SCOTTSDALE, Ariz. — The bailout of the nation's failed savings and loans will be a bonanza for lawyers, Federal Deposit Insurance Corp. Chairman L. William Seidman said Monday.
Seidman said he expects to double the 40,000 lawsuits already under way against troubled thrifts and eventually to spend half a billion dollars for outside legal counsel.
Speaking before the American Bankers Assn.'s National Conference for Community Bankers, Seidman also criticized the credit union industry, saying it was expanding too quickly and overstating its financial strength.
Seidman, who also is chairman of the Resolution Trust Corp., the thrift bailout agency, used a barrage of statistics to defend the RTC against critics who say it has been slow to act.
The agency has taken over more than 350 thrifts in 37 states and advanced $11.4 billion to institutions to stem runs on deposits or replace high-cost brokered deposits, he said.
In addition, the RTC has listed for sale about a tenth of the 300,000 properties it took over from the failed thrifts, Seidman said.
He also said the RTC has developed a strategic plan for how it will attack the S&L problem.
"Given the bureaucratic world we live in, that alone is earthshaking," he said.
Seidman said he hired a staff of almost 1,900 people while in the process of merging his agency with the Federal Savings & Loan Insurance Corp., a merger he described as "a marriage that is about the equal of Trump versus Trump," referring to the marital troubles of develop Donald Trump and his wife, Ivana.
The RTC is handling more than 40,000 lawsuits, "and that's just the beginning," he said. "We expect 80,000 by the end of the year and over one-half billion dollars in outside legal fees" on top of the costs for about 1,000 government lawyers.
"We are well under way to creating a shortage of lawyers in this country," he quipped.
Seidman spoke at the Phoenecian Resort, the palatial luxury complex built by Charles H. Keating Jr.
Keating's thrift, Lincoln Savings & Loan Assn. of Irvine, and the resort were taken over by the government last year. Regulators say it could become the most costly thrift bailout ever.
Credit unions, Seidman said, have been claiming that their deposit-insurance fund, run by the National Credit Union Administration, is stronger than that of other institutions because credit unions keep 1% of the funds on deposit with the NCUA. But the practice is deceptive because the credit unions also book the money as assets, Seidman said.
Credit unions are growing extremely quickly and are increasing their investments in areas where they have little experience, he said. "They've got a lot of the symptoms that the S&Ls had," he said.
Many critics of the thrift industry attribute the bulk of its problems to rapid growth and bad investments in projects outside its traditional bread-and-butter areas, such as housing loans.
The bankers in Monday's audience were mostly from small banks.