Government Will Push for Thrift Mergers : Savings and Loans: The U.S. will press for ‘shotgun marriages’ between struggling firms and their stronger competitors to develop a healthier industry.

The government will press for “shotgun marriages” between struggling savings and loans and stronger competitors to build a smaller but healthier thrift industry, M. Danny Wall, director of the Office of Thrift Supervision, said Wednesday.

Speaking to the U.S. League of Savings Institutions, the main thrift industry group, Wall said his agency would use the threat of penalties against thrifts to arrange mergers with potential suitors.

“We are calling this our arranged marriage program. Where I come from, they would put the word ‘shotgun’ in there,” he said. He said the program would start in a week.

The forced mergers would apply to S&Ls; that fall short of tough new capital requirements issued by the office this week. As of June 30, seven Orange County thrifts were deficient in their capital levels, according to Sheshunoff Information Services of Austin, Tex.

The capital rules and merger programs are the latest steps by the chief federal regulator of the 2,900 U.S. thrifts to reform the industry after heavy losses forced Congress to pass a $159-billion bailout law.

Wall said well-run institutions in the thrift industry, which is a major source of loans for home buyers, have been penalized for imprudent and criminal actions by some savings executives.

Wall, who has been heavily criticized by members of Congress, vowed he will be a diligent enforcer of new rules requiring thrifts to put more of their own funds at risk in the form of capital.

The capital rules issued by the thrift office Monday will require many thrifts to increase their capital beginning next month as a cushion against losses, and if they cannot, to submit a plan to comply.

If a cash-strapped thrift receives an offer to be acquired but is too coy about accepting, the regulators will have to consider whether the thrift’s behavior violates a rule against operating in an unsafe manner, Wall said.

“We will consider enforcement actions,” he said.

Wall said as many as 300 thrifts could disappear into acquiring firms, which might be healthy thrifts, commercial banks or industrial companies, and will include non-U.S. firms.

He cited the $110-million investment of Royal Trustco Ltd. of Toronto, the largest trust company of Canada, in Pacific First Financial of Seattle. Royal Trustco made the purchase as part of a major expansion plan in the United States.

Royal Trustco also recently acquired insolvent Pacific Savings Bank in Costa Mesa in a federally assisted transaction. The federal government provided $550 million and Royal Trustco pumped in $47 million in capital. The thrift will become part of the Pacific First network.

Wall also said a Japanese firm is acquiring part of a Hawaii thrift for $20 million. He did not identify either party in the deal.

“Major international financial service organizations share our vision of a positive future for the thrift industry,” Wall said.

Several Orange County thrifts are currently exploring ways to shore up their capital, including through the sale of assets, infusion of cash from new investors or mergers. Mercury Savings and Loan in Huntington Beach, for instance, recently hired an investment banker to explore a merger with an outside firm. The troubled thrift has lost $5.4 million in the first nine months of the year and as of June 30 had only half the capital required by regulators.

In another area, the agency will soon issue rules that will specify when an undercapitalized thrift must limit or omit dividends to help build up capital, Wall said.

He said the number of thrifts that are insolvent because they have liabilities exceeding assets will continue to grow.