13 More Thrifts Rescued at Cost of $411 Million
Continuing their rush to complete the rescue of as many failed thrift institutions as they can by year-end, federal regulators on Thursday announced $411 million in new bailouts, including the acquisition of eight insolvent savings and loan organizations by the Texas subsidiary of a Taiwanese firm.
The bailouts, which follow $6.8 billion in rescue efforts announced the previous day, involve 12 Texas institutions and the American Savings Bank of Springfield, Ill. All were acquired by private investors with the help of federal aid.
The acquisition by the subsidiary of a Taiwanese firm, Pacific USA Holdings Corp. of Texas, which purchased eight Texas S&Ls;, marks the first time a foreign investor has agreed to buy a failed U.S. thrift. Federal officials said no government aid was involved in the action.
The moves bring to 197 the number of insolvent thrift institutions that have been rescued or liquidated so far this year by the Federal Home Loan Bank Board and its insurance arm, the Federal Savings and Loan Insurance Corp. About 400 more insolvent thrifts are in need of help.
Regulators are trying to complete as many of these packages as possible by year-end because starting Jan. 1 the tax laws will change. Then, would-be investors no longer will be eligible for about half the tax breaks now available to cover losses of the insolvent S&Ls.;
The benefits that will be cut have allowed firms that agreed to take over troubled S&Ls; to deduct the losses of these institutions from the profits the investors earned on other operations. In many cases, the tax benefits have far exceeded the cost of buying up the S&Ls.;
Federal officials concede that the sheer size of the federal bailouts that have been needed will pose a serious budgetary problem for the incoming Bush Administration next year, particularly since some of the federal assistance has proved more generous than previously expected.
Although the bank board has estimated that it would cost between $45 billion and $50 billion to complete the rescue, agency Chairman M. Danny Wall said Thursday on NBC’s “Today Show” that it now is becoming clear that “it could be indeed somewhat larger than that.”
Keeping the insolvent institutions open has been costing the government an estimated $1 billion a month, but officials have been unable to shut any of them down because the FSLIC’s own insurance fund is strapped. So far, the agency has spent $34.4 billion on the bailouts.
Nearing Target Level
The packages announced Thursday include these elements:
- Pacific USA Holdings Corp., the Texas subsidiary of Pacific Electric Wire & Cable Co. of Taiwan, is acquiring eight insolvent Texas thrifts for $37.5 million. The FSLIC will offer the firm a 10-year, $161.7-million note in return for warrants to buy stock.
The eight include Charter Savings & Loan Assn. of Corpus Christi; Keystone Savings & Loan Assn. of Lampasas; Bayview Federal Savings Assn. of Corpus Christi; First Federal Savings & Loan Assn. of Luling; Independence Savings & Loan Assn. of Gonzales; Yoakum Federal Savings & Loan Assn. of Yoakum; Union Savings Assn. of San Antonio, and Seguin Savings Assn. of Seguin. - Centrex Corp., a Dallas home builder, is buying four more failed Texas S&Ls; for $26.5 million in return for $223 million from the FSLIC in the form of a 10-year note.
The four include Burnet Savings & Loan Assn. of Burnet; Lee Savings Assn. of Giddings; Ranchers Savings Assn. of Johnson City; and Peoples Savings & Loan Assn. of Llano.
- The American Savings Bank of Springfield, Ill., is being acquired by Citizens Federal Bank of Miami. The FSLIC will provide $106.5 million in cash and $25 million in seven-year notes and will purchase $56 million in troubled assets.
The addition of the 13 S&Ls; to the bailout rolls Thursday brought the bank board’s total for the year to within three rescue efforts of the 200-institution target that Wall set for the agency for 1988. Additional announcements are expected today.
Promises Review
There were signs Thursday that Congress may be planning to chide the bank board for having been too generous in its settlements. Senate Budget Committee James R. Sasser (D-Tenn.) said in a letter that he had “serious questions about the impact your plans will have on the federal budget.”
And Rep. Henry B. Gonzalez (D-Tex.), the new chairman of the House Banking Committee, said he is planning a series of hearings next year to probe the affair. “All of the bank board’s 11-hour deals will be reviewed by the House Banking Committee,” Gonzalez said.
