Supreme Court Turns Away GlenFed Appeals

The Supreme Court declined Monday to clarify how much the government should pay savings and loan associations that say they lost billions after Congress abruptly changed accounting rules to bail out the industry in the late 1980s.

The justices rejected an appeal by the government to review a lower court ruling that gave $381 million in “wounded bank” damages to Glendale Federal Savings. The high court also turned away an appeal by GlenFed seeking an additional $527.5 million.

The case stems from GlenFed’s 1981 takeover of a troubled Florida thrift, First Federal Savings of Broward County, after regulators began inducing healthy S&Ls; to take over sick ones by granting them unusual accounting breaks.

By agreeing to make such purchases, the thrifts helped the government avoid reimbursing account holders under a deposit insurance program.

Dozens of thrifts are still battling the government over billions of dollars they lost when Congress reversed the accounting breaks in 1989 as part of a massive bailout of the industry.

The government took GlenFed, now part of Citigroup Inc., and two other thrifts to the Supreme Court in 1996, unsuccessfully arguing that it had no liability for the losses. The justices ruled that the government had breached its contracts with the S&Ls; and sent the cases back for a determination of damages.

GlenFed, which believed it was entitled to the additional damages, appealed a ruling in August by the U.S. Court of Appeals for the Federal Circuit; the Justice Department in response filed a cross-claim, arguing that the $381-million award should be lowered and that there should be no additional damages.