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S&L; Industry Capital Jumps in August

Associated Press

The balance sheet of the savings and loan industry in August began reflecting the stepped-up pace of mergers and closings ordered by federal regulators.

The Federal Home Loan Bank Board said Tuesday that the industry’s capital--the difference between what it owns in loans and other assets and owes in deposits and other liabilities--jumped by $5.75 billion in August, only the second increase in 12 months.

Multibillion-dollar losses since the second quarter of 1987 have been eating away at thrift institutions’ capital cushion. But the increased pace of “resolutions” by regulators has, at least in August, reversed that trend. For the first eight months, capital is down $159 million, compared to a drop of $721 million in the same period of 1987.

“This demonstrates that as the bank board continues taking action against insolvent thrifts, there are salutary effects,” bank board chief economist James Barth said in a statement.

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By closing an insolvent institution or paying a healthier S&L; to take it over, regulators in effect transfer the red ink from the industry’s books to the books of the Federal Savings and Loan Insurance Corp., which insures deposits up to $100,000.


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