FHLBB Chief to Focus on Ailing S&Ls; in Southwest
Federal thrift regulators expect to identify this year a group of troubled savings and loans that need to be merged, and the Southwest will be the focus of that recovery effort, the head of the Federal Home Loan Bank Board said Friday.
Of all states in the Southwest, “Texas will be the focal point of activities on the bank board this year,” said M. Danny Wall, chairman of the bank board, which supervises member S&Ls.;
Wall was speaking before about 1,900 business leaders at a luncheon sponsored by the Southern Methodist University School of Business.
He said troubled thrifts in Texas, Mississippi, Louisiana, Arkansas and New Mexico “are at least half the problems in the U.S.”
Wall said every insolvent Texas thrift will be dealt with by the bank board by the end of this year.
“Be they by legal or management methods, by the end of this year we will have at least identified a basket of institutions to be merged, and we will have configured all of them,” Wall said, adding that not all the mergers would be completed by year’s end.
The bank board is scheduled to release its recovery plan, alternately dubbed the “Texas Plan” or “Southwest Plan,” on Tuesday in Washington.
Besides a series of mergers, the plan is likely to call for lowering the above-market interest rates used by Texas S&Ls; to lure depositors, Wall said. A reduction by a quarter percentage point would cut the cost of funds to the thrift industry by $2.3 billion nationally, he said.
Wall said he believes that the thrift industry nationwide is basically sound and that any shortcomings by individual institutions are seen by many investors as opportunities for new growth.
The restructuring plan, to be spearheaded by FHLB board member Roger Martin, will provide a way for cutting expenses and controlling losses in troubled assets, Wall said. He said the plan also would identify the most efficient managers to carry out individual bailouts and reduce duplication among institutions.
The bank board would continue to grant more time to institutions that have strong management and the prospect of growing stronger once the economy improves, he said.
Wall said two types of institutions will emerge following the plan--regional thrifts serving a particular area with assets of $800 million to $2.5 billion and multiregionals that cross state lines with assets of more than $2.5 billion.
He said he didn’t expect the plan to jeopardize smaller institutions.
Analysts have said the nation’s nearly 400 ailing U.S. thrifts may cost the Federal Savings and Loan Insurance Corp., which insures thrift deposits, at least twice the $10.8 billion in new capital approved by Congress last fall.
