State Takes on Hard Line on Forming New S

California Savings and Loan Commissioner William Crawford has rejected 20 applications for new S&Ls; in the past three months and strongly suggested Tuesday that he will deny most of the other 46 now pending.

Crawford, in a telephone interview, reiterated his belief that California generally does not need any more S&Ls;, particularly in light of the financial problems of the Federal Savings and Loan Insurance Corp.

“I would like to see a better pattern of success with the ones we already have,” the commissioner said, apparently referring to the rash of S&L; failures statewide in the past 10 months.

Crawford’s denials have affected a group of institutions known as de novo S&Ls; that have received permission from the commissioner to organize but do not have the state charter or federal deposit insurance they need to open their doors. More than 50 other California de novos have received state charters but are awaiting deposit insurance.

The FSLIC, in turn, has said it will not grant the insurance until the Legislature gives the California commissioner the authority to hire more banking examiners and appraisers.

The 20 rejections have been a bitter pill to swallow for the applicants, many of whom have spent hundreds of thousands of dollars and waited years to get their applications for charters approved.

Among the groups denied de novo status were ones in Fullerton, Irvine and Garden Grove, according to Salvatore Serrantino, a Santa Monica financial institutions consultant. Besides the denials, there also were 11 other groups in the last three months that had conditional approval for their operations revoked or denied, he said. Among those groups were ones in Costa Mesa, Orange and Anaheim.

“Surely two years is not a reasonable time (to wait),” said Felicia Wiseman, who was recently rebuffed in her bid to open an S&L; in Norwalk after getting a permit to organize in August, 1983. “This has caused us a lot of effort, agony and money.”

Wiseman’s embryonic institution, Norwalk Savings Bank, last month filed a complaint, known as a petition for writ of mandate, in Los Angeles Superior Court seeking to have Crawford’s decision set aside. Crawford “has abused his authority and acted in an arbitrary manner inconsistent” with California law, the complaint charged.

Crawford has jurisdiction over the 155 S&Ls; that have state charters. California has another 65 S&Ls; with federal charters. All must have deposit protection from the FSLIC, which insures customers’ accounts up to $100,000, before they may open.

Explosion in Demand

The demand for state S&L; charters exploded in the early 1980s after the Legislature passed a bill allowing state-chartered S&Ls; vast investment powers. More than 200 applications were filed with the commissioner’s office from 1982 through 1984 but scores lapsed when regulators did not act on the requests quickly enough to suit the applicants.

Regulators, meanwhile, became increasingly wary of the applications as many S&Ls; landed in serious trouble by making ill-conceived real estate development loans. These problems in turn severely drained the resources of the FSLIC, which acts as receiver and liquidator when S&Ls; are declared insolvent and taken over by the government.

As a result, only six new savings and loan institutions--three state chartered and three federally chartered--were allowed to open last year, according to William Davis, special assistant to Crawford.

The commissioner argues that new S&Ls; do not have the resources or sophistication to make home loans in competition with the large financial institutions that dominate California’s savings and loan industry.

‘Not Much Left’

“The small guys have to feed where the lions aren’t around, and there’s not much left to feed on,” he said. Such words have earned Crawford harsh criticism among frustrated de novo entrepreneurs, who charge that the commissioner is only protecting the status quo. “I feel a terrible injustice has been done to great numbers of people,” Wiseman said. “Thirty-five hundred people in our area were willing to buy the stock.”

Norwalk Savings Bank was designed to be the only locally owned and operated S&L; in a town with a high proportion of homeownership and a large population “of Spanish descent,” according to the court complaint.

“There is a public need for such an institution,” the complaint said, “and . . . there are sufficient monies available in the community which will be attracted to a locally owned association.”

Crawford declined to discuss the Norwalk Savings case but had a suggestion for those who want to get into the S&L; business in California.

“If these investors have so much equity, why don’t they buy Presidio Savings?” the commissioner asked, referring to an S&L; in Central California that was seized by regulators last August. “It’s for sale.”