Bank Insurance Fund (BIF):
- Comprehensive income was $944 million for the
nine months ending September 30, 2002, compared to $859 million for the same period last
year. Although net income declined by $341 million compared to last year, unrealized gains
on available-for-sale securities increased by $426 million. The decline in net income
primarily resulted from lower earings on U.S. Treasury obligations and higher estimated
losses for anticipated bank failure and litigation activity.
- Receivables from bank resolutions increased by
$521 million to $600 million during the nine months of 2002. This net increase was due to
the failure of eight BIF-insured institutions in 2002. Total assets at failure were $2.4
billion. The BIF made payments of $2.0 billion to cover obligations to insured depositors,
and subsequently recovered $825 million of these disbursements.
- Contingent liabilities for anticipated failures
increased by $252 million to $1.5 billion during the third quarter of 2002. Most of the
increase is attributable to the deterioration in the financial condition of a few
BIF-insured institutions.
- The reserve ratio increased from 1.23 percent at
March 31, 2002 (as amended), to 1.26 percent at June 30, 2002, just slightly above the
statutorily mandated designated reserve ratio of 1.25 percent. This increase resulted from
a second quarter 2002 increase in the fund balance of $490 million, or 1.6 percent, and
decrease in estimated insured deposits of $3 million, or 0.1 percent.
- Assets in liquidation increased by $859 million
to $991 million during the nine months of 2002 primarily due to assets that were retained
from the current year bank failures.
Savings
Association Insurance Fund (SAIF):
- Comprehensive income was $651 million for the
nine months ending September 30, 2002, compared to $56 million for the same period last
year. This increase over the prior period was primarily due to SAIF experiencing higher
estimated losses in 2001 for actual and expected thrift failures.
- Receivables from thrift resolutions decreased by
$1 billion to $275 million during the first nine months of 2002. This decrease was
primarily due to: 1) recoveries totaling $849 million of payments made to cover
obligations to insured depositors for the Superior Bank, FSB receivership and 2) a
final payment of $212 million from the Superior conservatorship to repay the line of
credit.
- Assets in liquidation increased by $227 million
to $421 million during the nine months of 2002. This increase was primarily due to the
consolidation of the Superior Bank conservatorship and receivership.
FSLIC
Resolution Fund (FRF):
~FRF-FSLIC~
- The U.S. Department of Treasury (U.S. Treasury)
has determined that the FRF is responsible for the payment of judgments and settlements in
most supervisory goodwill litigation cases against the U.S. Government.
Future goodwill
litigation judgements and/or settlements cannot be reasonably estimated at this time. This
uncertainty arises, in part, from the existence of significant unresolved issues pending
at the appellate or trial court level, as well as the unique circumstances of each case.
Funds to cover goodwill judgments and settlements are provided by an open-ended
appropriation as provided by section 110 of the Department of Justice Appropriations Act,
2000. Because of this, any liabilities for goodwill litigation should have no material
impact on the financial condition of the FRF-FSLIC.
In addition to payments for
goodwill settlements, the FRF is responsible for reimbursing the U.S. Department of
Justice for its goodwill litigation expenses.
During the past nine months, the
trial court entered orders dismissing the following goodwill litigation cases: (1) Biase/Polifly; (2) Cenlar Capital;
(3) Chatham; (4) CityFed; (5) Clare;
(6) Commonwealth; (7) First Commerce;
(8) First Fed Enterprise; (9) First Mid-Illinois;
(10) First FB; (11) Heartland; (12) Independence
Federal; (13) Hometown Savings and Loan; (14) Karnes
County; (15) LSB; (16) Morton;
(17) Pollack, et al.; (18) Tucker Anthony;
(19) Cain, et al.; (20) Southwest Investment
Company, Inc., et al.; (21) Bailey, et al.; (22) Abbene,
et al.; (23) Barron Bancshares, et al.; and (24) La
Van, et al.
In August, the Federal Circuit in
Castle, et al. v. United States reversed an award of $15 million to
private plaintiffs in a closed thrift case, from which Receiver had already been
dismissed. The Court found that plaintiffs had not suffered any damage as a result of the
passage of FIRREA.
Paralleling the goodwill
litigation cases are eight similar cases alleging that the government breached agreements
regarding tax benefits associated with certain FSLIC-assisted acquisitions. These
agreements contained the promise of tax deductions for losses incurred on the sale of
certain thrift assets purchased by plaintiffs, from the FSLIC, even though the FSLIC
provided them with tax-exempt reimbursement. A provision in the Omnibus Budget
Reconciliation Act of 1993 (popularly referred to as the "Guarini legislation")
eliminated the tax deductions for these losses. To date, there have been liability
determinations in five of the "Guarini cases."
The FDIC believes that it is
possible that substantial amounts may be paid from the FRF-FSLIC as a result of the
judgments and settlements from the "Guarini litigation." However, because of the
uncertainty surrounding the method of computing damages, the amount of the damages is not
estimable at this time.
- Assets in liquidation totaled $13 million as of
September 30, 2002.
~FRF-RTC~
- The RTC Completion Act (Act) requires the
FDIC to return to the U.S. Treasury any funds that were transferred to the RTC pursuant to
the Act but not needed by the RTC. The Act made available approximately $18 billion worth
of additional funding, of which $4.556 billion was used. In addition, the FDIC must
transfer to the Resolution Funding Corporation (REFCORP) the net proceeds from the sale of
FRF-RTC assets (once all liabilities of the FRF-RTC have been provided for) to pay the
interest on REFCORP bonds. Any such payments benefit the U.S. Treasury, which would
otherwise be obligated to pay the interest on the bonds.
With the last payment of $271 million on March 3, 2000,
the FRF-RTC has fully repaid the $4.556 billion to the U.S. Treasury. Beginning in April
2000, the FRF-RTC has made ten payments totaling $4.122 billion to REFCORP. The last
payment to REFCORP of $400 million was made on July 10, 2002. The FRF-RTC cash balance is
$515 million at September 30, 2002.
- The investment in securization related assets
decreased by $807 million to $280 million since year end 2001 due primarily to the
termination of thirteen securitization deals. Three deals remain active as of September
30, 2002; the last deal is expected to terminate in the first quarter of 2003.
- Assets in liquidation totaled $187 million as of
September 30, 2002.
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