DALLAS -- The collapse of the oil and real estate markets in Texas has pushed hundreds of banks and savings and loans to the brink of failure, forcing federal regulators to face the most serious banking crisis since the Great Depression.

Texas banks have been failing at the rate of one a week for more than a year, consuming $2 billion of the $3 billion paid out last year by the Federal Deposit Insurance Corp., the government agency that insures deposits, regulates banks and cleans up bank failures.

Last year was the most costly in the history of the deposit insurance fund, and this year's outlays could be two to three times bigger because of the failure of First RepublicBank of Dallas, the biggest bank in the state. The FDIC 10 days ago gave First Republic a $1 billion down payment on what is expected to be the most costly bank bailout ever, a $5 billion to $6 billion rescue mission.

Officially, First Republic has not failed, but the FDIC is a financial institutions' undertaker, not a bankers' emergency room doctor. The government put up its blank check to cover First Republic's obligations only after getting undated letters of resignation from the bank's officers and directors, giving FDIC Chairman William Siedman absolute power over the bank's future.

Hoping to avoid direct FDIC intervention at First Republic, federal regulators had been prepared to contribute up to $2 billion to help someone buy the bank, but massive withdrawals by frightened depositors forced the government to take action.

The FDIC loan to First Republic represented not only the failure of the bank, but also the failure of government policies that have sought to contain the Texas banking crisis.

Texas banks lost more than $2 billion last year because of bad oil and real estate loans and are sitting on almost $9 billion worth of overdue loans and repossessed property. Fifty Texas banks failed last year, another 15 so far this year and more than 175 have fallen into the bottom category of bank safety rating scales, where State Banking Commissioner Kenneth Littlefield considers them in danger of failing.

The Texas savings and loans are in even worse shape; 104 of them are broke but are being kept open by special dispensation from the Federal Savings and Loan Insurance Corp., which doesn't have enough money to pay off depositors.

Because the federal government has promised to insure the deposits, the problems of the Texas banks are the nation's problem. The FDIC will have to pay for the Texas bank bailout, even if it means depleting the $18.3 billion fund that provides insurance for all the bank deposits nationwide.

Because of the problems in Texas, the FDIC probably will lose money this year for the first time, adding to the federal budget deficit. FDIC takes in about $3 billion a year from a tiny tax on bank deposits and last year paid out all but a few million dollars of what it collected. Before First Republic fell, Siedman was predicting losses of about $2 billion in Texas this year; adding the $6 billion First Republic bailout would bring the total to almost half the FDIC's resources.

For months, Siedman and Comptroller of the Currency Robert E. Clarke have insisted publicly that the problems of the Texas banks are not serious enough to require any extraordinary government action.

Bending the Rules Behind the scenes, however, federal regulators have been bending the rules of banking to keep weak Texas financial institutions from going under and taking unusual steps to keep the public from learning how bad things are.

Only a week before First Republic sought government help, the Federal Reserve Bank of Dallas clamped a lid of secrecy on its weekly reports on deposits in large Texas banks. The reports had shown First Republic was being bled by a silent run of depositors, who drained more than $1.9 billion from the bank in the first few weeks of the year. Fed officials in Dallas admit they stopped releasing the reports under pressure from executives of troubled banks, who feared the runs that took down First Republic might spread to other Texas banks.

The Federal Reserve made an emergency $1 billion loan to First Republic and has provided cash to other Texas banks, but Fed officials decline to discuss what the nation's central bank is doing about the growing Texas losses.

The FDIC, which takes the lead on cleaning up bad banks, has begun to utilize a controversial practice called "forbearance" to keep from closing down all the Texas banks that are in financial trouble.

Siedman said the practice means "allowing a bank to operate with less than normal capital." The dispensation is granted only to banks that are hurting because of economic factors, not bad management, he said, and only to banks that have a workable plan to rebuild their capital.

Capital is the cushion of cash that banks set aside to protect against losses: When a loan has to be written off as a bad debt, the loss comes out of the bank's capital. Ordinarily, the FDIC steps in when bad loans eat up so much of a bank's capital that it falls below federal minimum standards. Siedman said Texas accounts for "a substantial number" of the 134 banks that have been granted formal "forbearance" from enforcement of the capital rules. FDIC officials will not say how many more Texas banks are seeking the same favor.

Though Siedman and other bank regulators deny it, Texas banking sources say there is evidence that federal banking examiners are also practicing a different kind of informal "forbearance" by not pushing banks to foreclose on overdue loans or write off bad debts.

