LITTLE ROCK, ARK. -- By the fall of 1983, Howard J. Wiechern Jr. had put it all together. With the help and encouragement of federal regulators, Wiechern had turned a small, stodgy savings and loan association in Pine Bluff, Ark., into the state's largest thrift institution. Southern Building and Loan had grown into FirstSouth FSB and its stock was snapped up by investors eager to share in its future.

Four years later, First South is gone. Last December federal authorities closed it down because it was running out of cash. At the end, First South was still holding loans and other assets supposedly worth $1.7 billion. But it was so short of cash that it had sold its furniture and many of its branches and was leasing them back. The once-sought stock was worthless.

Officials involved in sorting out what is left of FirstSouth say it probably will take seven to 10 years to sell off its assets and pay whatever money is left to a multitude of creditors, many of whom may get only a few cents on the dollar. Depositors have been protected by the Federal Savings and Loan Insurance Corp., but the FSLIC now has to salvage what it can from FirstSouth's bad loans and bankrupt investments.

The loan losses at FirstSouth are so large that its failure is likely to be the most costly savings and loan collapse in history, costing FSLIC several hundred million dollars, said an official at the Federal Home Loan Bank Board, the federal agency that regulates savings and loan associations.

When the bank board ordered FirstSouth closed, more than $500 million worth of loans were in default and others have gone bad since. More than $600 million in loans to stockholders was discovered, though not all of them were in default or illegal.

Ultimately, American taxpayers may have to cover a share of the losses at FirstSouth, as well as at scores of other insolvent but still operating thrifts around the country. The FSLIC insurance fund has just been given a $10.8 billion bailout by Congress and may need billions more. FirstSouth is a prime example of why.

FirstSouth failed not just because of the plunge in oil prices that depressed the Sun Belt real estate markets in which it made many loans, but also because of stunningly sloppy business practices, reckless real estate speculation and massive insider loans, many of them illegal.

The Federal Bureau of Investigation is looking into allegations of fraud and FSLIC has sued Wiechern and other former FirstSouth officials for $150 million.

Summing up charges against FirstSouth executives, the FSLIC lawsuit said the defendants "recklessly and negligently allowed FirstSouth to become a source of funds for favored real estate speculators and developers who gambled FirstSouth's resources away at little risk to themselves and at great cost to FirstSouth."

Though federal officials are now aggressively cleaning up after FirstSouth's fall, they not only consented to, but encouraged its rise and failed to monitor its explosive growth.

Despite danger signals flashed by earlier audits, FirstSouth was not examined by federal regulators between December 1982, and February 1985, Home Loan Bank Board officials admit. During that time, FirstSouth absorbed about a dozen smaller thrifts that regulators thought were or were about to be in financial trouble, and would be better off under the wing of FirstSouth.

Instead, the affiliation with FirstSouth pulled them into a whirlpool. During the critical 26 months when examiners weren't watching, FirstSouth grew from a $500 million institution to one with assets of $1.3 billion. Eventually it had more than $1.8 billion in assets on its books, though their true value was hundreds of millions less than that.

Howard Wiechern's strategy for growth was to deemphasize long-term home mortgages -- the safe, stodgy mission for which federally insured savings and loans were created. The Wiechern method -- as it came to be called in Arkansas -- did not demand waiting to earn interest over the life of a 20-year loan, it paid off immediately. FirstSouth concentrated on generating big up-front fees by making so-called acquisition, development and construction loans. Though enabling FirstSouth to pocket the equivalent of points on a home mortgage, development lending proved to be a disaster.

Since it was paying high interest rates to its depositors to attract funds from around the country, FirstSouth also charged its borrowers high rates -- which meant it attracted borrowers who had been turned down by lenders charging lower rates.

Among those eager to borrow at FirstSouth's high rates were several of the S&L's major shareholders, who borrowed millions to finance real estate speculation, much of it in the Dallas area.

