When Diana Cooper's husband lost his job at the National Bank of Washington last month, her world collapsed.

It wasn't just the realization that her family had joined the ranks of the unemployed: the Coopers' son was sick, his $14,000 hospital bill was mounting, and she was pregnant.

The Coopers had been counting on the employee health insurance plan at National Bank of Washington (NBW) to cover medical expenses.

But when the federal government closed NBW on Aug. 10, firing vice president Thomas Cooper and the bank's 900 other employees, all health benefits provided by NBW were terminated.

"I had already met my deductibles, and everything was going to be covered 100 percent," said Diana Cooper, who has since had a baby boy. "Now, they say that because we hadn't filed any claims, we don't have any coverage."

This is the most painful Labor Day in decades for thousands of Washington area residents, who face the prospect of unemployment and a loss of fringe benefits because of the failures of NBW, Garfinckel's department stores and Fantle's drugstores and

layoffs at USAir Group Inc. and numerous other companies.

And for those thrown out of work, it's an especially

difficult time to lose their paychecks, given the slow-

down in the region's economy and the crisis in the Middle East that has added to the air of uncertainty.

The harsh treatment of NBW's employees, who were among a select few at banks around the country who were protected by a labor union, also is a blow to organized labor. After the bank failed and required federal assistance to be sold, the federal government nullified the labor agreement that had protected NBW employees for many years. And all of this happened to a bank that from 1949 to 1985 had been owned by the United Mine Workers union.

Although employees knew that NBW, the District's oldest financial institution, had serious financial problems, few seemed prepared when the federal government announced last month that they would be fired without notice, without severance, without vacation pay and without health benefits. Though Riggs National Bank, which bought NBW for $33 million, offered to hire some NBW workers on a temporary basis as contract employees, no full-time jobs were offered.

When it came to layoffs at NBW last month, there appeared to be no discrimination on the basis of age, sex or race. Think of Maria Knight, 58, who is too young to retire but feels too old to start a new career. And Michael Quinn, who just purchased his first home in July and now has no way to pay his mortgage. And Jackie Burke, who expects her baby to be born in November and is suddenly without health insurance and without a job.

"It's really a terrifying experience," said Noel O'Brien, who worked 14 years in the commercial loan department at NBW. "We were all hoping the bank would make it. Maybe we tried to convince ourselves too hard. But we just couldn't think that we would all lose our jobs. That just wasn't supposed to happen."

Much of the employees' optimism came from the security of knowing that for more than 50 years, NBW workers had been represented by the Office and Professional Employees International Union, a division of the AFL-CIO. Because the federal government picks up the tab for bank failures, the Federal Deposit Insurance Corp. has broad powers to ensure that closings and takeovers are completed at the lowest possible cost to the government. As part of that government effort, NBW employees lost all of their basic rights under the union contract.

For Barrett Bhame, a vice president in charge of check processing, NBW's failure and the FDIC's response cost him $17,000 in severance pay, which he earned during nine years at the bank. He also lost his life insurance, two weeks vacation and his health insurance, which is now costing him $114 a month.

"A lot of people at the bank lost more than me," he said. "Some of them had been there for 25, 30 years. It'll be tough for them to find other jobs. Besides, they've lost that bond, working together for so long. It was like family."

The bank's failure hurt retirees too. Edgar Ewell, who worked at NBW from 1929 until 1970, now must pay $102 a month for health insurance.

"I had my prescriptions, my hospitalization, everything paid for," said Ewell, almost 81. "It's going to cost me about $1,200 a year now. That's a lot of money."

Ewell said he didn't believe that "any government department can just walk in and fire everybody on the spot. It's not fair. In most places you walk in, give everybody a pink slip, and you get severance pay and everything else. But they didn't get anything. Just, 'You don't have a job.' "

Ewell said he hopes the union fights hard for the workers' rights.

"They've got to stand up for this," he said. "We just can't let this kind of thing go on."

Although the union has organized several pickets and protests since NBW's doors were closed, even union head Jim Sheridan isn't sure what more can be done.

"We're trying to fight," he said at a protest late last month in front of the FDIC building on 17th street. "The FDIC claims it can overthrow contracts. The FDIC says that we're not protected. We don't believe them, but right now, they're winning."

The union has filed a claim with the FDIC, which demands that the workers receive the $3 million in severance pay they are owed. However, FDIC officials have said that the claim, like any claim in a bankruptcy court, will be paid only if there is money remaining after the bank's troubled loans are liquidated.

In the meantime, the union said it will continue protesting and will urge people to show support for the workers by withdrawing their money from Riggs National Bank, which bought some of NBW's assets and branches.

"Riggs could have done something about this," Sheridan said, adding that Riggs is partially at fault because it didn't agree to assume the union contract or to hire the NBW employees.

But Riggs spokesman David Palombi said it's the FDIC, not Riggs, that is to blame for workers' losses.

"The dispute is between the government and the workers," Palombi said. "We didn't fire the workers, the FDIC did."

For most of the employees, however, the argument over who is at fault rings hollow.

"At this point, what difference does it make?" Bhame said. "Riggs, the FDIC, in many ways they're both to blame."

Many employees said they believed that the FDIC tried so hard to avoid depositor panic that they acted hastily in shutting down the bank and dismissing the workers. But FDIC spokesman Alan Whitney said the agency did what was best to protect the federal deposit insurance fund.

"These things are always painful," Whitney said shortly after the bank was closed. "We are doing what we can for the employees."

Still, many people aren't satisfied.

"The thing that really gets me upset," said Caroline Graham, whose husband was fired from his job as a computer programmer, "is my tax money can be used to bail out the bank when it fails, and it can be used to build up the military, but it can't be used to help the people out who are in trouble. Somehow, that just doesn't make sense."

"Here we are in the nation's capital, right under the nose of Congress, and this is what happens," said O'Brien. "I hope it sends a message to the politicians and the president."

While many former NBW workers may soon be receiving unemployment checks and looking for new jobs, some say they're in no hurry to get back into banking.

Bhame, who has spent his entire life working in financial services, said, "Banking is just so unstable right now. With all of the mergers and acquisitions of the past, and now the problems that are creeping up today, I'm just a little leery.

"I might just go into business for myself."endquad