Wall Says Weak S&Ls; May Face Forced Mergers

Federal savings and loan regulator M. Danny Wall warned industry executives today that an “arranged marriage” with a merger partner might be the only way to prevent a weak institution from closing.

“Thrifts that are undercapitalized are in very grave jeopardy. Understand that,” Wall told 3,600 delegates at the 97th annual convention of the U.S. League of Saving Institutions, the industry’s largest trade group.

Wall, director of the Office of Thrift Supervision, didn’t mention in his speech the controversy swirling around his agency’s handling of the failure of Lincoln Savings & Loan Assn. of Irvine, expected to cost taxpayers as much as $2 billion.

But, at a news conference, he defended his decision to delay seizure of Lincoln by nearly two years, saying he understood he was legally required to keep it open unless it was insolvent.

On Monday, Wall’s agency issued new regulations requiring S&L; owners to back their lending with more of their own capital.

The thrift office estimates that about 800 of the nation’s 2,600 solvent S&Ls; will fall nearly $20 billion short of the new standard. Regulators have identified 223 of those S&Ls; as likely candidates for government takeover. Many of the others will be able to meet the requirements by shrinking their balance sheets or retaining profits, Wall said.

The rest, about 300, “must consider a merger or the reality of being acquired,” Wall said, warning weak thrifts not to be too choosy about suitors.

Thrifts not meeting capital standards by the end of 1994 face closure. In the meantime, the thrift office will launch a vigorous “matchmaker” program.