Some of the insider loans were so large they violated the legal limits on loans to a single or related group of borrowers, the bank board charged. Hundreds of millions of dollars worth of insider loans were in default when the institution failed. FirstSouth's biggest stockholders became its biggest debtors.

Meanwhile, FirstSouth's approach to making loans to those who didn't have inside connections was just as loose. In one instance FirstSouth agreed to give a $20 million mortgage on a Palm Springs, Calif., condominium called Sundance, owned by Clint Murchison, the well-known Texas oil man and then owner of the Dallas Cowboys. It was the largest single loan the institution had made up to that time and Murchison personally guaranteed it.

Murchison's name was apparently all FirstSouth needed to know. Before making the loan, no one at FirstSouth checked with Seafirst Bank of Seattle, which held a smaller existing mortgage on the property. If FirstSouth loan officers had asked, they would have discovered the original loan was already in default and the bank was pressing to have it paid off immediately.

No one at FirstSouth asked why none of the 60 condo units had been sold during the 10 months since several Dallas Cowboys and cheerleaders presided over the grand opening. Nor did anyone inquire into the unaudited financial statements provided by Murchison, or question the strength of Murchison's personal guarantee. Before he sold his beloved football team and went bankrupt, Murchison had given hundreds of millions of dollars worth of such guarantees, which proved worthless when Sundance failed.

And while no one at FirstSouth was looking too deeply into the loans being made, no one at the Federal Home Loan Bank Board was paying much attention to FirstSouth.

A closer look by federal authorities might have turned up not only insider loans, but insider stock trading. The bank board later said some of FirstSouth's biggest stockholders violated regulations prohibiting changes in control of an S&L without board approval. According to board officials, some of the investments in FirstSouth stock have been tied to the insider loans and were made to prop up the price of the stock.

A stockholder suit has charged that Wiechern and other FirstSouth officials withheld key financial information about its deteriorating status while some were selling portions of their own stock. The stock is now worthless, and the investors blame the FSLIC for not warning them that the S&L was heading for failure.

According to court records, depositions of FirstSouth officials, statements by federal regulators and other information that has come to light since the institution was closed, Wiechern and other top FirstSouth managers arranged a complicated series of transactions beginning at the end of 1983 to hide the fact that the institution was in serious trouble.

In one set of transactions, $25 million worth of bad loans was hidden for more than two years by selling them directly or indirectly to corporations controlled by E. Harley Cox, a former Arkansas Bar Association president who was the S&L's counsel. Cox's corporations bought the bad loans with money borrowed from FirstSouth, allowing the institution to take the overdue loan off its books and replace it with a new loan backed by a prominent borrower. But the loans still didn't get paid and eventually FirstSouth had to take them back and report them as losses.

Hiding bad loans was critical to maintaining FirstSouth's appearance of good financial health when it was selling stock to the public. At the end of 1983, the S&L had assets of $885 million -- almost triple its size four years earlier -- but it had a net worth of only $20 million.

FirstSouth reported profits of $4.6 million for the year, but if it had acknowledged the bad loans and added money to its loan loss reserves to cover likely losses, it could have wiped out 1983 earnings and eaten into its already paltry capital base. Investors never would have bought its stock.

FSLIC, as receiver for FirstSouth, recently filed a suit in federal district court here seeking $150 million in damages from Wiechern, FirstSouth Chairman Del L. Brannon and several outside directors. A similar claim was filed earlier in a bankruptcy proceeding involving Roderick D. Reed, president of FirstSouth and Wiechern's right hand man.

The suit charged that the FirstSouth officials "made staggering sums of money available to certain favored borrowers on terms and conditions in flagrant disregard of prudent lending practices and with serious adverse effects on FirstSouth's financial condition." It also charged that:"A substantial amount of FirstSouth's resources {were} devoted to speculation in high-risk real estate transactions in which loans were made without proper underwriting procedures; "Favored borrowers were not required to put any equity into the properties or projects on which they received loans; "Loan payments were taken from the loan proceeds themselves or from refinancings; "The security pledged for the loans was frequently insufficient to cover potential losses upon default.

