U.S. Sells Stake in S & L’s Successor

The federal government, which poured $5.4 billion into failed American Savings & Loan, has recouped $665 million by selling its stake in the Irvine thrift’s successor.

The Federal Deposit Insurance Corp. said Thursday that it sold 14 million shares in Washington Mutual Inc., which acquired the reconstituted American Savings Bank last month.

The sale closes a major chapter on the nation’s thrift debacle of the 1980s. American S&L; became the nation’s costliest thrift failure as regulators had to cover losses that grew from $1.7 billion to $5.4 billion.

Altogether, the government spent $160.1 billion in mostly borrowed money to clean up the thrift industry. With interest, the cost to taxpayers will be $480.9 billion, according to a government report.

The FDIC said it will use the money from the stock sale to recover some of the losses at American S&L;, once the nation’s largest thrift with more than $30 billion in loans and other assets.

The government’s stake had gained $245 million in value since the American-Washington Mutual deal closed Dec. 20. At that time, Washington Mutual stock was selling at $30 a share. Late Wednesday, the FDIC sold its stake to two underwriters for $47.50 a share.

The underwriters began selling the stock Thursday, pushing Washington Mutual’s price up $1.50 a share to close at $50 in Nasdaq trading.

In late 1988, regulators were criticized for pledging $1.7 billion to help an investor group led by financier Robert M. Bass of Fort Worth take over the good loans and other money-earning assets of American S&L.; The Bass group put in $350 million of its own money, and the government, in a rare move, carved out a 35% stake for itself should Bass sell the thrift, as expected.

Lawmakers complained loudly that the Bass group hadn’t put in enough and that regulators pledged too much. But regulators countered that it was the best deal possible and that closing the thrift would have cost even more.

American Savings Bank, under Bass and with industry veteran Mario J. Antoci as its chairman, thrived. It became the state’s second-biggest mortgage lender and carved out a name for itself as a major lender in poorer and minority neighborhoods.

The Bass group ended up with Washington Mutual stock valued at more than $900 million.