State Wants to Be American Thrift’s Bankruptcy Trustee
State regulators say they will try to take control of American Thrift & Loan Assn., a one-branch San Diego institution that this week filed for protection under Chapter 11 of the federal Bankruptcy Code, asking the court to name it trustee of the institution while it is in reorganization.
Richard Murakami, a State Department of Corporations assistant commissioner, said the state does not plan to challenge the legality of American’s bankruptcy filing, although state officials believe it to be the first such filing ever by a California thrift and loan.
Rather, the department will attempt to have representatives of the Thrift Guaranty Corp., the industry’s self-insurance fund that guarantees deposits up to $50,000, named as trustee in the bankruptcy. The insurance fund operates under close supervision by the state.
American Thrift & Loan’s bankruptcy filing Wednesday effectively froze 1,728 accounts totaling $15 million at its one Mission Valley branch. The filing, which surprised state regulators, took place three weeks before the institution would have been forced to close its doors because it was not in compliance with deposit insurance laws becoming effective July 1.
A state law passed in 1985 required that California’s 54 thrift and loans switch to Federal Deposit Insurance Corp. coverage by June 30 or be shuttered and liquidated. But insufficient capital kept American and eight other thrift and loans in the state, including Mission Thrift & Loan of San Diego, from qualifying for FDIC insurance.
All of the capital-deficient and uninsurable thrift and loans--except American--are in the process of being liquidated under the supervision of Thrift Guaranty Corp. Mission Thrift, for example, is down to $1.4 million in deposits at its 4th Avenue office and expects to cease existence by the end of this month, an employee said Friday.
American, which has assets of $25.8 million, saw its capital depleted by losses of $1.8 million in 1989 and $567,000 for the first quarter of this year. Murakami said the state expected American to qualify for FDIC insurance until the recent losses reduced capital to levels that were unacceptable to the FDIC.
American was informed June 1 that it would not be receiving FDIC insurance, a bank source said.
American, which is controlled by San Diego real estate developer J. W. Jones, said it decided to file for protection under the bankruptcy code because it did not believe that adequate funds existed in the Thrift Guaranty Corp. to cover depositors’ funds, sources said.
In a statement, American said the filing was designed to avoid a hasty liquidation of American’s assets that might have resulted in the thrift and loan getting less return in a liquidation, sources said. The thrift and loan lists assets of $25.8 million and liabilities of $25.6 million.
“The bankruptcy is being filed to give us more time to sell our assets, which will give the company the opportunity to return money held in thrift accounts to depositors,” American Thrift & Loan President Nick Pantell said in a statement this week. Neither Pantell nor Jones was available for comment Friday.
Thrift Guaranty Corp. President Tom Cunningham disputed the contention that the insurance fund has inadequate cash to pay off American’s depositors, saying the fund has more than $4 million cash on hand and access to millions more.
“Their fear is that if someone else is appointed conservator, that they might sell things at less value than they believe they can get themselves,” Cunningham said. “But, as conservator, I’m not going to do a fire sale. I want as orderly a process as possible, since it’s our fund that’s going to have to make up the shortfall.”
