GAO SAYS FSLIC SHOWS DEFICIT, NEEDS FUNDS
The Federal Savings and Loan
Insurance Corp is facing a deficit because of its potential
liability from insolvent savings associations, the General
Accounting Office told a House Banking hearing.
    "We have preliminarily determined that FSLIC needs to 
establish a contingent liability in the range of eight billion
dlrs to handle cases that will require action in the near
future," Frederick Wolf of the GAO said.
    "When that amount is deducted from FSLIC's reserves, FSLIC
would have a deficit of over three billion dlrs as of the end
of 1986. Clearly, FSLIC needs additional funds to resolve the
large backlog of insolvent and unprofiable savings associations
that continue to operate," Wolf said.
    He urged the committee to support the Treasury Department's
plan to raise 25 billion dlrs over five years to recapitalize
FSLIC.
    Wolf said as of Septmember, 1986, about 85 pct of FSLIC
insured savings associations were solvent, while 15 pct were
insolvent.
    He said 80 pct of savings associations were profitable,
earning a total of 6.9 billion dlrs during the first three
quarters of the year, while the other 20 pct of associations
lost a total of five billion dlrs in the same period.
    The GAO is the investigating agency of Congress.
    Roy Green, president of the Federal Home Loan Bank of
Dallas, estimated his district would need five billion to eight
billion dlrs over the next five years to close 12 Texas savings
associations and 14 associations in nearby states which he said
are considered "hopelessly insolvent".
 Reuter
