CEO: Run on Abacus Almost a Blessing
For a man whose thrift lost 13% of its deposits in a four-day run, Thomas Sung sounds surprisingly upbeat.
After all, his Abacus Federal Savings Bank is still standing, he points out.
Last week it looked like another picture was developing. Panicked depositors of the $282 million-asset New York thrift, which caters to Chinese-Americans, withdrew approximately $30 million from three branches. There were rumors that Abacus was on the brink of failing, despite reassurances from executives and regulators that it was safe and sound.
Several newspapers ran photos of long lines and police guards - publicity, combined with the loss of liquidity, that might have doomed another thrift. But Mr. Sung - the chairman, president, and chief executive officer - said the run, one of the industry's worst in recent years, has abated and that Abacus has emerged from the ordeal stronger.
Community leaders and other small banks showed tremendous faith in the thrift by opening accounts there over the weekend, he said.
"We opened up many new accounts on Saturday and Sunday," Mr. Sung said in an interview Monday. "We had people coming out of the woodwork. The community banks came out to support us. People like the Chinese Bankers Association deposited $75,000. It may be a symbolic amount, but it is a wonderful feeling. It makes you feel perhaps it was worthwhile to go through."
Mr. Sung, who founded Abacus in 1984, dismissed criticisms that his actions made the run worse, blamed some customers who he said could have helped him detect fraud at the thrift sooner, and argued that the banking system needs to be better prepared for runs.
Last week's problems were caused in part by a rumor that Mr. Sung had fled to China with $50 million. The truth was that Carol Lim, a former branch manager, had allegedly embezzled about $1 million, Mr. Sung said. The Federal Bureau of Investigation is now trying to find Ms. Lim, who is considered a fugitive.
At the height of the run, on April 23, Mr. Sung appeared alongside other top executives to show customers that he had not fled. "I went out and assured the people that the Abacus CEO did not run away," he said. "I'm still here. I'm here to serve them."
He denied suggestions that the thrift fed the panic by asserting that some customers might not recover all of their money because they were "contributorily negligent" - meaning that they either knew or should have known that a fraud was being perpetrated.
According to Mr. Sung, Abacus gave the warning because Ms. Lim, who allegedly created fake certificates of deposit and pocketed customers' money, often gave returns of two to three times the current interest rate when customers sought her out. Other customers did not receive any bank statement for months and failed to report it, he said.
"There are some responsibilities on [the part of] the account holder," Mr. Sung said. "If an innocent person gets hurt, of course we are here to make it right," but there should be consequences "if you somehow contributed to this phenomena."
Abacus, which has six branches in New York, New Jersey, and Pennsylvania, is one of the country's healthiest and best-performing thrifts, and it probably will not suffer any long-term effects from the exodus of deposits or fraud losses, he said.
Still, even though Mr. Sung said he worked closely with regulators, he contends that the government should be better prepared for runs.
"We need to tell our fellow bankers and tell the Congress that the defect in the American banking system is in providing liquidity in this type of crisis," he said. "When this sudden run came upon the bank, we had a tremendous amount of liquidity anyway. We always maintain huge amounts of liquidity. For us, we are very fortunate. But for a bank that is less strong, unless the system is there to assist, you will put a healthy bank in jeopardy."