A former federal regulator said it is "obvious" that bank examiners are not being tough on banks that have a lot of bad loans, but are otherwise sound and well managed. "You've got to assume the regulators are being lenient," agreed Sandra J. Flannigan, a specialist in Texas banks for PaineWebber Inc. in Houston.

The leniency frequently comes in evaluating the real estate that is collateral for billions of dollars worth of loans, Texas bankers say. Because of the depressed real estate market, much of that property is worth less than the banks loaned on it. Banks -- and bank examiners -- ordinarily insist that loans be fully collateralized and that borrowers put up more cash if the value of the collateral declines. In Texas today, that's not always being done.

Regulators Weigh Risks Leniency and forbearance enable regulators to avoid draining the deposit insurance funds, but those policies raise the risk that the underlying problems will get worse, costing the government more in the future. Siedman acknowledges that risk, but says there also is a risk "if you close down institutions that you might not have had to close down."

Playing hardball would only force the FDIC to take over banks that will be fine once the Texas economy turns around, said Charles Doyle, a Texas City banker who serves as chairman of the Independent Bankers Association of America, an organization of small banks. Doyle said bankers and regulators "have to become partners in finding out how we can work out of this thing, We have to pay more attention to trying to buy time for the well-managed institutions to get back on their feet."

Doyle warns that regulators are running out of time in Texas. "The system is pretty well wrung out. If you don't start having a turnaround, you run the risk of a second wave that could bring down businesses and institutions that at this moment appear to be secure."

Skeptics fear bank regulators may be following a strategy similar to what's been done with the troubled Texas savings and loans -- overlooking dangerous capital shortages, keeping institutions open to save the cost of paying off depositors, trying to avoid selling their real estate investments now while the market is depressed.

Texas bankers point out that the first thing the FSLIC did when savings and loans started having problem was to relax capital requirements. FSLIC first used accounting gimmicks to make it appear S&Ls had more capital, then lowered the minimum standards, and finally allowed associations to stay in business after they had used up all their capital and were insolvent. Today, more than 100 Texas S&Ls do not have enough assets to cover all their debts.

Siedman says "there is no comparison" between the capital forbearance the FDIC is practicing and what FSLIC has done. The FSLIC has kept open associations that have no hope of ever returning to health, while FDIC has bent the rules only for banks expected to recover along with the Texas economy, he said.

The government's strategy amounts to gambling that the Texas economy and real estate market will turn around before the banks go broke, warns Paul Zane Pilzer, a Dallas real estate investor.

Pilzer said the FDIC, the FSLIC, the institutions they insure and their borrowers are holding on to billions of dollars worth of vacant property, which is worth perhaps half as much as it was before the market collapsed. "It's an obscene public policy," said Pilzer, the same as if the government promised people whose stocks plunged in the Oct. 19 crash that they wouldn't have to sell them until prices went back up.

Among those dubious about whether the stalling strategy will work is Marcie Hahn, a Texas bank company specialist with Underwood Neuhaus & Co., a Houston brokerage firm.

"It won't work if oil goes back to $10" a barrel from its current $16, Hahn said. "It won't if the real estate situation is much worse than expected. It won't if the U.S. economy goes into a recession."

Even if nothing like that happens, Hahn said, "right now we're in a pretty precarious situation because the Texas economy does seem to be improving somewhat but the banks are not.

"Some will hold on and some will not," she said. "People that have just been hanging on by their fingernails are not going to be able to hold on until things get better."

Even if nothing goes wrong, "Washington needs to recognize that forbearance puts off the inevitable," said Dallas banking consultant Frank Anderson.

Bailout Costs Grow Daily Bert Ely, an Alexandria, Va., savings and loan consultant, said the cost of bailing out Texas S&Ls is growing by millions of dollars a day.

By failing to shut down the bankrupt Texas savings and loans, he contends, the FSLIC had made the situation much worse and infected many Texas banks with the same ailments that killed the S&Ls.

The only way the troubled Texas savings and loans can get deposits is to pay the highest interest rates in the country, as much as 10 percent on long-term certificates of deposits. Texas banks have to keep their own rates competitive, so they are paying about 1 percent higher interest than banks in the rest of the country.

Squeezed between those high rates and billions of dollars of nonperforming loans, the Texas banks are bleeding to death.

Texas banks are suffering from a combination of accidental injuries and self-inflicted wounds, compounded by government malpractice.

