First Network Closed; Depositor Payoffs to Start
Federal regulators today will begin paying off depositors of the failed First Network Federal Savings Bank, after spending nearly three months in abortive efforts to sell the Los Angeles-based thrift.
The Resolution Trust Corp., the agency created to sell assets of failed savings and loans, approved a plan Friday to pay off First Network’s insured deposits. The institution was closed for good at 6 p.m. Friday by the Office of Thrift Supervision.
Regulators said First Network had deposits of about $373.9 million in approximately 12,500 accounts. Uninsured deposits were believed to be minimal.
“The institution has been in conservatorship for some time,” RTC spokesman Stephen Katsanos said in a telephone interview Sunday. “When we have an institution in conservatorship, we basically strongly discourage customers from maintaining balances over the insurance limit. We normally see a few accounts that, once the interest is added in, it may bump over the insurance limit. It really is nominal.”
Katsanos said that although the thrift’s business operations are in Los Angeles, most of its retail customers are in the Lake Tahoe area.
Regulators seized First Network on April 20 and put it up for sale on June 27. When no “acceptable” bids surfaced, the RTC decided to pay off depositors, and the thrift was closed.
First Network is among seven Southland savings and loans that federal regulators and the FBI have given top priority in their investigations into possible criminal activity at thrifts. It was headed by Carl M. Rheuban, an amateur magician, philanthropist and developer who had close ties to Democratic politicians.
Katsanos would not comment Sunday on any investigations.
The RTC estimates that the failure of First Network will ultimately cost taxpayers $138.7 million--after assets are sold, depositors are paid off and ongoing litigation is resolved.
