COURT WILL HEAR DISPUTE OVER S&L ASSETS.
The U.S. Supreme Court agreed Friday to tackle a big-money dispute over whether the government is liable for damages to savings and loan associations for changing accounting rules.
Glendale Federal Bank is among the three thrifts that will defend a favorable federal court ruling when the nation's highest court takes up the issue this spring.
Glenfed's case is one of about 100 similar cases, involving $10 billion in disputed assets, filed against the government.
"I think the decision by the Supreme Court to accept the government's petition to hear the case is a little disappointing, but it's not a surprise," said Stephen Trafton, Glenfed chairman and chief executive.
Despite earlier efforts to reach a settlement with the government, Trafton said the company is no longer willing to initiate any deals.
"All offers are off the table, and the gloves are off. We are prepared to see them in Supreme Court," Trafton said. "If they want any more deals, they'll have to call and initiate it themselves."
The court said it will hear the Clinton administration's argument that it should not have to pay damages over Congress' decision in 1989 to sharply limit thrifts' ability to count "goodwill" as an asset.
Congress enacted the Financial Institutions Reform, Recovery and Enforcement Act in 1989 as a way to restore the ailing thrift industry to health.
Until then, S&Ls could count goodwill as part of their federally required minimum capital. Goodwill is the amount that an insolvent S&L was in the red when it was acquired by a healthy thrift.
Thrifts also were allowed to double-count as "capital credit" funds provided by the federal government to help them take over ailing thrifts.
Also involved in the U.S. Supreme Court case are Winstar Corp. of Minnesota and Statesman Savings Holding Group of Iowa, which had taken over or merged with ailing thrifts before 1989.
Each was allowed to count millions of dollars - $716 million for Glendale, $9.1 million for Winstar and $25.8 million for Statesman - as goodwill assets to be written off over at least 25 years. Statesman also counted $26 million in capital credit.
Under the 1989 law, those amounts no longer could be counted as assets. The Winstar and Statesman thrifts were forced into receivership, while Glendale had to raise money to meet its capital minimum.
All three thrift owners sued the government.
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|Publication:||Daily News (Los Angeles, CA)|
|Date:||Jan 20, 1996|
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