Wiechern, Brannon and the six outside directors named in the suit all filed responses denying any wrongdoing in managing FirstSouth's affairs. Reed has also denied any wrongdoing. Wiechern, Reed and Cox all declined comment on FirstSouth or failed to return phone calls.

Howard Wiechern's Baby Whatever happened at FirstSouth during the early 1980s, people familiar with its operations agree it was Howard Wiechern's baby.

Wiechern, 49, was from Ft. Worth but attended the University of Arkansas. His wife, whom he met in college, is from Pine Bluff, an Arkansas River town about 30 miles downstream from here. The Wiecherns moved to Pine Bluff more than 25 years ago and he went to work in a clothing store. In 1963 he joined the small Pine Bluff savings and loan association that was to grow into FirstSouth.

By 1976 Wiechern had moved up to executive vice president and in 1980 he became president and chief executive officer, setting the stage for the institution's dramatic rise and fall.

As CEO, Wiechern succeeded Del Brannon, described by some who know him as a genial, well-meaning man with far less drive than Wiechern and far less ambition for the institution.

At the time Wiechern took control, FirstSouth, like its counterparts across the nation, was being squeezed between a portfolio of single-family home mortgages yielding low, fixed returns and tight money markets in which interest rates were soaring to the highest levels since the Civil War. In Arkansas the squeeze was particularly severe because a provision in the state constitution strictly limited the interest rate that could be charged on any kind of loan.

Partly in response to this squeeze, federal legislation was passed in 1980 to begin eliminating virtually all restrictions on the interest rates financial institutions could pay on deposits other than regular checking accounts. The same legislation and another law passed in 1982 also opened up new lines of businesses to S&Ls and broadened the variety of loans they could make.

With deregulation of the industry under way, Wiechern moved aggressively to change FirstSouth's way of doing business. According to FirstSouth's descriptions of its business activities, it began in 1981 to concentrate on making land acquisition, development and construction loans from Florida to California.

These so-called ADC loans were "short-term, with adjustable, market-sensitive interest rates and included origination fees in excess of those which could be obtained on single-family loans," explained a FirstSouth press release. "The origination of these commercial real estate loans produced sufficiently high fee income and interest income to return the association to profitability" after 1981.

The prospectus offering to sell FirstSouth shares to the public in November 1983 described the new loans this way: "The ADC loans are typically made in amounts covering full cost of construction or development of the project, including the full cost of acquiring the underlying property, if applicable, and loan fees, interest and other carrying costs during the construction term."

In other words, the developers did not necessarily have to put up any money at all -- no down payment, no fees, nothing. The so-called "interest reserve" meant that no payments would be required for many months. Instead, FirstSouth agreed to take the interest out of the loan itself and to collect its upfront fees from the money it loaned the borrower.

This meant the borrower could speculate with FirstSouth's money -- money the S&L had gotten from depositors by paying high rates insured by the federal government. It meant FirstSouth could record the up-front fees as profit, even though it was simply taking back money it has just loaned. With no payments due soon, any danger of default on a bad loan was delayed. And when loans did come due, it turned out, FirstSouth often was happy to refinance the loan, collect new fees up front and postpone again the inevitable failures.

In addition to the up-front fees, the prospectus explained to investors, FirstSouth was also entitled to receive a "profit participation" in any gain when the property was sold.

FirstSouth not only kept a piece of the action for itself, it sold pieces of the loans to other financial institutions, so they too could share in the profits of the Wiechern method. FirstSouth received fees for collecting payments and keeping an eye on the deals and was supposed to keep at least 10 percent of each loan, so that it had its own money at stake.

