Westwood Savings Among 25 S&Ls; Taken Over by Regulators

Federal banking regulators Friday took over 25 more insolvent savings and loans across the country, including Westwood Savings & Loan in Los Angeles, a thrift in trouble for several years because of real estate loan losses.

The seizures were made by the Federal Deposit Insurance Corp. and bring to 36 the number of insolvent thrifts placed in government conservatorship during the past two weeks. President Bush has ordered the FDIC, which insures deposits at commercial banks, to take over more than 200 insolvent thrifts within the next six weeks.

In effect, the seizures temporarily nationalize the insolvent thrifts and seek to stabilize their financial condition until regulators decide what to do with them. The moves are part of the Bush Administration’s effort to clean up thrift industry failures, a task that is expected to cost at least $90 billion.

Meanwhile, three former thrift executives in Texas were indicted for their role in an alleged $1-million fraud, the Justice Department announced. The allegations included misapplication of funds and a conspiracy to defraud federal thrift regulators.

The indictment was the result of investigations by a federal criminal task force probing fraud in that state’s thrift industry. Named in the indictment were E. Morten Hopkins, Woodrow Brownlee and John Harrell.

The FDIC said its action will not disrupt normal operations of the 25 thrifts, which are in 14 states. The thrifts “will maintain normal operations, and all depositors will continue to be protected up to the $100,000 insurance limit,” according to a statement from the government agency.

Scattered Across U.S.

The biggest institution taken over was Southwest Savings & Loan in Phoenix, which has $2.42 billion in assets. The smallest was Nile Valley Federal Savings & Loan in Scottsbluff, Neb., which had $62.3 million in assets.

In all, five thrifts were in Nebraska, three in Arizona, two each in Florida, Kansas, Louisiana, New Jersey and Utah, and one each in Alabama, Arkansas, California, Connecticut, Illinois, Missouri and Wisconsin. They have total assets of $12.7 billion and total deposits of $11.1 billion.

In Westwood Savings’ case, the action amounted to a transfer of supervision from one government agency to another. Westwood Savings had been under a conservatorship of the Federal Savings and Loan Insurance Corp., the insurance agency for S&Ls.;

“It’s business as usual for depositors, customers and employees,” said Carol Schatz, an FSLIC spokeswoman. “This is an administrative change.”

Westwood Savings is the successor institution to California Women’s Savings & Loan, which was founded in 1978 to help women obtain credit and other financial services. The thrift was bought in the early 1980s by real estate developer Edward M. Israel.

In 1986, it was revealed that fast-growing Westwood Savings was in an “unsafe and unsound” condition because it had lent heavily to troubled commercial and residential real estate projects managed by Dallas entrepreneur Craig Hall.

Negative Net Worth

The FSLIC placed the firm in receivership on March 27, 1986, and later sued several former officers, including Israel, charging them with engaging in improper lending practices. Since then, the insolvent financial institution has maintained a low profile while gradually shrinking its assets from $554 million to its present level of $342 million.

Westwood Savings has a negative net worth of $216 million, meaning that its debts exceed its assets by that amount. With five branch offices in the Los Angeles area and 9,065 customer accounts, the thrift has total deposits of $414 million.

According to the indictment in Texas, Brownlee, Hopkins and Harrell are accused of participating in a phony land deal aimed at diverting $1 million from Commodore Savings Assn. to one of its affiliates, National Mortgage Corp. of America.

Brownlee and Harrell were both officials of Commodore Savings while Hopkins was president of National Mortgage. Commodore Savings, which became insolvent, was recently merged and renamed Consolidated Federal Bank.