Investors Decry Lengthy Delays of S&L; Mergers : Say Regulators Hold Up Deals for Solvent Firms

Federal regulators are peddling insolvent savings and loans across the nation as fast as they can, but they have been slower to approve mergers or acquisitions involving healthier institutions.

And even though this week’s agreement to sell American Savings to the Robert M. Bass Group of Ft. Worth would eliminate the industry’s biggest headache, the deal isn’t likely to shorten the long waits facing some investors who want to buy solvent S&Ls.;

The regulatory delays are threatening to undermine deals made long ago and may account for some of the 82 merger and acquisition applications withdrawn by investors during the past 19 months, according to investors, consultants and savings executives.

“It’s an outrage,” said Thomas T. Hammond, chairman and president of the Hammond Co., a mortgage banking firm in Irvine.

Hammond has been waiting more than a year for approval of his application to buy Mission Savings in Riverside, a thrift with $15 million in assets. Now, he worries that the deal is not the same as it was a year ago.

Bank Sale Held Up

“Rational businessmen cannot go into these situations with this kind of treatment,” he said. “Regulators can’t expect people like us to put money into S&Ls; when we’re treated this way.”

Another deal in California that has had an unusually long incubation is the pending sale of East-West Federal Bank in Los Angeles’ Chinatown to Talley Industries, a Phoenix conglomerate involved in defense work and the development of automobile air bags.

The deal has been pending before federal regulators since Aug. 1, 1987, and may not be completed before the end of this year, a Talley executive said.

While refusing to talk about specific S&Ls;, federal regulators said most deals are getting done rather quickly, usually within three to six months. But that’s longer than most executives in private business are used to, they acknowledged.

The longer delays for some S&Ls;, they said, tend to be caused by novel issues or policy concerns that must be resolved by officials at the Federal Home Loan Bank Board in Washington.

Six Applications Pending

Two regulatory executives, who asked that their names not be used, said that as long as an application is complete and does not present new issues or policy concerns, federal regulators in California can approve a deal without referring it to Washington.

They said they knew of only six pending applications for sales of healthy California thrifts. Only two of those applications--Mission Savings and East-West Federal--have been pending for more than a year. Both present the kind of issues that the three-member bank board in Washington must review, they said.

That’s the same board that also is devising programs to rid the nation of sick S&Ls; that have been depleting the federal deposit insurance fund.

“We do our darnedest to decide that applications are complete as soon as possible and get them processed as soon as possible,” one of the regulators said. “We have to make sure that the new institution has proper management, capital and internal controls to do the job.”

But industry executives and consultants see the bank board’s own process as the biggest obstacle to getting deals approved quickly.

Buyers Scrutinized Heavily

The caseload of insolvent thrifts that the board must deal with is “so huge it’s almost overwhelming the regulators,” said Stephen Skaggs, vice president of Alex Sheshunoff & Co., an Austin, Tex., industry consulting firm.

“Also, the bank board is placing greater scrutiny on buyers because the industry’s problems were caused partially by so many unscrupulous operators who gained control of thrifts,” he said.

Finally, Skaggs said, the “overlying fundamental cause” of delay is the agency’s own factional interests. Different divisions review aspects of each application.

“It makes it frustrating for someone in private industry,” he said. “The buyer submits what the board wants, waits three months and then gets a simple question out of the blue. He wonders why the regulators didn’t ask him that back at the beginning.”

The reason is simply because the application has moved on to a new reviewer, he said.