For Clients of Closed S&Ls;, High-Rate Hunt Resumes
The man waiting for an elevator in the lobby of a Costa Mesa office building sheepishly acknowledged his personal investment strategy.
“I’m a rate chaser,” said John C. Woolley, a judge in Orange County Superior Court.
He was referring to the unusually high interest rates that many now-troubled savings and loans have paid to attract big, long-term deposits.
And some of the highest rates in the nation were paid in that Costa Mesa building by American Diversified Savings Bank and North America Savings & Loan, until federal regulators closed them Monday.
Woolley was one of about 400 investors who showed up Tuesday to claim their share of a record $1.35-billion payout to depositors at the two failed thrifts.
Federal regulators, who had worked 48 hours straight to prepare for the payout process, had checks ready at 9 a.m. to hand out or mail to depositors.
Employees of the Federal Savings and Loan Insurance Corp., the receiver for both S&Ls;, set up shop in the 13th floor offices of American Diversified to process claims for the 16,000 accounts at the two S&Ls;, both of which operated out of the same building.
In one room, eight boxes were filled with the 500 claims received so far, said Mary Creedon, FSLIC’s principal deputy executive director.
Many depositors, who received notices Monday about the closings, had sent in claim forms overnight. Some envelopes, Creedon said, contained overnight return pouches, indicating that the depositors wanted their money back quickly.
Other depositors went to great lengths to get their money in person. One man drove all day and night from Texas, and another spent the night in his car outside the S&L; offices, said Nicholas Pastor of San Clemente. Pastor and his wife, Elsie, said they arrived at 7:20 a.m. and were ninth in line to get their refund.
A number of depositors interviewed as they picked up their checks said they wanted their money right away. They weren’t afraid of losing it. They wanted to reinvest it elsewhere as soon as possible so they wouldn’t lose much interest.
Most of the certificates of deposit issued by the two failed S&Ls; were held by financial institutions and other professional money handlers. But the relatively few private individuals who invested their own money seemed just as savvy.
Many who showed up for refunds Tuesday said they knew that the institutions were insolvent and were being operated by managers hired by the government. Regulators had seized American Diversified in February, 1986, and North America in January, 1987.
The depositors also said they knew how to identify insolvent institutions that pay high interest rates, and they expressed confidence in FSLIC’s promise to insure amounts up to $100,000 per account.
“I’ve switched accounts back and forth among savings and loans,” said Joan Steen of Newport Beach. “I used to have an account in North America but moved it to American Diversified in May. Before, I was with Great Western, but they have low rates.”
Like most other depositors at the two S&Ls;, Steen had purchased a $90,000 “mini-jumbo” certificate of deposit so that interest as well as principal would be insured. Only $2.7 million in deposits exceeded the insured limit, representing 0.2% of the total. Steen, who runs a Huntington Beach marketing and consulting firm, said she still plans to shop for the highest rates she can obtain from an Orange County institution. Judge Woolley also said he’ll still be looking for high rates.
There are plenty of insolvent institutions left to choose from. Four other Orange County-based S&Ls; continue to operate under regulatory management: Beverly Hills, Butterfield, Perpetual and Pacific Savings.
Los Angeles actor Douglas Lee said he became aware of American Diversified’s troubled history only after he had invested his money in a six-month CD issued by the institution. He criticized the S&L;’s managers and regulators for failing to tell him about the S&L;’s condition before he invested.
“I had heard simply that the rates were higher here,” he said. “Thank God for the FSLIC, and curse those who make the FSLIC necessary.”
Other depositors were thanking the federal agency not only for covering their funds, but for giving them their refunds so quickly.
FSLIC’s Creedon said that once regulators decided to shut down the institutions, employees began preparing notices and claim forms to send to depositors in time for Monday’s closing.
A crew of about 200 FSLIC employees began gathering in Costa Mesa on Friday and worked around the clock through the weekend on the complicated task of preparing files on every depositor to verify identification and to determine how much to pay back.
After news reports appeared about the impending closings, the group moved in quickly early Monday to shut down the S&Ls; and prepare the offices for the refund operations. Wary investors back East already were calling shortly after 6 a.m., the time when the so-called money desks at the two S&Ls; normally opened for business to solicit large deposits nationwide.
By Tuesday morning, the agency’s operation was moving smoothly. FSLIC officials even brought out coffee and doughnuts for those depositors who appeared in person to claim their money. Some early arrivals had to wait nearly an hour, but within 90 minutes, FSLIC employees had passed out 70 checks and had reduced the processing time to 20 minutes, Creedon said.
