State S&L Regulators Want Closer Cooperation with Federal Counterparts, but Gear for Battle

By Luke, Robert | American Banker, August 1, 1986 | Go to article overview

State S&L Regulators Want Closer Cooperation with Federal Counterparts, but Gear for Battle


Luke, Robert, American Banker


State S&L Regulators Want Closer Cooperation With Federal Counterparts, but Gear for Battle

SAN DIEGO -- State savings and loan regulators want closer cooperation with their federal counterparts, but are prepared to do battle with them on sensitive issues such as interstate branching rights.

Earlier this year, the Federal Savings and Loan Insurance Corp. agreed to give multiple-state branching rights to buyers of troubled thrifts.

"The one-cent sale will not apply to Texas," declared L.L. Bowman 3d, commissioner of the Texas Savings and Loan Department. He spoke at the annual conference this week of the National Association of State Savings and Loan Supervisors.

Mr. Bowman promised to take the interstate branching issue to court, if necessary. The only reason for offering these rights to acquirers of troubled thrifts is to facilitate the acquisition of thrifts by bank holding companies, he asserted.

Federal regulators disclosed here that First Nationwide Bank, a San Francisco-based thrift, paid $35 million to acquire two troubled Ohio S&Ls and the right to open branches in Colorado and Pennsylvania.

It appears that the FSLIC has set $10 million as the price for entry into a state, said C. Thomas Long, an attorney with the Washington, D.C., law firm of Jones, Day, Reavis & Pogue.

As a result, Mr. Long, a former Federal Home Loan Bank Board deputy general counsel, told conference participants he expects interstate branching will "grow very dramatically."

Several state regulators are worried at the development, particularly about their ability to monitor and regulate those interstate entities. Some suggested closer regulatory cooperation on a regional basis.

Mr. Bowman, among others, called for improved dialogue between federal and state thrift regulators. He said if there had been better cooperation between them earlier, "mistakes in the past could have been avoided."

He pointed to the 1984 failure of Empire of America-Texas FSA, as an example. Empire, he said, had not violated any federal thrift regulations. In fact, Mr. Bowman said, the thrift's management took pains to adhere to the regulations.

When it failed, federal regulators discovered that many of the thrift's loans were collateralized by real estate of dubious value. Mr. Bowman noted that federal regulations currently permit institutions to make loans up to 100% of market value, or the purchase price of an asset.

Mr. Bowman complained that federal regulators were slow to act and did not quickly prosecute Empire's management. …

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State S&L Regulators Want Closer Cooperation with Federal Counterparts, but Gear for Battle
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