Bank Board Pledges $6.8 Billion to Help Bail Out 6 Insolvent S
Federal regulators pledged $6.8 billion today to assist two major acquisitions involving six insolvent savings and loans institutions, five in Texas and one in California that is the largest foundering thrift in the country.
An investment group headed by Texas billionaire Robert M. Bass will invest $500 million over the next three years to acquire Stockton-based American Savings, the nation’s largest insolvent thrift.
The Federal Home Loan Bank Board will provide a total of $1.7 billion in financial assistance to bring to fruition a deal that has been more than a year in the making.
Five Insolvent Thrifts
In the second deal, Gerald Ford, chairman of Ford Bank Group, in conjunction with MacAndrews and Forbes Holdings Inc., a New York-based private investment group, is investing $315 million in new capital to acquire five insolvent Texas thrifts under the bank board’s Southwest Plan.
Two of the thrifts, Gibraltar Savings Assn. of Houston, with assets of $6.1 billion, and First Texas Savings Assn. of Dallas, with $3.5 billion in assets, are among the largest thrifts in Texas. The five thrifts had combined assets of $12.2 billion.
The bank board has agreed to kick in $5.1 billion to assist in that deal.
The latest Texas package represented the second largest amount of government aid ever extended. It was exceeded only by $5.5 billion in assistance provided in the merger of Sunbelt Savings Association and seven other Texas institutions last August.
Less Cost to Government
As costly as the rescue packages will be, bank board Chairman M. Danny Wall said that the cost to the government of simply closing the insolvent institutions and paying off depositors would have been far higher.
“I am amazed by the number,” said Bert Ely, a financial analyst based in Alexandria, Va. “It is so much larger than I thought it would be. But it’s just further confirmation that the losses are of a far greater magnitude in Texas than the bank board has ever been willing to admit.”
With today’s actions, the government has resolved the case of 181 failed S&Ls; this year, up from 48 last year.
Along with First Texas and Gibraltar, which Wall called “rather infamous,” Home Savings & Loan Assn., with assets of $568.3 million; Killeen Savings & Loan Assn., $256.6 million in assets, and Montfort Federal Savings & Loan Assn., with $1.8 billion, will be merged into a single new institution.
Left From Previous Merger
Montfort is the product of a previous merger with Vernon Savings & Loan, a deal that cost the bank board $1.3 billion, Federal Savings and Loan Deposit Corp. Director Stewart Root said.
The consolidation of the five Texas thrifts will cause no interruption to depositors, bank board officials said. All 132 of the former offices of the thrifts were to reopen today as branches of First Texas Bank, F. S. B.
Wall said the new owners plan to close about 60 of those branches by the end of 1989.
With the investment of $315 million, the bank board said its Southwest Plan has attracted $845.8 million in new capital to Texas thrifts. The transaction brings the number of insolvent thrifts dealt with under the plan to 74.
The American Savings deal culminates months of negotiations between the Bass group and the bank board, and it differs significantly from the original acquisition plan announced Sept. 5.
The new bank will be federally chartered, rather than state chartered, and therefore will not be able to engage in a full range of so-called merchant bank activities, which involve riskier loans to a variety of endeavors.
A subsidiary, however, will be allowed to make more restricted such loans.