Coming to the Rescue

During the past two weeks, lines of customers waiting to withdraw money from the 80 offices of Oakland's Fidelity Savings & Loan Association snaked through branch lobbies and out onto the sidewalk. There was no panic because everyone who demanded money got it, but cash was flowing out at near panic levels. Last Thursday alone, $25 million was withdrawn.

Finally last week the Federal Savings and Loan Insurance Corporation and the California department of savings and loan took possession of Fidelity, the 21st largest S and L in the U.S. The Federal Government immediately granted Fidelity a $100 million line of credit to meet withdrawals. Although the Federal Government has arranged 34 mergers of failing savings and loan associations and savings banks since the beginning of 1981, this was the first time the FSLIC had taken over a publicly traded savings and loan in order to save it from bankruptcy.

Like many other U.S. savings and loans, Fidelity had been in financial trouble for some time. Last year it lost $56.9 million. The savings and loan was caught in the now familiar crunch between old longterm, low-interest loans and the high cost of raising new money. Linda Tsao Yang, the California savings and loan commissioner, called Fidelity "a victim of high interest rates." Federal Home Loan Bank Board Chairman Richard T. Pratt tried to calm nervous depositors at Fidelity and other S and Ls by assuring them that the takeover was not the beginning of a trend. Said he: "This isn't the tip of the iceberg."

While no depositors will be losing money, Pratt held out no such assurances for Fidelity's stockholders. He said bluntly that the Government does not "protect stockholders, who are in the position of providing risk capital." The controlling interest of Fidelity is held by its longtime president, A.C. Meyer Jr., his former wife, Yvonne Eastman, and Philip H. Angell, a San Francisco attorney.

A flamboyant and aggressive executive, Meyer led Fidelity through a period of dynamic growth during the 1970s. After he and three other executives were fired last week when the FSLIC took charge, Meyer angrily threatened to challenge the action in court. He accused the federal regulators of having "systematically set about to destroy a financial institution."

Shortly after assuming the management of the savings and loan, federal officials held a bidders' conference at the Hilton at the San Francisco airport for institutions interested in acquiring Fidelity. Representatives of 32 companies, two-thirds of them other S and Ls', showed up. The FSLIC said it would accept offers for Fidelity during the next 30 days and hopes the troubled institution will be taken over by another company within three months. Pratt and Yang announcing the takeover

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