ADEQUACY OF FEDERAL HOME LOAN BANK BOARD SUPERVISION OF EMPIRE SAVINGS AND LOAN ASSOCIATION HEARING BEFORE A SUBCOMMITTEE OF THE COMMITTEE ON GOVERNMENT OPERATIONS HOUSE OF REPRESENTATIVES NINETY-EIGHTH CONGRESS SECOND SESSION APRIL 25, 1984 Printed for the use of the Committee on Government Operations CONTENTS Barnard, Hon. Doug, Jr., a Representative in Congress from the State of Georgia, and chairman, Commerce, Consumer, and Monetary Affairs Subcommittee: Opening statement. Blain, Spencer H., Jr., former chairman and principal stockholder, Bowman, L. Linton, III, commissioner, Texas State Savings and Loan Bryant, Hon. John, a Representative in Congress from the State of Texas. Cates, David C., president, Cates Consulting Analysts, Inc., New York Gray, Edwin J., Chairman, Federal Home Loan Bank Board, accompanied by Norman Raiden, General Counsel, and William Schilling, Director, Office of Examinations and Supervision.... Letters, statements, etc., submitted for the record by: Barnard, Hon. Doug, Jr., a Representative in Congress from the State of Georgia, and chairman, Commerce, Consumer, and Monetary Affairs Subcommittee: FHLBB news release of April 16, 1984, concerning Jack Appendix 1.-List of documents supplied by Federal Home Loan Bank Board to Commerce, Consumer, and Monetary Affairs Subcommittee... Appendix 2.-Background material on supervision and closing of Empire c. Adverse rating report regarding October 7, 1982, examination.. d. FHLBB supervisory letter dated January 14, 1983, regarding October 7, 1982, examination, followup letters, and Empire reply dated April 1, f. FHLBB and State of Texas documents, January to March 1984, relating to cease and desist orders, State supervision, and closing of Empire Appendix 4.-Post-Empire-failure FHLBB documents.. b. April 16, 1984, press release appointing supervisory agent in Dallas ADEQUACY OF FEDERAL HOME LOAN BANK BOARD SUPERVISION OF EMPIRE SAVINGS AND LOAN ASSOCIATION WEDNESDAY, APRIL 25, 1984 HOUSE OF REPRESENTATIVES, AND MONETARY AFFAIRS SUBCOMMITTEE OF THE COMMITTEE ON GOVERNMENT OPERATIONS, Washington, D.C. The subcommittee met, pursuant to notice, at 12:35 p.m., in room 2203, Rayburn House Office Building, Hon. Doug Barnard, Jr. (chairman of the subcommittee) presiding. Present: Representatives Doug Barnard, Jr., Ronald D. Coleman, John M. Spratt, Jr., Elliott H. Levitas, William F. Clinger, Jr., and Tom Lewis. Also present: Representative Steve Bartlett. Staff present: Peter S. Barash, staff director; Theodore J. Jacobs, chief counsel; Faye Ballard, clerk; and Jack Shaw, minority professional staff, Committee on Government Operations. OPENING STATEMENT OF CHAIRMAN BARNARD Mr. BARNARD. The Subcommittee on Commerce, Consumer, and Monetary Affairs will come to order. Today, the Commerce, Consumer, and Monetary Affairs Subcommittee examines the failure of Empire Savings and Loan Association of Mesquite, Tex., and the adequacy of its supervision by the Federal Home Loan Bank Board. Empire was closed by the Bank Board on March 14, 1984, the very same day this subcommittee held hearings into the role of brokered deposits in bank and thrift failures. One of the questions that we want to explore today is what role brokered deposits played in Empire's failure and whether such deposits were, in fact, the proximate cause of that failure. But more than brokered funds is involved in the failure of this association. Empire has been called the Penn Square of the thrifts, and there appears to be some troubling similarities between Empire's failure and those of other financial institutions recently examined by the Commerce, Consumer, and Monetary Affairs Subcommittee. The subcommittee held hearings on the Penn Square failure in 1982 and held further hearings and issued a comprehensive report on the United American Bank failure in 1983. All of these institutions had been under special scrutiny by Federal banking agencies months and even years prior to their failure. All appear to have (1) |