MARIO J. ANTOCI
The future of the besieged savings and loan industry has been in doubt ever since a federal law forced thrifts to restructure operations in 1989. But Mario J. Antoci, who heads giant American Savings Bank in Irvine, sees a long-term role that thrifts will fulfill. Antoci, 58, former president of Home Savings of America, now the nation’s biggest thrift, took over last month as chairman of the industry’s statewide trade group, the California League of Savings Institutions. He spoke recently with Times staff writer James S. Granelli.
Q You take over a trade group for an industry that is fading away. How much longer will the industry or its trade group exist?
A I think they’ll be around a long time. I think the industry has been fading, but it’s about to end that downward spiral because most of the institutions that are going to be taken over have already been taken over, or we know who they will likely be. Some may work their way out of the problems. But then I think we’ve pretty much settled down. Capital is now strong at a lot of institutions.
Q But is there a need to have a dual banking system any longer?
A I don’t know if there’s a need for a dual banking system. I think there will always be niche players. And of course, FIRREA (the Financial Institutions Reform, Recovery and Enforcement Act of 1989) made S&Ls; even more of a niche player. If you think about the mortgage arm of the banking system--those who choose to portfolio mortgages as their primary asset--there will always be a need for that kind of institution.
Q What does this shakeout mean for the consumer?
A I think the consumer in the long run hasn’t really been hurt at all. I think there’s still enough competition so that the consumerwill be better off long range. When an S&L; is having trouble, the only way it can continue to exist is to pay higher and higher interest rates on deposits. You might think of that as great for the consumer, but it really isn’t because now the taxpayers are paying for it. I think there are enough institutions to create the competition that makes it fair for the consumer.
Q What were some of the major mistakes in FIRREA?
A I think the biggest mistake in FIRREA is the time in which we had to meet certain requirements. And it’s caused part of the real estate problems that we face because of the need to dump assets. I think another major mistake that was made was the confiscation of goodwill that so many of the institutions had because they were doing a favor for the government. That’s just not right.
Q You’re talking about the accounting method that affects capital because of acquisitions, in this case purchases of failed thrifts that regulators urged on healthy S&Ls.;
A Yes. And to say that goodwill is going to be charged directly to your capital in five years instead of 20 or 40 years is changing the rules of the game and not giving institutions long enough time to recover. There isn’t a company that isn’t sold that doesn’t have some goodwill that goes along with it. We, the industry, were buying institutions in other states, places that we could not go because the laws would not allow interstate branching but would let us buy failing S&Ls.; All of the people who had done these things had done their forecasting and had written off this goodwill over a long period of time because the accounting conventions allowed it. You write off that asset over 20 years, that makes sense, but it doesn’t when you write it off over four or five years.
Q Are there other big problems with FIRREA?
A Yes, the issue of investment in real estate. There’s no question that some people didn’t know what they were doing and, for the most part, those people have been shut down. But there are people in the business who were building things that they knew. Think about it this way: The S&L; industry has always been big in construction lending. They were taking a bigger risk than the developer because developers first of all had very little money into anything and if the tract of homes went sour, they walked away from it. The institution was holding it and had to sell it. So there were a lot of institutions that decided this is silly. Why don’t we just build the houses ourselves and get the upside potential. We already had the downside, the risk. There wasn’t any reason for FIRREA to force S&Ls; to dump these assets over such a short period of time, writing them off against capital. That was also unfair. The goodwill and the real estate investments are by far the worst parts of FIRREA.
Q What are some good parts of FIRREA?
A The discipline that it brought back to the business; the focus it caused the industry to adopt in looking at the kind of loans that they were making. Our industry must focus on adjustable rate lending. We cannot let ourselves be trapped by fixed-rate loans. FIRREA, in effect, forced those who didn’t have the discipline to be disciplined.
Q A new law, the Federal Deposit Insurance Corp. Insurance Act of 1991, gives regulators authority to micro-manage thrifts. Is that good?
A It’s terrible. Hopefully, something is done to modify it because it is a bill that is going to add substantial costs not only to the institutions that have to be supervised but to the supervision group themselves.
Q What impact does all this have on consumers?
A Ultimately, the consumer has to pay. If you think about it, we are now mandated to make a certain profit through FIRREA. If you don’t make profit, you won’t be in business. You don’t have the option of saying, well, maybe we won’t do so well this year. You have to do well. To me, that means we have to price our products more intelligently and there will be less of the price-war type pricing that we’ve seen in the past because you can’t afford to do it. And embedded in our costs are all of the implications that (the laws) have on running your business, such as the papering of the files to protect ourselves in case something goes wrong.
Q On lending to minorities.
A “We’re having, like everybody, problems really doing an excellent job in the black communities. In Hispanic communities, three families will go together to buy a house. They just don’t do that in the black communities.”
Q On restructuring the banking industry.
A “I’d like to see a consolidation of regulatory authorities. It would be great to be regulated by one rather than several.”
Q On calls by some for private deposit insurance.
A “Tell me one private institution that’s big enough to handle the mess that we just went through. I don’t see how. I suspect that the price of insurance is a lot lower with the FDIC than it would be with a private institution.”
Q On American committing $1 million to South L.A.
A “We hope that money is going to go for things that will bring employment.”
