DALLAS — The Federal Home Loan Bank Board announced Tuesday that it has approved the formation of a corporation to liquidate the problem loans of the savings and loan industry.
Bank board Chairman Edwin J. Gray, in a speech before a national convention of savings and loan executives here, said the new corporation will be a federally chartered savings and loan association to be known as the Federal Asset Disposition Assn.
The new association represents an attempt to shore up the ailing Federal Savings and Loan Insurance Corp., a government agency that has neither the financial nor the human resources to handle the bad-loan liquidations. The FSLIC insures customer accounts up to $100,000 and has responsibility for selling off the assets of S&Ls that are put into receivership.
"This is a meaningful step in the right direction," Gray said. "But it is only one of many that needs to be taken" to bolster the FSLIC fund.
The Federal Asset Disposition Assn. was first proposed this summer by an industry advisory group and was later endorsed by the industry's principal trade group, the U.S. League of Savings Institutions.
Bank board officials estimate that the association will be responsible for selling off assets worth at least $2.5 billion.
According to the bank board, the association will be based in Denver and will receive $1 million in initial start-up funds from the FSLIC. The first priority will be to come up with a business plan on how the association should operate, bank board officials said.
Norman Raiden, bank board general counsel, said Denver was chosen as the headquarters city because it is away from both Washington politics and the industry's most severe problems. Parts of California's savings and loan industry are among the most troubled in the nation.
Among the long-term issues facing the Federal Asset Disposition Assn. will be where its long-term capital will come from and whether it will buy or just manage the sale of the problem assets.
The chairman of the association's 14-person board is Los Angeles lawyer William McKenna, one of Gray's closest advisers. Another Southern Californian on the board is Richard H. Deihl, chief executive of Los Angeles-based Home Savings of America.
Meanwhile, Gray declined to comment on news reports of last week that he will resign soon because of pressure from White House Chief of Staff Donald T. Regan. But he did suggest that no action was imminent.
"I am the one you've been reading about," Gray said in his first comments to the convention. "If you're holding your breath, don't. It could be detrimental to your health."
Afterwards, Gray told reporters: "You can interpret those remarks any way you want to."
Doesn't Favor Merger
On another front, the new chairman of the Federal Deposit Insurance Corp. said he does not favor a merger between the deposit insurance funds at the nation's commercial banks and savings and loans associations.
Though never formally proposed, a merger between the FDIC and the FSLIC has also been discussed informally as a means of bailing out the FSLIC. The FDIC insures customer accounts at most of the nation's commercial banks.
"My own opinion is we already have plenty to do at the FDIC and we do not seek a merger," FDIC Chairman L. William Seidman told the convention.
Seidman said that neither the banks nor the S&Ls want such a merger.