American Savings Has Regained Place as Financial Leader

If the world of savings and loans has a phoenix, its name is American Savings.

Once a proud financial company that helped make home ownership possible for hundreds of thousands Southern Californians by offering low-cost mortgages, American Savings grew to become the nation’s largest thrift.

Then a slumping real estate market and new owners in the early 1980s transformed it into a toxic waste dump of financial assets.

A $5.4-billion government bailout pulled the institution back from fiscal collapse, and new leadership has transformed the company again into a lending leader throughout the state.

And on Monday, the institution that was patched together from several small thrifts in the mid-1950s by Southern California entrepreneur S. Mark Taper, entered the latest chapter in its colorful history. American Savings said it will be sold to a Seattle thrift, Washington Mutual Savings Bank, in a $1.4-billion deal.

The purchase, rumored for months, was widely hailed by analysts who said that the new chapter could be the best move for a company once left for dead.

“American Savings has had some wild ups and downs, to say the least,” said Jack Rodman, a director with E&Y; Kenneth Leventhal Real Estate Group in Los Angeles.

“American Savings was a real phoenix: It rose from the ashes,” said Barry Rubin, a bank consultant in Santa Monica who worked at the thrift in the late 1950s with Taper.

While the roots of the company stretch back to 1885, it was transformed from an insignificant company to a very large firm by Taper, a Polish immigrant who came to Southern California from England and built a massive housing development that became Lakewood.

Taper’s savings and loan thrived during the late 1950s and 1960s as a housing building boom fueled the need for more construction loans and home mortgages.

Probably best known for giving $1.5 million and his name to create the Los Angeles Music Center’s Mark Taper Forum, Taper is also thought to have brought the drive-by cashier’s window to Southern California.

The backbone of the company, Taper was known for his frugality--he reportedly even saved the brown paper bags in which he carried his lunch--and conservative financial strategies, said those who worked with him.

But in 1983, the elderly Taper sold his company to Financial Corp. of America, a Stockton-based savings and loan led by former stockbroker Charles W. Knapp. Knapp turned the thrift into one of the nation’s highest-flying savings and loans, a firm that epitomized the excesses of the 1980s.

The company once owned high-risk mining operations, engaged in sloppy and questionable loan practices and incurred losses stemming from a large pool of mortgage-backed securities.

After years of financial turmoil--including a $6-billion run on deposits in 1984--American ultimately crashed and failed after absorbing heavy losses on real estate development loans made while Knapp was in charge.

“American went on a roller coaster ride during the wild and crazy ‘80s,” said Ed Carpenter, a banking consultant in Orange County.

In what was the single largest rescue of a thrift, the government stepped in with a $5.4-billion bailout that included selling American to Robert M. Bass, a billionaire and corporate bailout specialist from Texas. Bass, who put up $350 million, received a package of tax breaks as part of the deal.

“The place was in shambles,” said William J. Popejoy, brought in to restore order at American after Knapp was ousted in 1984. Popejoy, who worked at the company years earlier with Taper, remained at the request of the government until 1988. “The Bass people came in with a good organization and turned the company around.”

In 1988 the Bass family brought in Mario J. Antoci, who came up through the ranks of Home Savings of America, to restore confidence in the company as the new chairman and chief executive. By 1989, Antoci said, the company was in the black.

In recent years, American Savings has been one of the state’s largest mortgage lenders, attracting homeowners with low rates and its extensive branch network. It has managed to stay profitable, even while home sales sagged during the recent real estate downturn, because it boosted its home refinancing business as interest rates sank.

In the late 1980s, a coalition of minority groups targeted American Savings for redlining, or avoiding poorer and minority borrowers. But by 1992, American had become the state’s premier mortgage lender in low-income neighborhoods. The firm devoted a greater percentage of its loan money than any other major financial institution to such areas.

With Monday’s announced purchase, American begins a new era.

“It looks very positive,” Popejoy said. “It’s not being swallowed by some huge financial firm. It has really weathered a tough time and come into its own in the 1990s.”

Fred Forster, former president of Home Savings of America, another large Southern California thrift, who once worked at American Savings said the deal was good for the Basses, the company and even Southern California consumers.

“I can’t identify who loses in a deal like this,” Forster said. “It’s good for everyone involved.”

And what would Taper, who died in 1994, think of this deal?

The man who helped create American out of several firms that included such now-lost names as Whittier Building and Loan and American Mutual Building and Loan of Redondo Beach would applaud the deal, Popejoy said.

“Mr. Taper would be pleased, very pleased,” Popejoy said. “Because it looks like his company is staying intact.”