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People are starting to make nervous jokes about pulling their money out of the United States' shaky banks and stashing it under their mattresses instead.

But the banking crisis is no joke.

It is so real it risks turning the emerging recession into the biggest economic nightmare since the Great Depression of the 1930s.

"My own view of this tends to be apocalyptic -- that we are on the threshold of a '30s-like experience," said David C. Cates, chairman of Ferguson & Co., bank consultants based in Dallas.

"The banking system is under tremendous strain. Should it begin to unravel, recession could easily become an economic disaster," declared a recent editorial in Business Week magazine.

Not since the Great Depression have U.S. banks been so weak as the economy entered a tailspin. Banks are trying to strengthen themselves by cutting back loans to reduce their risks. But that is creating a "credit crunch" that makes the economy even weaker, because the crunch is denying many firms the money they need to conduct or expand their business.

"The risk here is it's going to feed on itself. As the recession gets worse it compounds the banking problems," and vice versa, said Lawrence Chimerine, senior economic counselor to DRI/McGraw Hill, consultants of Lexington, Mass.

A congressional report due to be released Monday but widely reported on Friday said that most of the nation's largest banks are teetering on the brink of insolvency and tax money must quickly be injected into the government fund insuring deposits.

Bank failure costs could total $63 billion in a severe recession, it said. Even the mild downturn expected by most economists would leave the fund short of cash, said the report, which was written by three economists at the request of the House Banking subcommittee.

The study was written by Robert Litan of the Brookings Institution, a Washington-based think tank; James Barth of Auburn University and R. Dan Brumbaugh of Stanford University. Barth and Brumbaugh are former chief economists of the Federal Home Loan Bank Board, the regulatory agency -- since dismantled -- of the savings and loan industry.

The report directly challenges Treasury Secretary Nicholas F. Brady, who has declared banks and savings institutions "as different as chalk and cheese," and pledged that bankers, not taxpayers, will pay to bail out banks if necessary.

Barth and Litan favor shoring up the Federal Deposit Insurance Corp. with a massive loan from the Treasury, as large as $50 billion. They recommend that banks repay the sum over an extended period, perhaps 10 years, "unless events unfold that make repayment impossible."

The report said, however, that Brumbaugh favors an unambiguous taxpayer bailout because he "believes that higher (deposit insurance) premiums now would send additional weak banks into insolvency and could irreparably harm the rest of the industry."

The economists evaluated the health of the insurance fund under a range of recession scenarios, from mild to severe. Mild is defined as a national downturn roughly half as bad as the recession now plaguing New England. Severe is defined as the national equivalent of the contraction that rocked Texas in the mid-1980s when oil prices plummeted.

In a mild recession, the economists estimate the FDIC "is conservatively facing" costs over three years of $31 billion to $43 billion. However, the FDIC will have "at most $28 billion . . . to pay for . . . failed banks," even if it raises deposit insurance premiums for the third time in as many years.

The fund could have far less than that, the economists said, if the new owners of previously bailed-out banks exercise their option to return an estimated $8 billion in bad loans and real estate to the government.

A severe recession, with bank failures costing $63 billion over three years, would swamp the fund.

The economists based their estimate on financial data through June 30. The 29 percent drop in bank earnings reported last week for the July-September quarter makes them even more pessimistic, they said.

The report's authors said they have uncovered evidence that lack of money in the insurance fund is nudging regulators toward a policy of forbearance, or allowing weak banks -- particularly large ones -- to remain open.

It takes the FDIC 28 months on average to close a bank once it is identified as troubled, nearly twice as long as the 15-month average in 1980.

"There is very good evidence that the BIF (Bank Insurance Fund) is in the same position as FSLIC (Federal Savings and Loan Insurance Corp.) was in the mid-1980s -- without sufficient resources to pay for its expected caseload of failed depositories," they wrote.

The most important lesson of the S&L debacle, they said, was that allowing insolvent institutions to remain open simply permits them to gamble with insured deposits and run up larger losses.

To be sure, the crash of the U.S. economy is not necessarily imminent, nor even likely. But for the first time in 60 years, the shadow of that fearsome specter is visible and growing.

How great is the risk?

To your deposits, absolutely none, if they are in federally insured bank accounts. Insured deposits are safe because they are backed by the full faith and credit of the U.S. government.

But ultimately, that means they are backed by taxpayers -- who unfortunately are at rising risk.

Taxpayers may have to bail out the sinking federal bank insurance fund, experts warn, just as they must pay up to $500 billion over the next 30 years to bail out deposits in failed savings and loans.

What concerns everyone so much are trends like these:

Almost 900 banks have failed since 1985, more than twice the number closed between 1934 -- when federal deposit insurance began -- and 1979.

More than 1,000 banks are on the Federal Deposit Insurance Corp.'s problem list -- four times as many as in 1981, the last time the U.S. economy entered recession.

The emerging recession is driving loan defaults up and bank profits down.

The federal Bank Insurance Fund is at record low levels and sinking fast. It is projected to fall to $10.2 billion by Dec. 31, providing only 51 cents of coverage for every $100 in insured deposits, far below the $1.25 per $100 ratio prescribed by law. Failure of any one of the top 10 U.S. banks alone could wipe out the BIF.

Consumer confidence -- the cornerstone of banking -- is plunging, surveys show; experts fear public faith in banks could be shaken dangerously if any major bank should fail in this climate.

Stock values of the biggest U.S. banks, such as Citicorp and Chase Manhattan, have plummeted 50 percent since July.

To shore up profits, banks are cutting back loans even to credit-worthy businesses, shrinking the already-slowing economy.

"There is no clear evidence right now that we are headed for a recession that would be anything like the one in the 1930s," Barth said, adding: "Having said that, not too many years ago I would have simply dismissed (such talk) . . . I would have just said, never again could there be a Great Depression. Now I don't say that.

"We could have major financial failures that adversely affect the economy. Now I might say that's on the order of 5 percent (probability) or so. Not very high, but high enough to concern me."

Most economists think the recession will be relatively mild, with the economy rebounding by mid-1991 -- unless a Persian Gulf war destroys Saudi Arabia's oil fields, which would inflict a terrible global economic shock.

"You can easily spin out scenarios in which all hell breaks loose, but I don't think that's going to happen," said Litan of the Brookings Institution.

Meanwhile, economists are counting on the Federal Reserve to intervene as necessary.

"The very first responsibility of the Federal Reserve, one which ranks even ahead of controlling inflation, is the charge to guarantee the soundness of the American financial system against breakdown," economist Charles L. Schultze of Brookings reminded the House Banking Committee on Nov. 28.

"You can be sure the Federal Reserve will not let the balance sheet problems of one or more large banks threaten the financial health of the economy," said Schultze, a former adviser to Presidents Johnson and Carter.

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