Oh, brother!

Dateline: VIENNA

BANK runs are rare in rich countries, but they still happen. This week Austrian financial institutions and the government stepped in with a €1.35 billion ($1.7 billion) package to stem a run on deposits at BAWAG, the country's fourth-biggest bank, which is owned by the Ă-GB, the trade-union federation.

BAWAG was caught last October when it gave a €350m top-up loan to Refco, an American futures broker, hours before it went bust. When BAWAG tried to get its money back, other angry creditors filed a counterclaim for $1.3 billion, alleging that bank officials had been complicit in the fraud surrounding Refco's downfall. On April 25th an American judge initially froze BAWAG's American assets but then decided that the bank could post a $1.1 billion surety. The bank then agreed to pay $675m in a settlement with Refco's creditors.

Then came the run on BAWAG's deposits. The government put up a guarantee of €900m and the banks and two insurers injected €450m of capital into the wounded bank.

The episode provides more evidence that trade-union federations and big business are a dangerous cocktail. The Ă-GB had already had trouble in the 1990s with Konsum, a retail chain. In Germany the BGAG, the unions' investment vehicle, has also had its share of woe. Late last year, it rid itself of a troubled mortgage bank, AHBR.

The Ă-GB has pledged to sell BAWAG as soon as possible. Refco is not the only recent blot on its copybook. In the late 1980s BAWAG's then chief executive, Walter Flöttl, began to invest the bank's money in an American derivatives business run by his son, Wolfgang. After Mr Flöttl senior retired, his successor, Helmut Elsner, revived the business but ran up undeclared losses of around €1 billion. A cover-up via Caribbean subsidiaries, successful until only a few weeks ago, was provided by the Ă-GB, which used its strike funds to plug the gap. Mr Elsner and Mr Flöttl junior are under investigation.

The Austrian government will hope that its guarantee will not have to be called on, and that its mere involvement will be enough to repair confidence in BAWAG. Ministers are doing their bit, personally: Wolfgang SchĂĽssel, the chancellor, and other members of the cabinet conspicuously opened accounts in the troubled bank on May 2nd.

PHOTO (COLOR): Everything's under control, says SchĂĽssel