American Savings and Loan Association was an American

savings and loan A savings and loan association (S&L), or thrift institution, is a financial institution that specializes in accepting savings deposits and making mortgage and other loans. While the terms "S&L" and "thrift" are mainly used in the United States, ...

based in

Stockton, California Stockton is a city in and the county seat of San Joaquin County, California, San Joaquin County in the Central Valley (California), Central Valley of the U.S. state of California. It is the most populous city in the county, the List of municipal ...

. In 1988 it was the largest thrift failure and the federal government's costliest resolution during the

savings and loan crisis The savings and loan crisis of the 1980s and 1990s (commonly dubbed the S&L crisis) was the failure of approximately a third of the savings and loan associations (S&Ls or thrifts) in the United States between 1986 and 1995. These thrifts were b ...

at an estimated cost of $5.4 billion.

History

The thrift was founded in 1922 as State Savings & Loan Association in Stockton. It was owned by

Irvine, California Irvine () is a Planned community, planned city in central Orange County, California, United States, in the Los Angeles metropolitan area. It was named in 1888 for the landowner James Irvine. The Irvine Company started developing the area in the ...

based Financial Corporation of America (FCA). The thrift experienced rapid growth in the 1970s and early 1980s. In 1983, it acquired First Charter Financial Corporation in

Los Angeles Los Angeles, often referred to by its initials L.A., is the List of municipalities in California, most populous city in the U.S. state of California, and the commercial, Financial District, Los Angeles, financial, and Culture of Los Angeles, ...

for $700 million. First Charter was the parent company of American Savings & Loan, and was controlled by real estate developer

Mark Taper Sydney Mark Taper (25 December 1901 – 15 December 1994) was a Polish-born British-American real estate developer, financier and philanthropist in London and Southern California. His 1962 gift to the Los Angeles Music Center resulted in the Ma ...

. State Savings changed its name to American Savings after the acquisition. In 1984, the thrift suffered a

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of nearly $7 billion on its deposits after posting a $1.1 billion loss on bad investments and real estate loans. Chairman Charles W. Knapp and president J. Foster Fluetsch were forced out of the thrift by regulators in August 1984 and Bill Popejoy took over as chairman. However, the condition of the thrift continued to deteriorate. The thrift had large holdings of

mortgage-backed securities A mortgage-backed security (MBS) is a type of asset-backed security (an "Financial instrument, instrument") which is secured by a mortgage loan, mortgage or collection of mortgages. The mortgages are aggregated and sold to a group of individuals ( ...

, which were subject to price volatility as interest rates changed. A $468 million loss in 1987 left the thrift technically insolvent. American Savings was placed in receivership in September 1988. FCA filed for chapter 11 bankruptcy the next day. (In February 1989, it was changed to a chapter 7 liquidation.) The thrift was split into a good bank and bad bank, with New West Federal Savings bank as the bad bank. At the time it had $30 billion in assets and was one of the largest thrifts in the United States. The Robert M. Bass Group, Inc. of Fort Worth, headed by

Robert Bass Robert Muse Bass (born 19 March 1948) is an American billionaire businessman and philanthropist. He was the chairman of Aerion Corporation, an American aerospace firm in Reno, Nevada. In 2018, he had a net worth of $5 billion. Bass has served o ...

, acquired American Savings in December 1988 in a controversial deal with the federal government. They invested $500 million total over three years, and the federal governments contributed $1.7 billion. The thrift was then renamed American Savings Bank, F.A. The thrift purchased deposits and branches of Columbia Savings and Loan in 1991, Far West Savings and Loan in 1992, Valley Federal S&L in 1992, and Encino Savings Bank in 1994. In 1996, American Savings Bank was purchased by Washington Mutual Bank for $1.2 billion. Washington Mutual failed in 2008 and was acquired by JP Morgan Chase Bank. Charles Knapp was convicted in 1993 of fraud, although it was not related to American Savings. His company, Trafalgar Holdings Ltd., obtained a $15 million loan from Western Savings and Loan in

Phoenix, Arizona Phoenix ( ) is the List of capitals in the United States, capital and List of cities and towns in Arizona#List of cities and towns, most populous city of the U.S. state of Arizona. With over 1.6 million residents at the 2020 census, it is the ...

, using fraudulent financial information. He was sentenced to years in prison.

History

References

Further reading