jr., once a director of the bank.
In May, the bank's parent became the first bank company in the nation to default on commercial paper, a form of short-term debt.
NBW's latest CEO, John Mason, who took over on May 30, said he could fix the parent company's cash-flow problems. But Mason, who was desperately trying to protect his recent multimillion-dollar investment in the bank, failed to realize his dream of turning NBW around.
On Wednesday at noon, Mason filed for Chapter 11 bankruptcy protection for the bank's parent company. Just a few hours later, federal regulators stepped in, marking the first time since the Great Depression that a major bank in Washington has failed.
Now federal regulators, who are ready to provide financial assistance, are looking for a buyer.