LIVING ON BORROWED TIME?
How serious is the crisis facing the Federal Savings and Loan Insurance Corporation (FSLIC)? It depends on who you ask.
Thrift industry spokesmen say the FSLIC is experiencing temporary cash flow problems which should be worked out over the next couple of years, even if interest rates rise modestly. But others believe the FSLIC is in danger of going broke, and will do so if interest rates turn upward.
"The FSLIC is not in trouble in the long term. It's just having difficulty clearing up leftovers from the early 1980s," said Dennis Jacobe, director of research for the US League of Savings Institutions, a Chicago-based trade group. "It has bad asset problems and short-term funding problems, but a 100-to-150 basis point rise by the end of 1986 won't matter."
Taking an opposite view, Warren Heller, director of research at Veribanc Inc, a Woburn, Massachussets, research firm, said: "The situation is very severe. The savings and loan industry doesn't have any economic value, on the whole. If interest rates go up a couple of points, the industry dies." And with it, by implication, the FSLIC.
The health of the FSLIC is crucial to the maintenance of confidence in America's thrifts because it insures over $1 trillion of deposits at more than 3,000 savings institutions across the US.