Federal Banking Agencies Are Adequately Examining Net Worth Certificate Program Applications

GGD-85-33: Published: Jul 3, 1985. Publicly Released: Jul 3, 1985.

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GAO reported on its semiannual audit of the net worth certificate programs administered by the Federal Deposit Insurance Corporation (FDIC) and the Federal Home Loan Bank Board with its subsidiary, the Federal Savings and Loan Insurance Corporation (FSLIC).

GAO found that the federally insured thrifts, while faced with rising interest rates, were slightly more profitable during the first half of 1984 compared with the second half of 1983. While, as a whole, federally insured thrifts were profitable for the first half of 1984, most thrifts receiving net worth certificate assistance were still reporting losses and declining net worth as of June 30, 1984. Of the 26 FDIC-insured thrifts and the 74 FSLIC-insured thrifts that received assistance, none were liquidated, 6 were merged, and 1 was acquired by another thrift. FDIC granted $486 million in assistance and FSLIC granted $113 million as of June 30, 1984. Both agencies examined thrifts' applications for assistance sufficiently to verify their accuracy and completeness. Each consistently acted upon the applications in accordance with prescribed statutory and regulatory requirements. Although the federally insured thrift industry reported a $1.1 billion net income in the first half of 1984, when interest rates were rising, some federal banking regulators caution that the thrift industry remains vulnerable to rising interest rates.

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