S&L; Industry Is Solvent, Bank Board Chief Reports
The U.S. savings and loan industry is solvent and viable even though there are problems in several states, Federal Home Loan Bank Board Chairman M. Danny Wall told the Senate Banking Committee on Thursday.
“The problems in the industry are, for the most part, geographically isolated,” Wall said.
The insolvent institutions in six states--California, Florida, Illinois, Louisiana, Oklahoma and Texas--account for 80% of the losses, and half of these troubled thrifts are in Texas, he said.
Wall said the bank board listed 511 savings associations as insolvent and estimated the cost of resolving these cases at $22.7 billion.
But the General Accounting Office has estimated the size of the thrift problem from $26 billion to $36 billion. Other estimates have ranged from $20 billion to $60 billion, over and above a $10.8-billion infusion of new funds into the federal thrift insurance fund approved by Congress last year.
Timetable Offered
In a hearing before the committee on Wednesday, the top two Democrats on the banking panel, Chairman William Proxmire of Wisconsin and Sen. Donald Riegle of Michigan, said they would seek quick action on a federal thrift bailout plan.
Wall said the Federal Savings and Loans Insurance Corp. expects to resolve all 511 troubled thrift cases within five years by issuing notes, adding that FSLIC income over the next two years should total $30.2 billion.
“We have made incredible progress in a very short time,” Wall said, referring to the bank board’s plan to deal with 109 insolvent institutions in the Southwest through mergers and acquisitions.
He said the Justice Department and FBI had formed a white-collar crime task force to investigate possible fraud in some of the insolvent thrifts.
Merger Called Premature
FSLIC will have an estimated $20 billion in revenue over a three-year period to deal with the 259 most troubled thrifts, he said. The bank board and the General Accounting Office agree that the effort will cost $17.4 billion.
“With the bond authority you have given us plus our other resources, we have the funds to make significant progress over the next few years,” Wall said, adding that it was premature to consider a merger of the FSLIC with the Federal Deposit Insurance Corp. that protects accounts at banks.
“We believe we are in striking distance of solving the problems without a taxpayer bailout. Let the next President and the next Congress assess our progress and then decide the course of future action,” Wall said.
In a related development, a bill extending a moratorium on savings and loan associations leaving FSLIC was introduced by House Banking Committee Chairman Fernand St Germain (D-R.I.)
The present moratorium on thrifts leaving FSLIC for the FDIC expires in August. The extension was endorsed by Wall.
