Upstairs, downstairs at Continental bank

Upstairs, the two newly elected heads of the Continental Illinois National Bank and Trust Company were discussing the future of the troubled institution. ''I think we can put this bank back on the street,'' said John E. Swearingen, who becomes the chairman and chief executive officer of Continental's holding company.

Downstairs, bank customers stood in line waiting for a teller.

''I never panicked,'' said one woman about the recent troubles of Continental , the Midwest's largest bank and the eighth largest in the country. ''For the average person, it doesn't matter.''

And outside, a cab driver said the resignation of Miss America was more talked about than Continental's troubles.

Nevertheless, the rescue of the bank by federal regulators will have an impact on the Midwest and its economy, according to economists and bankers.

The attempt to bring Continental ''back to health is a good thing for the city of Chicago,'' says Don Jacobs, dean of Northwestern University's graduate school of management. The failure of one of these large institutions would have had ''very large consequences.''

Bankers were concerned that the near collapse of this large bank this spring would shake confidence in the whole banking system.

And so, although free-marketers in principle, bankers here have applauded the Federal Deposit Insurance Corporation (FDIC) bailout plan.

''I kind of expected it,'' says Martin Ozinga, president of the First National Bank of Evergreen Park.

He says he would have preferred a merger with another bank. But earlier attempts to do that failed, partly because Continental was so large.

Since then, Continental has been slimming down by selling some of its assets.

In a news conference announcing the plan, outgoing Continental chairman David G. Taylor said he expected the new bank to be ranked somewhere between the 10th and 20th largest banks in the country.

For the region, economists say the economic impact will be small.

Other banks have begun and will continue to pick up the excess business. The biggest winner, they speculate, will be Continental's rival, the First National Bank of Chicago.

The city has long benefited from the competition generated by the rivalry of its two largest banks, these observers add.

''All of these banks felt acutely the competition of Continental Bank,'' says Stuart I. Greenbaum, director of the Banking Research Center at Northwestern. ''Without these guys, there's less of a need to be at the cutting edge.''

The concern now is whether Continental will be able to get back on its feet in relatively short order so that the federal government could relinquish its control of the institution.

Mr. Greenbaum says he sees a time frame of two to three years. But David G. Taylor, the outgoing chairman of Continental, refused to speculate on how long it would take for the government to give up control.

The first hurdle is gaining approval for this agreement from the stockholders at a meeting expected to take place in late September.

Mr. Taylor said he hoped the plan would be approved.

''The alternative ... is far worse than the opportunity offered to the shareholders,'' he said. ''This is not the go-it-alone path we aspired to, but at this point it is the best course open to us.''

Mr. Swearingen and the incoming chairman of the bank, William S. Ogden, stressed that there were no quick solutions lying ahead.

''No one should expect instant results,'' Swearingen said.