Siedman and Clarke acknowledge that the Office of the Comptroller of the Currency set up Texas for a fall by chartering hundreds of new banks there, though Texas already had more banks than all the other states combined. Until 10 years ago, an applicant for a bank charter had to prove there was a need for a new bank. Regulators began chartering banks at will after deciding that the marketplace, rather than bureaucrats, should determine whether new banks were needed.

Texas banking commissioner Littlefield says almost half the Texas banks that failed were chartered recently. Siedman and Clark admit Washington's responsibility and have drastically curtailed chartering of new banks.

Though Siedman repeatedly stressed that economic circumstances were responsible for the problems in Texas, bankers in the state admit they contributed significantly to their own demise.

They also used their holding companies to exploit the federal deposit insurance system, obtaining FDIC insurance for accounts running into millions of dollars, instead of the usual $100,000 limit. Texas does not allow banks to have branches, so each banking office is organized as a separate bank.

By taking multimillion dollar deposits at one of their banks, then passing $100,000 around to each of the other banks owned by the holding company, Texas bankers have given their customers huge insured accounts.

The biggest mistake Texas bankers made was not to diversify their lending, says Dallas banking consultant Frank Anderson. Instead, they put about 40 percent of their money into loans for energy and real estate. By making too many loans on oil and real estate, the Texas bankers fell victim to the same boom and bust cycles that have thrown thousands of wildcat drillers and real estate speculators into bankruptcy.

"There was a big vulnerability in oil, but the vulnerability in real estate is far greater than the vulnerability in oil ever was," said M. Ray Perryman, a Baylor University economist who specializes in the Texas economy.

"We built so much real estate that even if we had $90-a-barrel oil, we'd have too much," Perryman said.

"No bank is failing because of what's happening now," Perryman said. "It all happened back in 1982 to 1986" and is showing up today because "banks are a lagging economic indicator."

Bank loans backed by black gold began turning into a black hole of bad debts soon after oil prices peaked in 1982, said James Cochrane, vice president and chief economist for Texas Commerce Bank in Houston.

As oil prices slid, the Texas economy slowed, but the real estate developers refused to stop building. Racing to take advantage of tax loopholes that were to expire at the end of 1986, they built billions of dollars worth of buildings that no one needed.

Today there is so much vacant office space in Houston that you could move every office worker in Pittsburgh to Houston tomorrow and still have room left over. There are so many empty offices in Dallas that they could absorb all of downtown Boston.

The banks' losses are growing because the price of oil is going nowhere, as are the empty buildings.

Late Mortgage Payments As the Texas recession drags on, more and more property owners are falling behind on their mortgage payments or letting lenders take over buildings through foreclosure.

Today more than 20 percent of the real estate loans of the state's biggest banks are 90 days past due.

Real estate foreclosures in Houston have jumped from 1,300 in 1980 to 31,000 last year. In Dallas, they've gone from less than 600 a year to 8,600 last year. Owners of older buildings are being forced to cut their rents to keep tenants from being lured away by the giveaway prices on new buildings.

In downtown Houston, office rents are $9 to $14 a square foot a year, barely half of what comparable quarters cost in Washington, according to The Office Network, a leasing service.

Perryman blames the savings and loan industry for the depression in Texas' real estate market. After Congress unleashed S&Ls to make commercial real estate loans in the early 1980s, the Texas associations went on a building binge that Perryman says led to construction of $11 billion worth of buildings that no one needed.

For a couple of years after oil prices started to slip, all that construction kept Texas from falling into a recession. Then the overbuilding caught up with the state and caused an even worse recession, costing Texas twice as many jobs as the boom created.

At the rate that Texas office space was leased last year, it could take six or eight years to fill up all the vacancies.

Perryman figures it will be three or four years at the earliest before there's any need to build more new buildings, which means few jobs for construction workers anytime soon.

How much it will cost to clean up the Texas real estate mess is no more certain than how long it will take.

Congress recently gave the FSLIC $10.8 billion in new financing, but that isn't enough to take care of the Texas S&Ls, let alone the rest of the country.

"The joke here is that $10 billion will fix up four intersections in Dallas," said Perryman, "that's not so far off."

Alexandria consultant Ely estimates it would cost $25 billion to pay off the obligations of the Texas savings associations.

The Texas bank problem could prove nearly as costly though "no one has been willing to admit it's of the same order of magnitude," said William Townsend, the former head of the banking school at Southern Methodist University in Dallas and now a bank consultant for Underwood, Neuhaus & Co.

"Eventually," added Townsend, "I think the U.S. government is going to have to be there to finance the bailout."