$900-Million Bailout : Regulators Shut Texas Bank

From Associated Press

Federal regulators late Thursday closed the 24 banking branches of Texas American Bancshares Inc. and established an interim institution to oversee the failed banks until they are fully acquired by Deposit Guaranty Bank of Dallas.

The Federal Deposit Insurance Corp. said it will spend $900 million in the bailout. Texas American's 24 banks will open today as branches of Texas American Bridge Bank, a bank created to enact the takeover, the agency said.

Depositors, including those with funds that exceed the $100,000 federal insurance limit, will automatically become depositors of Texas American Bridge Bank.

The Texas American transaction raises the number of bank closings in Texas this year to 95 and to 131 nationwide. Texas American's insolvency was blamed on loan losses, losses in intracompany transactions and deterioration of the Texas real estate market.

Texas American Bridge Bank will be managed under contract by Deposit Guaranty. The new bank has total assets of about $4.2 billion and deposits of about $4.1 billion.

Deposit Guaranty will sell stock and debt instruments to bring the resulting institution up to required regulatory financial standards.

The FDIC set aside $600 million in 1988 to assist Texas American. The regulator will absorb losses on the bank's problem assets, which Deposit Guaranty will manage.

Before the Texas American transaction, Deposit Guaranty had purchased 13 banks, 11 of them in closed-bank, federally assisted deals. Even when Deposit Guaranty acquires troubled assets it is protected from losses by regulators.

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