Regulators Act to Liquidate Consolidated

Just 14 weeks after seizing Consolidated Savings Bank, federal regulators Friday abandoned the search for an institution to take over the failed Irvine-based lender and began liquidating its assets.

Friday’s action makes Consolidated the 17th S&L; in the United States and the fourth in California to be closed so far this year. Nationwide, it is only the second in which insured depositors will be paid back rather than have their accounts transferred to another institution, said David Loveday, a spokesman for the Federal Home Loan Bank Board.

The state-chartered S&L; had just one office and $61.4 million in assets as of Friday, Loveday said. Of Consolidated’s $67 million in deposits, 80% were in high-interest-paying jumbo certificates of deposit, a factor that Loveday said contributed to the decision to liquidate the institution.

Although Loveday said it was unknown Friday how long the liquidation will take to complete, he estimated that after the failed lender’s assets are liquidated, the FSLIC will still have to pay depositors about $43 million from the agency’s insurance fund.

“It became quite obvious . . . that the association was not marketable,” Loveday said. “This was mainly because of the 80% jumbo CDs and the one office.”

Consolidated, whose sole owner, Robert A. Ferrante, had financial ties to W. Patrick Moriarty, the former Anaheim fireworks magnate now serving a seven-year prison sentence for political corruption, was criticized by bank board regulators for its alleged “unsafe and unsound conditions resulting from practices” of the management under Ferrante. Those unsafe practices included making loans to insiders, extending loans to one borrower in excess of limitations and failure to secure adequate appraisals when making loans.

In May, when the bank board named the FSLIC as conservator, the institution was placed under the management of a group from Household Bank of Newport Beach.

Following that action, the FBI began an inquiry into the bank board’s allegations.

Since May, sources said, Consolidated has lost an additional $1.3 million.

According to Loveday, Consolidated’s approximately 800 depositors will be able to begin claiming their money either by mail--after submitting a completed insurance claim form and proof of ownership for each account--or in person during regular business hours on Tuesday, Wednesday and Thursday.

Borrowers from Consolidated should continue to make loan payments in accordance with their contract terms, but they should make their checks payable to: FSLIC as receiver for Consolidated Savings Bank.