Word: thrifts
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Even in an era of perilously go-go thrifts, the two California savings and loan associations seemed to be looking for trouble. One of them loaned money for energy schemes ranging from windmill farms to cow-manure incineration, while the other served as a whimsical and allegedly fraudulent investment machine for its owner, a former dentist. Last week federal regulators said they would liquidate the two ailing S and Ls, a drastic step for institutions so large. The Federal Savings and Loan Insurance Corp., which guarantees thrift deposits, will spend a record $1.35 billion in cash to pay off insured...
...assets that the thrift operators gambled away on risky loans are mostly long gone, leaving the FSLIC to pick up the tab. The Government is suing the managers of both thrifts for more than $100 million, charging them with fraud and negligence. But most of the $1.35 billion payout will come from the FSLIC's reserve fund, which is largely composed of premiums collected from...
Federal regulators said last week that liquidations will remain a last resort in resolving the industry's widespread insolvencies. Of 3,100 federally insured thrifts, some 200 are considered hopelessly insolvent. The FSLIC's liability for these S and Ls now significantly exceeds its assets on hand, so that the fund posted a deficit of $13.7 billion at the end of 1987, contrasted with $6.3 billion the previous year. But the FSLIC aims to narrow that gap over the next few years, relying on income from premiums and other sources. The FSLIC estimates that it will have $20 billion available...
...protect itself from the vicissitudes of a fickle business, Ford has been moving to diversify. Since 1985, it has bought an 80% stake in Hertz (for $1.3 billion); California's First Nationwide Bank ($493 million), the fourth largest U.S. thrift institution; and BDM International ($425 million), a military research firm that will supplement Ford's longtime aerospace expertise. Ford is rumored to be interested in using its $10 billion cash hoard to go after a much larger acquisition, perhaps a company the size of Boeing, Lockheed or Singer...
Many savings and loan executives and analysts believe the thrift industry needs an even more aggressive cleanup. But Wall contends that the problems are contained mostly in one region. Says he: "Aside from Texas and the other oil- patch states, there is no question that we are well past the trough." In fact, more than 100 of the 280 or so thrifts in Texas are technically insolvent but still lurching along in business. FSLIC will have to clean up that gulch of insolvency as soon as possible if it hopes to maintain confidence in the thrift industry as a whole...