In one case, FirstSouth officials discovered belatedly that they had sold more than 100 percent of a loan to other institutions. They had to hastily repurchase some of the participations and even so ending up with less than 1 percent of the loan, according to an attorney familiar with FirstSouth affairs. One of the other problems with the Wiechern method, it turned out, was that FirstSouth loan officials were not experts on the real estate markets of places as diverse as Palm Springs, Basalt, Colo., Destin, Fla., and Plano, Tex.

Why take the risk of making loans in far away places? Gerry E. Powell, a FirstSouth board member who is president of Ben Pearson Manufacturing Co. Inc., of Pine Bluff, a well-known maker of archery products, provided one answer in a deposition taken in a suit filed by a number of financial institutions that had bought participations in the Sundance loan in Palm Springs.

Branching out from Arkansas mortgages to Dallas development loans was "more or less as a directive from the chief of the Federal Home Loan Bank. If we couldn't make a profit, we would not exist if we hadn't gone into that business. And I think you are going to find some of the participants {the suing institutions} in the same situation."

"Was FirstSouth in a loss situation in 1980-81," asked Allan Gates, the Little Rock attorney questioning Powell.

"We sure weren't making any money of consequence," said Powell. "We had loans on the books of 7 or 8 percent, you know, and we were paying 12 and 14 percent for the money, or more. So, there was a dead-end there."

Dallas Federal Home Loan Bank President Roy Green offered a variant of this view in testimony this spring before a House Banking subcommittee, "In a sense," he said, "we had a problem with an industry that was locked into single-family home portfolios" that did not pay enough interest to cover an institution's cost of funds, much less other operating expenses.

Noting the laws that began deregulating savings and loans, Green continued, "BothFirstSouth officials "made staggering sums of money available to certain favored borrowers on terms and conditions in flagrant disregard of prudent lending practices and with serious adverse effects on FirstSouth's financial condition." -- FSLIC suit the 1980 and 1982 legislation were necessary landmark initiatives which have provided us with both benefits and challenges.

"The legislation deregulating portfolios in order to combat interest-rate-spread problems also placed new responsibilities on the thrift industry and the regulators. We believe the industry and the regulators have in large measure responded promptly and appropriately.

"However, the new deregulated environment was vulnerable to abuse by some individuals," Green declared. "The excessive growth that these so-called entrepreneurs directed FSLIC-insured institutions to pursue for quick profits has resulted in asset portfolios that fall far short of industry standards for long-term value and sound underwriting."

Or as he also put it, more simply: "Some individuals reached too far."

The End of the Rope Howard Wiechern reached the end of his rope in April 1986. Citing poor health, he unexpectedly resigned as FirstSouth CEO and Rod Reed took over, but only briefly. Federal regulators, by then, were taking an increasing interest in the institution's problems. In August they forced Reed out and the FirstSouth board accepted a "supervisory agreement" with the Federal Home Loan Bank Board that gave the bank board a major say in the S&L's management.

Soon after, the FirstSouth board hired the Washington law firm Wilmer, Cutler & Pickering to investigate just what had been going on.

In a report delivered to the board last November barely a month before FirstSouth failed, the law firm said there were indications of possible criminal actions by the former management and grounds for civil suits against a number of parties, including former FirstSouth officials, several major stockholders and some mortgage brokers. Concerned about confidentiality, the law firm named no names. Now that FirstSouth is broke, the firm is no longer working on the case.

The cautiously worded Wilmer, Cutler report raised questions about other lawyers who represented FirstSouth. The report said the Washington firm was "investigating situations where the lawyers apparently participated in transactions that hid bad loans and affected the stock price and earnings of FirstSouth by allowing FirstSouth to recognize income or fail to recognize loss {typically just at the end of an annual or quarterly reporting period}, without adequate regard for the substance and circumstances of the transactions.

"In addition," the law firm's report said, "there appear to be a number of transactions in which the lawyers, acting as principals in transactions, participated in the parking of non-performing loans outside FirstSouth and funneled FirstSouth funds to other borrowers in order to provide those other borrowers with the means to make payments on their loans, which otherwise would be nonperforming."

