Thrift Industry Restructuring and the Net Worth Certificate Program

GGD-85-79: Published: Sep 24, 1985. Publicly Released: Sep 24, 1985.

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Pursuant to its legislative requirement to audit the Net Worth Certificate Program (NWC), GAO reviewed: (1) information on the condition of the thrift industry from December 1977 through September 1984; (2) the extent of restructuring that has taken place in the thrift industry; and (3) the performance of participants in the NWC program.

GAO found that: (1) the overall condition of the thrift industry had not improved since the crisis of 1981 and 1982; (2) thrifts returned to profitability, but profits continued to be low by historical standards; and (3) the average net worth for the industry was less than 3 percent of the assets by September 1984. GAO also found that: (1) the average growth of assets was very high when compared to commercial banks, despite the poor net worth position of the industry; (2) Congress provided thrifts with many new powers to enable them to restructure their assets and liabilities; (3) there was an industrywide shift away from mortgage loans and an increase in holdings of mortgage-backed securities; (4) thrifts were granted increased authority to make consumer and commercial loans, however, the industry, on the average, did not move quickly into these areas; (5) the portfolio share of negotiable certificates of deposit, time deposits, and transaction and money market deposit accounts increased as a result of industry restructuring; (6) participants in the NWC program, in general, did less restructuring of their assets and liabilities; and (7) NWC participants' income was consistently below both the industry and nonparticipants' averages.

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