Federal regulators would contribute $905 million to Empire of America’s recapitalization under a proposal made by the troubled thrift Monday.
The application to the Federal Savings and Loan Insurance Corp. is a first, but industry observers said others are likely to follow.
“We’ve been predicting this would happen for some time,” said Douglas Faucette, an attorney for a coalition of banking interests.
“Unless executives are totally asleep at the helm, they’ll all be doing this,” he added.
If the request were approved, Empire said it could raise an additional $670 million through private investors and could return immediately to profitability.
The recapitalization plan “demonstrates a means whereby the cost to taxpayers of the resolution of the entire thrift crisis could be significantly reduced,” according to Empire Chairman Paul Willax.
Empire, the nation’s 12th-largest thrift with $11.3 billion in assets, is asking FSLIC for the cash as a replacement for non-cash assistance that FSLIC gave Empire when the firm took over 13 failing savings and loans from 1981 to 1986.
Although it is currently solvent, officials are afraid that federal proposals to save the thrift industry will reduce the value of its non-cash assistance. If that happened, Empire would have difficulty raising money to meet new capital requirements.
“This is not at all an act of desperation but rather an act of anticipation,” Willax said.