Bankers Recall Dark Days of the S

The rolling savings and loan crisis that began in the mid-1980s nationally hit San Diego with a vengeance later that decade when four major lending institutions were seized by the federal government.

Within three years starting in 1989, Central Federal Savings Bank, Imperial Savings Bank, Great American Bank, and HomeFed Bank were deemed to have inadequate capital to operate and put into receivership of government regulators.

Coming as it did during one of the worst recessions in California’s history, the government’s disposing of the seized assets from the failed Banks was roundly criticized by many local bankers, including one who actually worked for both the

Resolution Trust Corp. and Federal Deposit Insurance Corp.

“The RTC decimated the real estate markets in this country. It absolutely exacerbated the situation,” said Frank Mercardante, now the chief executive officer at Southwest Community Bancorp in Encinitas.

In the early 1990s, Mercardante was managing director for the RTC at Franklin Savings and Loan in Overland Park, Kan. He said the thrift had problems, but the government’s strategy of liquidating assets quickly made things much worse.

Mercardante said despite his entreaties to higher-ups to alter the strategy and take a more deliberate approach, those in charge wouldn’t change.

“They wouldn’t listen, or budged from what they were doing,” he said. “The result was that taxpayers took additional losses.”

Later on, Mercardante was put in charge of another failing bank, the Bank of San Diego. He helped find an investor who would have pumped an additional $25 million into the troubled bank, but when the FDIC declined to approve a loan protection plan, the investor pulled out, forcing the agency to take it over.

“Because of that failure, the FDIC took a loss of about $150 million on a bank that was about $280 million in assets. It was one of the worst losses to asset ratios,” he said.

Getting The Shaft

Executives at several of the largest thrifts said the government appeared intent on getting rid of the entire savings and loan industry.

“Their game plan was to shaft the S