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Most investors make money by avoiding financial disasters. But a growing number of savvy business executives have begun seeking fortunes in the ruins of the savings and loan industry's insolvent institutions. Since 1984 investors have bought 260 failed S and Ls, most of them in the West and Southwest, where thousands of loans to the depressed real estate and oil industries have gone bad. Last week Robert Bass, 40, one of Fort Worth's billionaire Bass brothers and an accomplished takeover artist in his own right, joined the trend. He led a group that agreed...
...troubled S and L? For starters, once the bad loans have been excised, the thrift institution's traditional business of writing mortgages can be quite profitable. Now that many home loans have adjustable interest rates, few S and Ls should be savaged, as they were in the early 1980s, by having to pay high rates to depositors while receiving low yields on long-term mortgages. Furthermore, real estate prices in the Southwest cannot stay depressed forever. "We're at or near the bottom of the cycle for the Texas economy," says William Gibson, a former Continental Illinois banker who, with...
Danny Wall, the chief U.S. regulator of savings and loans, is on a bailout binge. Last week the Federal Home Loan Bank Board, whose Federal Savings and Loan Insurance Corporation guarantees thrift deposits, said it would spend $1.9 billion to rescue 14 ailing Oklahoma S and Ls. The Bank Board merged the thrifts into six larger institutions in the hope of selling them to private investors. With the Oklahoma rescue, the agency has laid out a total of $9.8 billion in the latter half of August to salvage 45 thrifts, most of them in the financially troubled Southwest...
Once again the weakest institutions are heavily concentrated in Texas, where 281 S and Ls lost $6.9 billion last year. In the rest of the country, S and Ls eked out a collective $100 million profit, but the industry is sharply divided between highly profitable institutions and those losing money at a rapid clip. "The bad few are pulling down the majority," says James Barth, chief economist for the Federal Home Loan Bank Board...
...will raise $10.8 billion in three years. Chairman Danny Wall of the Bank Board estimates that with the $10.8 billion and premiums from member institutions, the insurance fund will bring in nearly $30 billion during the next decade -- almost enough to take care of all the insolvent S and Ls. But other experts are not so optimistic. The FDIC's Seidman has told Congress the bailout figure could reach $50 billion, and some analysts put it as high as $100 billion. Few people believe the FSLIC can avoid going to the taxpayers for billions of dollars...