A federal judge has denied a request by the former Home Savings & Loan that the federal government return control of the institution to its directors.
Home Savings was seized by the Office of Thrift Supervision in May as part of the national plan to bail out failed savings and loans.Home's former owners have been fighting to regain control of the institution, which had assets of about $16 million and served about 15,000 depositors in Salt Lake City.
Home's directors, who say they now are able to infuse capital into the bank, had sought an injunction against the Office of Thrift Supervision and Resolution Trust Corp., which was appointed as Home's receiver on July 5.
But according to an order issued by U.S. District Judge David K. Winder Oct. 5, the Office of Thrift Supervision had authority to appoint Resolution Trust as receiver for Home.
"Home has not demonstrated a fair ground for litigation and is unlikely to succeed on the merits of this case . . .," Winder wrote.
Days before the government's seizure of Home Savings, the state intervened and helped owners change the institution's charter from that of an S&L to one making it a state-chartered commercial bank.
In an affidavit, state Financial Institution Commissioner George Sutton conceded he allowed the last-minute switch of charters just so Home Saving's owners could escape the jurisdiction of federal S&L regulators.
During a hearing last month, Office of Thrift Supervision attorney Harvey Levin told Winder that Sutton's actions defied the federal S&L bailout law. If states are given the power to prevent federal intervention by allowing such charter switches, the entire federal regulatory structure will be weakened, he argued.
Assistant Utah Attorney General Stewart Hansen had said that with an injunction, there was a possibility that Home's owners could resurrect the institution and avoid the need for taxpayer dollars to bail it out.