FHLBB Acts to Shore Up S&L; Insurance Fund

The Federal Home Loan Bank Board, the primary regulatory agency for the nation’s 3,200 savings and loan associations, moved Friday to raise $250 million for the sagging fund that insures depositor accounts up to $100,000 in case an S&L; fails.

The FHLBB said it will assess a special charge on the entire industry, amounting to 1/32 of 1% of deposits at each institution. The money will be added to the $6-billion insurance fund administered by the Federal Deposit Insurance Corp., a government agency run by the FHLBB.

The regulatory agency said that further, similar assessments will be considered “in subsequent quarters,” but that they would be refunded if Congress passes legislation by Sept. 1 providing for the long-term replenishment of the fund. The first assessment is due at the end of March.

The action reflects the high priority that agency Chairman Edwin J. Gray has put on shoring up the insurance fund, whose resources have been sharply diminished in recent years by hundreds of thrifts failures or forced mergers. Recently, for example, it cost the FSLIC $193 million to close Southern California’s San Marino Savings & Loan Assn.

Gray has repeatedly emphasized that his principal obligation is to protect the fund, which now stands at about 0.77% of industry deposits, far below its usual levels of 1% to 2%.

FSLIC insurance is considered a primary reason why savers are willing to put their money in savings and loan associations. Savings industry officials often point out that no saver has lost a cent in a FSLIC-insured account.

But the prospect of additional fees will undoubtedly be an unpleasant burden for the industry as a whole. About one-third of the nation’s S&Ls; are in the red, Gray said in a recent interview.

One industry trade group, the National Council of Savings Institutions, said Friday that it “regrets” the FHLBB action, while another, the U.S. League of Savings Institutions, gave it a lukewarm endorsement.

The U.S. League had been pushing for a plan to add $9.5 billion to the insurance reservoir by getting each S&L; to contribute the equivalent of 1% of its liabilities into an equity fund supervised by FSLIC.