2 of 3 S&Ls Are Insolvent, Economist Says: 2 of 3 S&Ls Insolvent, Says Feel's Economist
HARWICHPORT, Mass., Oct. 28ÛÓThe chief economist for the Boston Federal Reserve Bank said today that two out of every three of the nationÛªs savings institutions are insolvent when their assets and liabilities are calculated at realistic, current market levels.</br></br>As a result, Richard W. Kopcke told the opening session of a conference on the future of the thrift industry, the federal government faces a possible ÛÏbailout" cost of at least $30 billion. In the event of actual liquidation of failing thrift institutions, rather than a mere subsidy from Washington, Kopcke predicted the cost to the taxpayers could exceed $200 billion.</br></br>Kopcke's assessment of the industry came as Congress took a major step toward aiding the savings and loan industry. The House voted 371 to 46 to approve legislation allowing emergency takeovers of ailing thrift institutions. The legislation would permit banks and S&Ls in one state to take over ailing institutions in another state. The fate of the legislation is uncertain since the Senate favors a broader bill.</br></br>KopckeÛªs predictions were based on a detailed study of the financial situation of the mutual savings banks in the state of Massachusetts and of savings and loan associations in the state of California, as well as a more general examination of the condition of such institutions across the country.</br></br>He pointed out that sharply rising interest rates have not only raised dramatically the cost of money obtained by the thrifts but have also lowered the real value of many of their mortgages, written years ago at lower interest rates.