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Even More to Pay on S&L Cleanup? Could Be

April 09, 1999|Reuters

U.S. taxpayers who think the savings and loan crisis is dead and buried along with the 1980s could be in for a surprise today.

A decade after Congress committed nearly $150 billion to bail out the teetering thrift industry, the U.S. federal claims court in Washington is expected to rule on the first of a series of damages claims that could eventually add billions more to the cost of the S&L cleanup.

Glendale Federal Bank, a unit of Golden State Bancorp, is seeking up to $2 billion from the government in a case being closely watched by about 120 other thrifts that have filed similar suits.

The cases grew out of efforts in the 1980s by federal bank regulators to encourage investors and healthy thrifts to take over failing S&Ls by allowing them to circumvent normal capital requirements.

When Congress eliminated this so-called regulatory goodwill in 1989, a number of merged thrifts found themselves technically insolvent, some failed and many sued, including GlenFed.

That suit prompted a ruling from the U.S. Supreme Court, which said the government had in effect breached its contract. The case now goes to the claims court to determine damages.

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