Perpetual American Federal Savings and Loan Association gained control of Guardian Federal Savings and Loan Association virtually by default this week and, in the process, solidified its position as the largest S&L between between Georgia and New Jersey.

Ironically, Perpetual American did not actively seek control of Guardian. The acquisition was the culmination of waffling in the federal bureaucracy and a hard-nosed stance by Perpetual American's chief executive officer, Thomas Owen, in the face of pressure from regulators.

In the end, it was a case of federal regulators painting themselves into a corner and leaving themselves little choice but to turn to Perpetual American for help in solving a nagging problem.

Guardian had been on the critical list for more than a year and had come under close scrutiny by the Federal Home Loan Bank Board. When the current earnings squeeze hit the S&L industry, Guardian's financial problems grew progressively worse.

If federal regulators had acted more promptly to solve the problem by agreeing to a proposal to merge Guardian with another local S&L, at least $6 million might have been saved in the process. As it turned out, the Federal Savings and Loan Insurance Corp. had to give Perpetual American $10 million in cash to take over Guardian.

Why the Bank Board and FSLIC took so long to solve the crisis at Guardian is unclear. "We don't publicly discuss our supervisory activities," said a bank board spokesman.

And when asked why the FSLIC agreed to give Perpetual American $10 million in assistance to absorb Guardian, the spokesman replied: "The assisted mergers are always consummated at the lowest cost factor to the FSLIC in the long run."

While federal officials refused to discuss why Guardian's position was allowed to deteriorate to a negative net worth, accounts from industry and government sources show the process was filled with miscalculations and indecision.

Long before the current financial crisis hit the S&L industry, Guardian encountered problem loans and regulators put it on their "watch" list. "Its reserve requirements were not up to par even in good times," said one official.

Late last fall, the FSLIC issued an ultimatum to Guardian to find a merger partner, leading officials of the association to hold talks with at least four District S&Ls, including Perpetual American. Early this year, Guardian's president, Richard Bernstein, agreed to a merger with National Permanent Federal, now the District's largest S&L.

But Bernstein did an about-face and agreed to a merger with Washington Federal. Although the Federal Home Loan Bank of Atlanta approved the merger application, officials in Washington rejected it even though Washington Federal wanted only $4 million in assistance.

Meanwhile, the FSLIC asked Perpetual American to take over Guardian as a condition for the agency's approval of a merger between Perpetual American and Washington-Lee of McLean. But Owen elected to bid on another Maryland association.

Meanwhile, the FSLIC tried to get several Maryland S&Ls to take Guardian but failed. Moreover, it failed to forge a merger with other S&Ls in the region, which includes several Southern states.

Finally the FSLIC asked Perpetual American to reconsider and Owen agreed to a formula that would have indemnified his association for several years. But the FSLIC reversed itself and offered Owen a $10 million cash-assistance package to take over Guardian.

Whether a merger between Guardian and another S&L would have been viable in the long run is anybody's guess. It's apparent, however, that as the largest S&L in the region, Perpetual American had more going for it than its competitors.

The FSLIC decision helped Perpetual American accomplish in less than two months what District S&Ls have been seeking for years--unlimited interstate branching in Washington's suburbs. Actually, with its acquisition of Washington-Lee Federal in June and Guardian this week, Perpetual can branch anywhere in the District, Maryland and Virginia.

And much to the chagrin of District officials, Perpetual American is now a Virginia-based association by virtue of its merger with Washington-Lee.

While District officials have had little to say about the loss of taxes from one of the city's biggest financial institutions, they are said to be extremely disappointed over their inability to intervene.