Pace of S&L; Rescues to Rise, Regulator Says

The new chairman of the Federal Home Loan Bank Board, M. Danny Wall, said Tuesday that federal regulators expect to rescue at least one savings and loan a week in 1988, far ahead of this year’s pace.

The rescues will take the form of capital injections into ailing thrifts, either from outside investors or through forced mergers with healthy financial institutions, Wall said.

Wall made his remarks to an audience of members of the U.S. League of Savings Institutions, which is holding its annual convention here. Wall later held a press conference.

The increased pace of rescues, Wall said, results from recent congressional legislation that will inject $10.8 billion into the Federal Savings and Loan Insurance Corp. during the next three years. FSLIC, an arm of the Federal Home Loan Bank Board, steps in when a savings and loan firm becomes insolvent.

Nearly 500 Troubled S&Ls;

There are nearly 500 savings and loans in the United States that have negative net worths according to generally accepted accounting principles, and they either are or may become eligible for FSLIC rescues.

Wall said his new job makes him feel like a minister. “We’re performing a lot of funerals and a lot of weddings,” he said, adding that the weddings are of the “shotgun” variety.

Wall said federal regulators have a “conservative goal” of rescuing 52 S&Ls; in 1988, not including the liquidations that will take place if they cannot find buyers for the ailing financial institutions. Federal regulators expect to make about 33 such rescues in 1987.

“Our goal is one a week in 1988 and they will involve larger and more complicated financial institutions,” Wall noted.

The bank board chairman also noted that the savings and loan industry as a whole has benefited from last month’s stock market dive.

The industry owns just $1 billion in equity securities and $8 billion in so-called high-yield junk bonds, Wall said. The S&L; industry as a whole has more than $1 trillion in assets.

Wall noted that the break in interest rates that followed the crash has increased asset values and heightened investor interest in thrifts. “Thrifts are better buys now,” he said.

In written remarks, Wall also said: “We hope to resolve the FCA situation soon,” though he declined to elaborate on what he meant by “soon.” FCA is the troubled Financial Corp. of America, based in Irvine and parent of American Savings & Loan, the nation’s largest thrift.

Both Citicorp in New York and First Nationwide Bank in San Francisco are interested in FCA. First Nationwide, a subsidiary of Ford Motor Co., wants to buy the entire company, while Citicorp is primarily interested in FCA’s California branch network.

Wall also announced a structural reorganization of FSLIC and a comprehensive study on ways to a “speedy solution” of the deep-seated problems in the thrift industry in Texas.