Magazine article American Banker

RTC Sale of Homefed Bank Could Cost Some Depositors

Magazine article American Banker

RTC Sale of Homefed Bank Could Cost Some Depositors

Article excerpt

WASHINGTON - The Resolution Trust Corp. on Friday is selling the nation's largest failed thrift, and depositors with $12 million in holdings stand to lose money as a result.

RTC spokesman Stephen Katsanos said a July analysis of Homefed's books indicated that a portion of $12 million - of the $4.88 billion of deposits at San Diego's Homefed Bank - is uninsured because the accounts exceed the federal government's $100,000 limit.

The agency is selling only the insured deposits and has not notified the uninsured depositors of their potential losses

"We expect that the depositors are watching their own money," Mr. Katsanos said, noting that taxpayers would pay more of the thrift cleanup costs if the RTC suggested that uninsured deposits be withdrawn before failed thrifts are resolved.

More Deposits Exceed Limit

In addition to the $12 million, Homefed has $350 million more in deposits above the $100,000 federal deposit insurance limit.

The RTC could not say exactly why those deposits are considered insured, because it does not conduct a final audit on failed institutions until the night it resolves them.

Mr. Katsanos said there are several possible explanations for why the other $350 million in accounts over $100,000 are considered insured.

What appears on the books as a single large account could actually be a group of deposits of less than $100,000 each that brokers have placed on behalf of clients; deposits of more than $100,000 might secure loans; and the large deposit accounts might also be joint accounts, trust accounts, or custodial accounts.

According to second quarter financial reports, Homefed had no uninsured deposits, but had 997 accounts with balances of more than $100,000.

Altogether, the 997 accounts hold $362 million, or 7.4% of Homefed's $4.88 billion of deposits, said William C. Ferguson, president of Ferguson & Co. …

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