Glendale Fed Wants $1.5 Billion to Settle U.S. Suit, Vows Minority Loans

Glendale Federal Bank on Thursday offered to settle its seven-year legal battle against the U.S. government for $1.5 billion and to lend that amount during the next three years to low-income and minority communities in California.

The thrift, a unit of Glendale-based Golden State Bancorp, sued the government for changing accounting rules set up to help the savings and loan industry through its crisis during the 1980s. A number of other savings and loans have similar suits pending against the government over its alleged reneging on “goodwill” incentives that were established to encourage thrifts to buy other, troubled thrifts.

“We are willing to offer the government an opportunity to settle its liability for damages that are due the bank and simultaneously advance public policy, provide jobs and housing, and improve the lives and outlook for California residents,” said Stephen Trafton, chairman and chief executive at Glendale Federal.

Justice Department spokesman John Russell said that “we will confirm we’ve been having talks” with Glendale Federal regarding a possible settlement, but “we seldom find it productive to discuss settlement issues in public. . . .” He declined to comment further.

Glendale Federal, one of California’s largest thrifts, with 176 offices, gave the government until next January to accept the offer.

This is not the first time Glendale Federal has offered to settle with the government. In late 1995, it offered to settle for an undetermined amount, but those discussions were never fruitful, said Richard Fink, a senior executive vice president at the thrift.

Since then, the Supreme Court has ruled that the government breached its contract with Glendale Federal. In July, U.S. Court of Federal Claims Chief Judge Loren Smith said Glendale had a “convincing” case.

If a settlement is reached, Glendale executives said, the thrift will set up a program to bring banking services to underserved areas, establish lending for multifamily housing in low- and moderate-income and minority areas and provide more technical assistance and training to low-income and minority small-business owners.

Earlier this year, activists attacked Glendale’s record of lending to minorities, saying the thrift made just 11 home loans to blacks earning less than $35,000 a year in 1995. A Glendale Federal spokesman has said those numbers were taken out of context.

Golden State Bancorp’s shares rose $1.06 to close at $33.25 on the New York Stock Exchange on Thursday.

Times staff writer James F. Peltz contributed to this report.