California S&Ls lead move to 'going federal'
Some of the nation's major state-chartered savings-and-loan associations are converting to federal charters so they can participate faster in new national regulations and gain more flexibility in mortgage instruments. They feel these efforts will lead to muchsought improved earnings.
California is in the forefront in S&Ls' conversions to the federal system. Among the S&L giants applying for federal charters are Home Savings & Loan Association, Los Angeles, the nation's largest; Great Western Savings & Loan Association, Beverly Hills; World Savings & Loan Association, Oakland; and Gibraltar Savings & Loan Association, Beverly Hills.
Through mid-September, about 15 state-chartered S&Ls in California received approval to move under the federal banner. California is one of 20 states in which legislatures have not granted state-chartered S&Ls powers equivalent to those of federally chartered institutions.
"Starting with the fourth quarter, there really is no regulatory role for a state anymore," declares Leonard Shane, chairman of Mercury Savings & Loan Association, Huntington Beach, Calif., which completed its conversion to federal charter Sept. 3, altering its name to Mercury Savings, a federal savings-and-loan association.
"Conditions have changed," Mr. Shane adds. "There cannot be regulation by [ state] legislature even with the best intentions, because it's now a national market."
Shane, also president of the California Savings and Loan League, points out that for many years there was an advantage with a dual system. "The California system permitted the needs of the state to be satisfied with more progressive policies and programs to attract more funds for California housing," he continues. "But over the last couple of years this has not been true. California housing and mortgage issues have pretty much become politicized, while federal laws and regulations have been modernized to meet the current economic environment."
Some state-chartered S&L managers in California started to grumble last year after Gov. Edmund Brown Jr. vetoed a bill that would have liberalized state law on variable rate mortgages.
State-chartered S&Ls have for a long time been seeking the greater flexibility allowed in mortgage instruments under federal charter. The current exodus was precipitated, relates W. Dean Cannon, executive vice-president of the California Savings and Loan League, "because of the Brown administration's unwillingness to give the state's major mortgage lenders the necessary tools to finance housing."
Mr. Commonsays another key factor is the California Supreme court's 1978 decision that halted use of due-on-sale clauses, thus allowing the assumption of older, lower-interest loans. Other factors inspiring defections, according to Common, are more liberal branching requirements of the Federal Home Loan Bank Board ad the quickness with which it makes decisions, and the extra costs in volved in dual examinations by state and federal regulators.
S&L folks see federal charters as a way to cross state lines. This was illustrated by San Francisco-based Citizens Savings & Loan Associations going national Sept. 8 with a federally approved merger with West Side Federal Savings & Loan Association, New York, and Washington Savings & Loan Associationn, Miami Beach. To complete the move, Citizens and Washington went to federal charters.
The three-way merger boosted Citizens to the nation's largest federally chartered S&L, with combined assets of $6.8 billion, topping the Los Angeles-headquartered California Federal Savings & Loan Association, for a long time the nation's No.1, with $6.3 billion in assets.
Federally chartered S&Ls, meanwhile, were granted authority in August to Establish automated teller machines across state lines.