Help Your Country and Help Yourself

By S.C. Gwynne/Los Angeles

"To say that it was a great deal is a gross understatement. It was unbelievable," says a high-ranking savings and loan executive. So goes the industry's scuttlebutt these days about Robert Bass's takeover in December of the crippled American Savings & Loan of Stockton, Calif. In one of the sweetest deals ever bankrolled with taxpayer money, the intensely private Fort Worth billionaire, 40, stands to benefit hugely from a decade of regulatory laxity. His purchase of American Savings is the pre-eminent episode in a string of controversial bailouts last year in which regulators handed out gilt-edged gratuities to some of America's richest men.

American Savings (assets: $30 billion), which was once the largest thrift in the U.S., had got into the same trouble as many other go-go S & Ls. During the early 1980s its maverick chairman, Charles Knapp, furiously pumped up the company's growth with brokered deposits and high-risk loans. When the thrift suffered a run on deposits in 1984, the Federal Home Loan Bank Board seized American and installed fresh management. But the new team gambled and failed in a multibillion-dollar investment in mortgage-backed securities. When the Bank Board went looking for help again, it eventually decided to grant exclusive bargaining rights to the Robert M. Bass Group, which had already taken over such properties as the Westin hotel chain and Bell & Howell.

The total amount of cash that the Federal Savings and Loan Insurance Corporation will pump into the thrift to make it lucrative for the new owners is estimated at $1.7 billion to $2.5 billion. The arrangement clearly adds up to a sure-thing profit for Bass. American Savings will be split into two entities: a "good" S & L to hold $15.4 billion in healthy assets and a "bad" one that will liquidate $14.4 billion in sour loans and other assets. For a total investment of only $500 million, the Bass Group gets 70% ownership of the good thrift. FSLIC controls the rest.

Bass has thus managed to buy a huge, healthy S & L, complete with a network of 186 branches, for a relatively tiny amount of capital. More than half of his thrift's assets consist of another sure thing: a $7.8 billion loan to the "bad" S & L that is fully guaranteed by FSLIC to pay a handsome 2% more than the going cost of funds. That will pump some $160 million in annual interest into the Bass thrift, no matter how much trouble FSLIC has in getting rid of the bad assets.

The bonanza goes on. As part of the deal, Bass was also rewarded with some $300 million in tax benefits. Taking those into account, Bass stands to make straight profits of $400 million to $500 million over the next four years, which roughly equals his original investment. To post those earnings, the thrift will have to be well managed. For that Bass has hired Mario Antoci, one of California's most respected thrift executives.

Bass's really big payoff will come if he decides to sell the thrift. One source close to the deal says that a profitable American Savings might fetch Bass a tidy $1 billion or more. Bass could conceivably still lose money on the deal if his thrift were to suffer losses, but that is almost an impossibility because it has been cleansed of its failing assets. Since FSLIC shoulders almost all the risk, the better Bass does, the less the deal will cost the Government. "We hope he makes a lot of money," says Bank Board member Roger Martin, who negotiated the sale. "We want him to be a success, because we don't want the company back."