Page 17


came under regulatory control. Hometown lenders. All told, the RTC sold or closed insolvent thrifts holding a total of $2.1 billion in rural deposits in 106 counties across nine Southern states: Thirteen transactions involved “local” thrifts those headquartered in rural counties with at least 70 percent of their deposits from local residents. Two local S&Ls Mississippi Savings Bank of Batesville, Mississippi, and Sabine Valley FSA of Center, Texas were closed and depositors were paid $153 million. The remaining 1 1 local thrifts, with total deposits of $502 million, were sold to other savings and loans or to commercial banks. In addition to local S&Ls, the RTC sold or liquidated dozens of rural branches of urban-based thrifts holding $1.5 billion in rural deposits. Big Banks. Instead of giving communi ties control of their hometown thrifts that failed, government deals have concentrated rural deposits in a handful of large financial institutions. In 16 early deals overseen by the Federal Home Loan Bank Board, eight Texas buyers assembled extensive networks of rural branches containing $1.8 billion in deposits. Texas Trust Savings Bank of Llano acquired four thrifts with $494 million in rural deposits and Sunbelt S&L Fed Lightning Hit Texas S&Ls ederal regulators shook up the Texas sayEings and loan industry in 1.988 when the Federal Home Loan Bank Board, in an effort to recapitalize troubled thrifts, assembled 88 Texas S&Ls into 1 .6 “stabilization” packages which the board offered to financiers. Eight of those packages contained rural branch networks with a combined $1.8 billion in deposits. During a six and a half month span in 1988 the Bank Board deals involved almost twothirds of the Lone Star State’s rural thrift deposits and introduced a new level of absentee control and financial giantism to sparselypopulated farming and ranching communities that had been rocked by the escapades of the high-flying thrifts. \(By the time the Resolution Trust Corp. was created in 1989 to salvage the thrift industry, 90 percent of thrift deposits When the dust settled from the Bank Board’s tornado of 1988 deals, the only S&L operator in Cottle County, population 2,080, was Ronald Perelman. The new owner of First Gibraltar, corporate raider Perelman was a charter member of Drexel Burnham Lambert’s junk bond inner circle and President Bush’s $100,000 soft money club. At mid-year 1991, First Gibraltar was the 17th biggest S&L in America, with $8.1 billion in assets. Nearly 400 miles to the south, the dominant new banker in Gonzalez County, population 17,205, was the second-largest forest products company in the United States. Using $1.5 billion in taxpayer assistance \(not includtaken over Guaranty Savings & Loan. At midyear 1991, the new $3.3 billion Guaranty Federal Savings Bank was the country’s 60th biggest S&L. In Dawson, Deaf Smith and Mitchell counties, the new banker on the block was james Fail, an insurance and securities operator with a checkered background, who purchased Bluebonnet S&L with only $1,000 of his own money. In the country towns of Lampasas, Luling and Yoakum, the new banking presence was Pacific Southwest, a subsidiary of Pacific Wire and Cable Co., one of the largest conglomerates in Taiwan. Bluebonnet, with $3.2 billion in assets, and $1 billion Pacific Southwest, ranked as the nation’s 63rd and 225th largest S&Ls, respectively. . Altogether, the eight companies involved in Bank Board deals control led $26.2 billion in assets 42 percent of all assets held by Texas-based S&Ls at midyear 1992. The Bank Board awarded the largest network of rural deposits to Dallas-based Centex Corp., one of the nation’s biggest homebuilders. On Dec. 29, 1988, Centex’s Texas Trust Savings Bank acquired four thrifts that operated a total of six rural branches with $494 million in deposits. One “stabilization” project, Sunbelt S&L of Irving, combined a dozen insolvent thrifts with 13 rural branches containing deposits of $363 million. Two other Bank Board acquisitors, AmWest of Olney and Bluebonnet of Dallas, each took over rural branch networks with more than $200 million in deposits. The remaining acquisitors of rural deposits included Guaranty Federal Savings Bank of Dallas, which took over $167 million in survey county deposits; Southwest Savings Association of Dallas, $133 million; Pacific Southwest Savings Bank of Corpus Christi, $79 million; and First Gibraltar Bank of Irving, $69 million. in 1990, the House Banking Committee estiMmated that buyers received $78 in assets and government benefits for every dollar of capital they invested. Corporate raider Ron Perelman’s investment group paid $315 billion for five failed Texas thrifts. In return, the group got $7.1 billion in good assets, $5.1 billion in cash to cover bad assets and tax benefits worth an estimated $900 million. Lewis Ranieri, the former Salomon trader, led an investment group that acquired $5 billion United Savings of Dallas for approximately $200 million. Ranieri’s Hyperion Partners then dumped the most troubled assets and counted its profits as the Bank Board guaranteed a 2.2 percent spread over the cost of funds. Former Alabama securities dealer James Fail managed to purchase 15 failed Texas thrifts using virtually none of his own money. For $70 million, all but $1,000 of it borrowed, Fail got Bluebonnet Savings along with subsidies worth an estimated $1.85 billion. Two years later, congressional investigators found Fail had been banned from the securities business in 1976, following an Alabama indictment for securities fraud. According to the Bank Board’s internal policies, Fail’s background should have prevented him from doing business with the agency. SFP’s examination of government thrift sales and liquidations in the rural South revealed that virtually all of the rural fallout from the 1988 Bank Board deals occurred in Texas. Seventy of the 75 survey region thrift branches affected by the 1988 transactions were located in Texas. Approximately half hosted at least one branch of an institution sold by the Bank Board. In June 1988, these institutions held a combined $1.99 billion in rural deposits. Most of these S&Ls were relatively small; only eight had total assets exceeding $500 million and only three People’s S&LA of Llano, Colorado County FS&LA of Columbus and Federated S&LA of Brady claimed more than $100 million in rural deposits. In 22 rural Texas counties, institutions involved in Bank Board deals accounted for more than one-fourth of total local deposits. In six counties, they accounted for more than The deposits involved in the Bank Board deals nearly equalled all the deposits of all the survey thrifts resolved by the Resolution Trust Corp. since that agency’s creation in 1989, the survey found. In contrast to the Bank Board deals, RTC case resolutions have distributed rural deposits to a wider group of financial institutions. By yearend 1991, 37 banks and six S&Ls had received rural deposits in RTC transactions. However, RTC deals also tilted heavily towards big acquisitors in this agency’s case, big banks. Of the $2.1 billion in rural deposits involved in RTC case resolutions, 74 percent were transferred to commercial banks, 10 percent were transferred to savings and loans and the remaining 16 percent were paid out to depositors. Of the rural deposits transferred by RTC, 58 percent were acquired by institutions whose par ent corporations held more than a billion dollars in assets. These acquisitors included the lead ing or second-largest bank holding companies Worthen Citizens and Southern Perelman’s First Gibraltar and Temple-Inland’s thrift subsidiary, Kilgore Savings and Loan. J.C. and M.L. THE TEXAS OBSERVER 1 1