FirstSouth's principal attorney was E. Harley Cox, a member of the firm of Ramsay, Cox, Lile, Bridgeforth, Gilbert, Harrelson & Starling of Pine Bluff. Both Cox and the firm's managing partner, Louis Ramsay, are former presidents of the Arkansas Bar Association.

One set of transactions of the sort questioned by Wilmer, Cutler and Pickering involved the 38-unit Sandpiper condominium project on the Colorado River in Parker, Ariz. Over three years, FirstSouth lent more than $5.2 million to Sandpiper before declaring the loans in default.

Trying later to recover some of its losses, FirstSouth sued two Arizona appraisers, blaming their work for the loan losses. Defending the appraisers, Phoenix attorney Thomas K. Irvine discovered records showing FirstSouth had not lost money on the failed condos, but had sold the loans in 1983 for full value.

Irvine said the Sandpiper loans were sold by FirstSouth to a Dallas firm, Wagner & Nelson, in September 1983. A short time later Wagner & Nelson sold them to Sunbelt Service Corp., a subsidiary of a Dallas S&L. Sunbelt in turn sold the loans to Multistate Real Estate Management Co. and other corporations owned by FirstSouth's attorney, Harley Cox.

Irvine argued that his clients didn't owe FirstSouth anything, since FirstSouth hadn't lost any money.

Cox responded that though the loan had been sold several times, the S&L had always been at risk. His corporations had bought the loans at face value, he agreed, but the "cash" mentioned in the records was actually two new loans from FirstSouth to his companies.

Moreover, Cox added, it was understood at the time the loans were purchased that his firms were supposed to recover as much as possible on the various projects and that FirstSouth was supposed to insure that neither Cox nor his companies would suffer a loss.

The Sandpiper loans were among $25 million worth of properties that moved directly or indirectly from FirstSouth to Cox's companies late in 1983.

During most of the two years that those bad loans were off the books, FirstSouth reported steadily rising earnings and set aside only relatively small loan loss reserves. FirstSouth's 1984 annual report listed only $8 million worth of "slow loans" that were 60 to 90 days past due and another $3.4 million in foreclosures.

About 18 months later, however, the Cox loans were transferred back to FirstSouth according to documents in the Arizona suit. Twelve days after that Wiechern announced a $17 million addition to its loan loss reserves -- the first public statement by the S&L that it had financial problems.

Wiechern also said FirstSouth was going to return to concentrating on single-family home mortgages instead of the more risky acquisition, development and construction loans. The Wiechern method was dead.

The announcement claimed FirstSouth still had a net worth of $47 million after the $17 million writeoff. But the $17 million turned out to be only the beginning of the bad debts.

The Big Loser FirstSouth's largest losses are likely to be on a series of loans to the Watson & Taylor Realty Co. of Dallas, according to knowledgeable sources. That one company had $148 million worth of loans at FirstSouth, far more than Federal Home Loan Bank Board regulations allow to go to any one borrower from an institution of FirstSouth's size and net worth.

Watson & Taylor is a development company owned by George S. Watson and A. Starke Taylor III, son of Dallas Mayor A. Starke Taylor Jr.

When FirstSouth failed, Watson, young Taylor and two associates owned or controlled more than one-fourth of the S&L's common stock, according to Bank Board documents. Under such circumstances, Bank Board regulations limit loans to no more than $100,000.

The Bank Board didn't audit FirstSouth during the time when most of the loans were made and didn't know Watson & Taylor had purchased so much stock.

The controling stock in FirstSouth has been purchased without Bank Board approval, and early last year the two men agreed to sell their interests. However, as the bad news about FirstSouth's condition began to become public, they reportedly were asked by federal officials to hold off, since putting such a large block of shares on the market might have led to such a loss of confidence that FirstSouth would have failed immediately.

