Wright Blocks Bill to Boost FSLIC Funding

Worried about treatment of Texas savings and loan associations, Majority Leader Jim Wright (D-Tex.) is blocking House consideration of a bill to add $15 billion to the ailing Federal Savings and Loan Insurance Corp.

Wright complained Wednesday that federal regulators who are fearful of more S&L; losses are telling financially troubled Texas S&Ls; to avoid real estate investments in the state, whose economy is suffering from the decline of the energy industry.

“Such a policy could create a regional recession or even a depression when none existed,” Wright said in a statement issued here.

The dispute has consequences far beyond Texas because the insurance fund, which covers deposits in about 3,200 S&Ls; across the nation, is badly depleted. It has shrunk to $2.5 billion, down from $4.6 billion at the end of last year, as federal regulators have shut down troubled institutions and paid depositors. Accounts up to $100,000 are protected by the federal insurance fund.

The legislation, supported by the Administration and approved by the House Banking Committee, would transfer $15 billion from regional federal home loan banks to the central insurance fund to help cover future reimbursements. It also would expand federal powers to arrange sales across state lines of failing financial institutions.

Wright, who as majority leader can influence which bills go to the House floor, is seen as the only impediment to the legislation. It has no serious opposition on the Senate floor.

Wright’s complaints drew a quick response from the Federal Home Loan Bank Board.

“We would be surprised and dismayed if any comment was made derogatory to investing in Texas,” said Pat McKelvey, the bank board’s director of communications. “We don’t know who made the complaints” to Wright, McKelvey said.

Bank board officials said they hope to resolve Wright’s concerns.

“We want to get this issue resolved. Now it’s a matter apparently of convincing Congressman Wright,” McKelvey said.

Seeks Assurances

Wright said that before the House considers a measure giving more power to federal regulators, he wants assurances that the agency will act responsibly.

“I want some assurances that their power will be used to save local home-owned lending institutions rather than to destroy them or sell them out at fire-sale prices to big out-of-state absentee owners.”

Wright also is angered by what he regards as the regulators’ unfair treatment of big S&L; customers, including Craig Hall, a major Dallas real estate syndicator.

Westwood Savings & Loan of Los Angeles, now being run under a conservatorship by federal officials, was a major lender to Hall and has attempted to foreclose on his real estate properties in four states.

Wright said that several big S&L; customers who are “right now on the verge of financial collapse can save themselves, and thousands of innocent investors with them, if allowed to restructure loans on a long-term basis.”

Bank board officials said they have conferred with Hall about his Westwood S&L; loans. McKelvey said the board has offered to send an observer to any meetings with Hall and his other lenders to help them reach an agreement to avoid foreclosure.