The Federal Home Loan Bank Board today will try to find a buyer for a troubled San Francisco savings and loan, using a controversial new procedure that could set a pattern for future S&L takeovers.
Under pressure from Congress and state officials, the Bank Board has agreed to give California banks and savings and loans a second chance to bid for Fidelity Savings and Loan of San Francisco.
The Bank Board earlier agreed to let Citicorp of New York, the country's second-largest banking company, buy Fidelity for an undisclosed price. Fidelity, a $2.9 billion S&L, was taken over by the government in April after suffering losses of $57 milllion last year.
Normally, negotiations to merge financially ailing institutions are conducted in secret to prevent panic among depositors. However, last Friday, the Federal Savings and Loan Insurance Corp. announced publicly that it was reopening bids and giving California financial institutions five days to match Citicorp's bid. As of yesterday, only one new offer had been made.
Federal officials are to meet with prospective buyers today and will take bids until Aug. 2.
The decision to take new offers reflects a growing grass roots rebellion against use by federal regulators of forced mergers to rescue troubled financial institutions.
Permitting Citicorp to buy Fidelity would effectively end the longstanding prohibition against interstate banking, something Congress has not yet been willing to do.
Federal regulators have been willing to stretch the rules against interstate banking in their efforts to find healthy financial institutions to take over sick ones, raising bitter complaints from local bank and S&L executives and state officials.
Sen. Alan Cranston (D-Calif.), through an aide, criticized the procedure as unfair and complained that California bidders won't have time to analyze Citicorp's bid and secure additional financing to match it. Citicorp would have another chance to raise its bid.
California Savings and Loan Commissioner Linda Tsao Yang denounced the decision to reopen bidding as "an exercise to legitimize a predetermined bid in favor of Citicorp."