Beginning in 1985, federal authorities began to put pressure on FirstSouth to reduce its lending to Watson & Taylor, but that never happened. According to the FSLIC suit against Wiechern and the other officials, the institution went to elaborate and costly lengths to give the appearance of complying with the federal mandate without actually doing so.

Watson and Taylor have told reporters they never sought to control FirstSouth and did not get special treatment. However, the FSLIC suit details some remarkable deals made with Watson & Taylor, as well as some other major stockholders.

FirstSouth began lending to Watson & Taylor in March 1982. By 1983 they had borrowed $73 million, more than the S&L's entire net worth. The following year, when the two men began buying stock, their loan total hit $126 million, more than double FirstSouth's reported net worth.

The FSLIC suit detailed a number of Watson & Taylor loans, including those on some unimproved real estate in an area known as Frisco, north of Dallas. Without investing any of its own money, Watson & Taylor borrowed more than $50 million in mid-1983 to acquire the land, the suit said. As was the case with many such deals, the loans covered the purchase price, fees, interest, taxes and closing costs.

The following year, when the loans were about to fall due, FirstSouth refinanced them, raising the total to more than $59 million. Again, Watson & Taylor put up no money and no added security, and all the upfront fees were paid out of the loan proceeds. "At maturity in 1985, the loans were extended to September 1986," the lawsuit said, and along with the extension, the two stockholders got another loan for $5.6 million on the property. FSLIC has foreclosed on the loan.

Also borrowing heavily from FirstSouth were board members John P. Wagner and William C. Nelson Jr., owners of Wagner & Nelson Inc., another Dallas real estate firm, and of Wagner & Nelson Mortgage Ltd., a mortgage brokerage involved with a substantial number of FirstSouth transactions.

Wagner and Nelson collected brokerage fees on loans made to themselves or joint ventures in which they participated, according to the FSLIC lawsuit. By August 1985, loans to Wagner and Nelson and their ventures exceeded FirstSouth's net worth, the suit said.

Another series of loans in excess of $70 million went to Jerry L. Grigsby of Malvern, Ark., who owned more than 10 percent of FirstSouth stock, the suit continued:

"Grigsby invested none or virtually none of his own funds in projects financed by the Grigsby loans. Proceeds of each loan funded reserves to pay interest on the loan as it accrued. In addition, the Grigsby loans regularly were renewed or refinanced with no reduction in principal. Grigsby thereby had the free use of FirstSouth's money."

Grigsby, Wagner, Nelson, Watson & Taylor all would not discuss the loans, which are now involved in court cases.

Sorting Out the Pieces Today, FSLIC receivers are trying to sort out the pieces of the FirstSouth wreckage. About $200 million worth of assets have been sold. Many others have been foreclosed including the Watson & Taylor loans.

Each day the legal fees and other costs mount, eating away at the value of the FirstSouth remains and increasing the losses to the FSLIC insurance fund and other creditors.

But if the losses are mounting for the federal government, the bank board and FSLIC can only blame themselves -- because above all else, FirstSouth is a monument to regulatory failure.

Roy Green, of the Dallas Home Loan Bank -- the region's regulator of S&L's -- acknowledged as much in that congressional hearing this year.

The Dallas district, like most others around the country, he said, did not have enough bank examiners and those they did have generally were poorly paid and not very good.

"Because of salaries and regulations, we were not able to attract staff and expertise," Green said. That changed in 1985 when the examiners became employes of the 12 district banks, which technically are private institutions not subject to Civil Service regulations and pay scales.

One particular problem with the Southwestern regional home loan bank was that in the summer of 1983 -- under political pressure from Texas -- it was moved to Dallas from Little Rock. About 40 percent of its employes refused to follow their jobs to Texas. A significant number of them went to work for FirstSouth.

"It was an advantageous time for FirstSouth," recalled Rebecca Vail, director of communications for the Dallas bank. "It was growing and they painted an advantageous picture for employes whose jobs were ending and wanted to stay in Arkansas."

