Bouncing Back?

If businesses ranging from steel to computers can rebound from sharp slumps, what is wrong with the thrift industry? Instead of hitting bottom and starting back up, an estimated one-third of the 3,200 federally insured thrifts in the U.S. just keep falling deeper into the red. The problem is potentially grave, because the ballooning cost of rescuing the ailing thrifts could strain the Federal Government's insurance fund. Last week officials at the Federal Savings and Loan Insurance Corporation, which guarantees deposits up to $100,000 and handles troubled thrifts, estimated that the deficit in its fund reached $11.6 billion last year, nearly double its 1986 level of $6.3 billion.

Still, M. Danny Wall, chairman of the Federal Home Loan Bank Board, which oversees FSLIC, believes that the thrift spiral is finally ending. His list of the worst-off thrifts has stabilized at 204. Moreover, S and Ls in general are starting to soak up much needed deposits again. During the first two months of this year, thrifts absorbed $10.6 billion in new deposits, compared with an outflow of $3.2 billion during that period last year.

Wall estimates that for now FSLIC has the money it needs for closing and merging insolvent thrifts. Along with $10.8 billion in new borrowing authority approved by Congress last year, FSLIC will have enough income from deposit- insurance premiums and other sources to bring its rescue resources to $20 billion through 1991. That is only somewhat less than its liabilities for all 510 of the U.S. thrifts that are considered insolvent under strict accounting rules.

FSLIC is steadily whittling away at the problem cases. Since last August it has closed 13 thrifts and merged 28 others into healthy institutions. Last week regulators began negotiating the sale of one of their most unwieldy cases, California's American Savings & Loan Association, the nation's second largest thrift (assets: $33 billion).

Many savings and loan executives and analysts believe the thrift industry needs an even more aggressive cleanup. But Wall contends that the problems are contained mostly in one region. Says he: "Aside from Texas and the other oil- patch states, there is no question that we are well past the trough." In fact, more than 100 of the 280 or so thrifts in Texas are technically insolvent but still lurching along in business. FSLIC will have to clean up that gulch of insolvency as soon as possible if it hopes to maintain confidence in the thrift industry as a whole.