Federal regulators on Friday sold 59 branch offices of New Jersey's biggest savings and loan as part of a bailout expected to cost taxpayers $1.5 billion.
The offices and accompanying $2.8 billion in deposits of City Federal Savings Bank of Somerset, N.J., were distributed among five New Jersey financial institutions by the Resolution Trust Corp.The agency ranks it as the nation's fifth most expensive S&L bailout.
Separately, regulators at the Office of Thrift Supervision said they seized Far West Savings and Loan Association, Newport Beach, Calif., one of the industry's heaviest speculators in junk bonds.
The Resolution Trust Corp., which already has one of the nation's largest junk bond portfolios, will operate Far West. Its deposits remain federally insured and it will remain open during normal business hours.
Most of the City Federal's deposits, $2.5 billion, went to First Fidelity Bank of Newark, the state's largest commercial bank.
The agency said it received no acceptable bids for seven other offices, with $800 million in deposits. They were merged into another government-controlled insolvent S&L, First Atlantic Federal Savings Association of South Plainfield, N.J.
In September, the agency had sold City Federal's 27 Florida offices and nine Camden, N.J., area branches. Together, they had $1.4 billion in deposits.
City Federal, seized by the government in December 1989, got into trouble with aggressive lending to commercial real estate projects in New Jersey, Florida and Texas, according to analysts.
All City Federal branches will reopen for business as usual on Monday. Deposits continue to be federally insured and customers can continue to write checks. However, all certificate of deposit rates will be subject to readjustment by the acquirers after 14 days. Customers can withdraw their funds early without penalty.