Newspaper article THE JOURNAL RECORD

Receiver Says Examiners Knew Home State Bank Was in Peril

Newspaper article THE JOURNAL RECORD

Receiver Says Examiners Knew Home State Bank Was in Peril

Article excerpt

COLUMBUS, Ohio (AP) - A federal court receiver says Ohio examiners became aware in 1981 that Home State Savings Bank had made ""unsafe and unsound'' investments with a Florida firm which collapsed and caused Ohio's savings and loan crisis.

But Thomas Tew of Miami, Fla., declined to speculate Tuesday at a hearing before a joint legislative committee as to why state officials did nothing but warn Home State about ESM Government Securities, Inc. of Fort Lauderdale.

""I won't try to second-guess your senior officials,'' Tew said, pointing out that state regulators often face tough choices in the actions they can take to try to secure and protect the funds of depositors.

Tew's testimony was interrupted by a telephone call with the news of the apparent suicide in Coral Gables, Fla., of Stephen Arky, son-in-law of Home State owner Marvin Warner and a figure in the probe of ESM's dealings by the U.S. District Court of Southern Florida.

Tew continued his testimony without comment about Arky, a defendant in an ESM suit filed by Tew. Afterward, he said Arky was ""an excellent lawyer'' and would not comment further.

Home State's March 8 collapse triggered runs by depositors at a handful of other thrifts, mostly in the Cincinnati area, and precipitated the Ohio crisis which led to the March 15 closing of 69 privately insured Ohio S&Ls. Most have since reopened with federal insurance.

Home State's collapse was a direct result of the ""over-collateralization'' of loans it took out from ESM, Tew said.

Tew told the committee that Home State, along with American Savings and Loan Co., Miami - of which Warner was a majority stockholder - both provided ESM with securities worth up to five and six times the value their loans.

Collateral normally is 105 percent to 110 percent of the value of a loan, he said, adding that most ESM borrowers provided those amounts. ""Home State was one of its first and most significant customers'' to provide excessive collateral, he said. …

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