Garamendi Will Back Bill to Help Bass Acquire S

State Sen. John Garamendi (D-Walnut Grove) announced Thursday that he is throwing his full support behind a tax bill in the California Legislature designed to pave the way for Texas billionaire Robert M. Bass to buy ailing American Savings & Loan.

Garamendi’s move follows new assurances from the Robert M. Bass Group that it will not dismember the company’s operations in Stockton if the sale goes through. American Savings is based in Stockton and employs about 1,700 people there.

“We will not be moving anything out of Stockton,” David Bonderman, a top assistant to Bass, said in a telephone interview from Ft. Worth, where the Robert M. Bass Group is headquartered.

Bonderman had previously given Garamendi written assurances about the Stockton operations, but Garamendi insisted that a letter was not enough. So the Robert M. Bass Group has now agreed to include the guarantees in any final sale agreement, Bonderman said.

“This takes things beyond their good will and best intentions,” said Garamendi, whose legislative district includes Stockton.

“This is very significant,” federal thrift regulator Roger Martin said in reaction to the Garamendi announcement. “This is a key point.”

Garamendi’s undivided support of the tax bill is important because he has sponsored the legislation, known as Senate Bill 573, and is chairman of the Senate Revenue and Taxation Committee. Garamendi has scheduled a hearing on the bill next week but said it is unlikely that the proposed legislation could be approved and signed until late this month.

Garamendi’s support is another step forward in the long and tortuous process of finding new capital for American Savings, which has been rendered insolvent by poor-quality real estate loans.

The search, being conducted by the Federal Home Loan Bank Board and its deposit insurance arm, the Federal Savings and Loan Insurance Corp., has been going on since March, 1987. A proposed sale of American Savings to Ford Motor fell through earlier this year. The Bass investors have been negotiating with the bank board for several months and now have a deadline of Sept. 1 to consummate the sale.

‘Important Step’

American Savings, the nation’s second-largest thrift, is the operating subsidiary of Financial Corp. of America in Irvine. FCA employs nearly 6,000 people, with the largest single concentration of them being the 1,700 in Stockton. American Savings is also building a $42-million administrative office building in Stockton that is expected to be completed early next year.

Though Garamendi’s principal concern is his Stockton constituents, he said “for all of California, this is an important step. The settlement of the tax issue means a major roadblock is removed.”

In addition to its 185 retail branch offices statewide, American Savings also has large staff offices throughout Los Angeles and Orange counties. FCA’s headquarters staff in Irvine numbers about 150.

If the deal goes through, Bonderman told Garamendi in a letter dated June 30, “American will also continue to maintain an administrative office in Southern California.” In addition, “some administrative functions may be shifted between the home office and the Southern California administrative office as the needs of the institution change,” Bonderman said.

An American Savings spokeswoman noted some Southern California staff jobs, such as accounting and loan servicing, could be consolidated in the administrative office in Stockton when the new building is finished.

The purpose of the Garamendi bill is to ensure that any financial assistance the Bass investors receive from the Federal Savings and Loan Insurance Corp. is not subject to California taxes. FSLIC assistance is not subject to federal tax, and the state of California has not taxed similar federal rescue packages in the past.

But the Bass investors want a law ensuring that the FSLIC assistance is not subject to the 9.3% California corporate profit tax, primarily because so many dollars are involved. Though the size and shape of the final aid package have not yet been determined, FSLIC has agreed to provide as much as $2.2 billion in cash over 10 years to seal the deal.

Garamendi said he does not see any opposition to the bill. “We think the road is clear,” the lawmaker said, “but I never think it’s a slam dunk until the bill is signed.”

Passage of the tax legislation is the last major obstacle facing the sale, though peripheral issues remain to be settled and the three-member bank board must approve the deal.