Top regulator says 24% of thrifts are in trouble noted bank analyst cites 62%

December 12, 1990|By Knight-Ridder News Service

WASHINGTON -- Bad news just keeps coming from the savings and loan front.

Regional real estate slumps and a looming recession have made 350 savings and loans "highly vulnerable" to failure, atop 244 others that are already so ill they're virtually certain to collapse, the nation's top thrift regulator said yesterday.

Timothy Ryan, director of the Office of Thrift Supervision, told a House Banking Committee cleanup task force that those two groups of S&Ls have assets of $327 billion -- 31 percent of what remains in the devastated thrift industry. And they represent 24 percent of the country's 2,453 thrifts.

Each thrift failure adds to the cost of the taxpayer-funded savings and loan bailout, which the General Accounting Office has estimated could climb to $500 billion.

Mr. Ryan said that, despite his agency's best efforts, "we find that the deterioration in economic conditions, especially in real estate, is adversely affecting the prospects for recovery of many institutions."

The problems are focused on some regions, Mr. Ryan said, with "the Northeast, mid-Atlantic, Southwest and pockets of the Southeast" showing the worst problems.

As large as Mr. Ryan's numbers are, one noted banking analyst, Robert Litan of the Brookings Institution, figures they're far too conservative. By Mr. Litan's new calculations, a stunning 62 percent of the nation's still-operating S&Ls are financially troubled and may require taxpayer-funded help. That would represent 1,524 still-operating S&Ls -- or nearly triple the 516 institutions the government has sold or seized since President Bush's S&L bailout plan began in 1989.

Mr. Ryan could not be reached to comment on the difference between Mr. Litan's estimate and his own.

The government's effort to clean up failed thrifts is also hurt by recession fears, the task force was told. Despite a nationwide sales effort, the Resolution Trust Corp., the S&L cleanup agency, has been acquiring assets from failed S&Ls much faster than it can sell them.

As of Sept. 30, the RTC held $142 billion of real estate, securities and other assets.

"Key to the ultimate costs of the bailout is the ability of the RTC to sell and close failed institutions and to dispose of the assets of those institutions," said Representative Bruce F. Vento, D-Minn., chairman of the House task force. "Thus far, the RTC gets a failing grade on both counts. The RTC has let itself become a junkyard of failed S&Ls' assets."

To help unload some of its inventory, the RTC agreed last week to offer $7 billion in financing to certain buyers of its property.

David Cooke, the RTC's executive director, said the agency has sold off $110 billion in assets in 16 months, which he termed a good indication of "the magnitude of our task and achievements." That represents about 44 percent of all its holdings.

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