American S&L; Deposits Down 10% : July Outflow at $337 Million; Firm Counting on CD Sales
Another $337 million in deposits was pulled from American Savings & Loan in July, continuing an outflow that has dogged the ailing financial institution for the entire year.
American Savings’ deposits stood at $15 billion at the end of last month, down 10% since the end of 1987, according to company statistics released Monday in a quarterly report to the Securities and Exchange Commission.
The savings have been flowing out in starts and stops as American Savings has released more information about its worsening financial condition.
The deposit drains make it more difficult for American Savings to fund its operations and have dropped the company below required liquidity levels mandated by federal thrift regulators. Irvine-based Financial Corp. of America, American Savings’ parent, reported a $160-million loss in the second quarter.
FCA has scrambled to stem the outflows with various programs, including a move in late July to sell up to $2.5 billion in certificates of deposits through professional money brokers. An American Savings spokeswoman said $236 million in new deposits has been raised through the CD program, but she declined to release deposit figures for August.
Savings flows are still in the red, she noted, but the brokered CD program “is definitely beginning to have a major impact in reducing the outflows.” Thrift regulators have guaranteed the protection of all deposits in American Savings, including those above the traditional insurance ceiling of $100,000.
Bass Still Negotiating
American Savings, based in Stockton, has been rendered insolvent by poor-quality real estate loans and is being operated as a ward of the federal government. It is the nation’s second-largest thrift and has 185 retail branch offices in California.
Meanwhile, news continues to dribble out about the proposed purchase of American Savings by private investors led by Robert M. Bass, the Texas billionaire. The proposed sale is being negotiated by the Federal Home Loan Bank Board and is expected to close by Sept. 1.
It’s believed that Bass and his partners have sought regulatory permission to establish a separate subsidiary of American Savings that will fund the Texan’s merchant banking activities, including corporate takeovers and leveraged buyouts. Savings and loans may invest up to 10% of their assets in direct investments.
The reorganization is expected to provide Bass an investment pool of $1.5 billion that he may use as a source of inexpensive capital for acquisition activities. Regulators won’t confirm the plan, while spokesmen for Bass had no comment.
Roger Martin, one of three members of the Federal Home Loan Bank Board, has confirmed news reports that the Bass investors plan to inject $550 million in new capital into American Savings, while the Federal Savings and Loan Insurance Corp. will provide cash assistance of as much as $2.2 billion.
Martin has also confirmed that FCA and American Savings will be reorganized into a “good bank” that will have clean loans and a “bad bank” that will contain problem assets. The FSLIC will share in future earnings because it will receive warrants representing nearly a one-third ownership in the reorganized financial institution, Martin said.