The Little Rock financial community is small and there were many ties between FirstSouth and the regulatory bank. One-time CEO Reed was a bank board alumnus. And Bank Board Chairman Green once headed one of the little S&Ls taken over by FirstSouth.

Some Little Rock attorneys and others involved with the aftermath of the FirstSouth failure are convinced that ties between the former regulators on its payroll and those regulating them was a significant factor in causing the authorities to turn a blind eye to the institution for so long.

After the long-delayed examination of FirstSouth in early 1985, the regulators began to press for changes, but not very successfully. Many transactions that form the basis of the FSLIC suit took place after that increased scrutiny began.

Even when Wiechern unexpectedly resigned -- everyone agrees he was not forced out -- he stayed on the payroll. The board gave him a job with a subsidiary with no cut in his $440,000 salary.

Only after the board found out he had made about $1 million in loans and never told them about it, was Wiechern fired. According to the directors, the offense was not the loans, which he had the authority to make, but the failure to report them.

Finally, last August, the Dallas Home Loan Bank imposed its management agreement and ousted Reed as the death throes began.

Like so many of the savings and loan associations around the nation that decided to grow fast, FirstSouth had relied on the twin attractions of high interest rates and federal insurance up to $100,000 per account to attract deposits. A major share of the deposits were in $100,000 jumbo certificates of deposit.

As the FirstSouth news got worse and worse, depositors began pulling out their money when their CDs matured.

Last November, virtually none of the CDs were renewed, recalled a bank board spokesman. If that happened again in December, as appeared likely, FirstSouth would run out of cash and have no way to borrow any. Thus the Bank Board decided the only course was to close it.

The necessary papers were filed in federal court here on Friday morning, Dec. 4.

The Feds moved in at a key moment. A state court judge that morning was planning to sign an order directing FirstSouth to pay six other institutions more than $12 million in a lawsuit claiming they were defrauded by FirstSouth on loan participations in Clint Murchison's Sundance project.

The judge had concluded that FirstSouth management had committed "constructive fraud" in the transactions.

Before the fraud victims could collect, however, the FSLIC took over. The institutions are now FirstSouth creditors. The Sundance condos, being operated as a hotel, are up for sale.

Only a few FirstSouth depositors lost any money in the failure -- those with more than $100,000 in their accounts. Only $14.4 million turned out to be uninsured, most of that interest on Jumbo CDs, Bank Board officials said.

The loss to depositors was so small in part because FirstSouth employes -- at the urging of Bank Board officials -- had been advising depositors to organize their accounts so that as little money as possible remained uninsured.

The Monday following the closing, a new institution, Riverside Federal Savings Association, opened for business in place of FirstSouth.

It took over all of FirstSouth's accounts that had had less than $100,000 in them, a small portfolio of good single-family mortgages and a whopping promissory note from FSLIC to cover its liabilities.

Nobody Is Talking

None of the principals in the FirstSouth rise and fall will talk about it.

Howard Wiechern still goes to an office he rents in the FirstSouth building here, reportedly working as a financial consultant.

Harley Cox has not been sued by FSLIC, though efforts are under way to collect from an insurance company that provided a bond for him.

Rod Reed filed for bankruptcy early this year. He has come up with a plan -- if the bankruptcy court approves -- to pay his creditors part of what they are owed.

There will be nothing much left to satisfy the $150 million claim FSLIC filed against him for mismanaging FirstSouth, or the added $1 million in punitive damages FSLIC has demanded.

The FSLIC also wants $150 million and damages from Wiechern, Brannon and the outside directors, but collecting that is doubtful as well.

Watson & Taylor are suing and countersuing FirstSouth, in another of the pack of legal disputes that will live on after FirstSouth.

The FSLIC attorneys, trustee and S&L salvage specialists have set up shop in Little Rock to continue the clean up.

They don't know how long it will take. FSLIC has never closed the books on an S&L liquidation.