Gov. Norm Bangerter, recognizing there is "politically no safe ground" in resolving Utah's thrift crisis, strongly recommended the Legislature approve his negotiated settlement with thrift depositors during Wednesday's special session.
In a meeting with legislative leadership before the session began, Bangerter outlined the bill that would settle a class action lawsuit against the state brought by thrift depositors who lost a substantial amount of savings in five failed thrift and loans."I'm not emotional about this because I don't know what side to be emotional for," Bangerter told House and Senate leaders. "I just made a hard-nosed business decision and this is as good a resolution as we could come to."
He said he recognized that past polls show a majority of the respondents are against using state tax money to reimburse depositor losses. "Politically there is no safe ground on this. We have put togeher a package that's reasonable and I strongly recommend you approve it."
Some leaders agree that they don't like having to settle, but its a better option than the state taking its chances in court.
After months of negotiation, the state, with help from its former liability insurance carrier, has agreed to pay an estimated $60 million to settle allegations of fraud and negligence filed in the 3rd District Court by an organization of depositors, Depositors of Insured Thrifts (DOIT).
To finance the $60 million, Bangerter is asking lawmakers to issue a $31.7 million general obligation bond, appropriate $7 million from the state's Risk Management Fund and another $2 million from the general fund. Former state insurance carrier California Union Insurance Co. has agreed to contribute $19 million.
The bond would eventually be paid off by liquidating assets of the five thrift and loans and the Industrial Loan Guaranty Corp. - the insolvent deposit guaranty created by the state and which triggered the collapse of the state's thrift industry. The Risk Management Fund, which would be depleted by the settlement, could be reimbursed through an appropriation during the general session in January.
The Senate went into caucus after the special session opened to discuss funding mechanisms for the settlement other than bonding or using money in the Risk Management Fund.
"I for one would be very pleased if depositors would take (proceeds from) the assets as they come in so we wouldn't have to bond," said Sen. Cary Peterson, R-Nephi. Peterson had six or seven senators support his suggestion.
Bangerter has asked lawmakers to approve the delicately crafted settlement as is, but he said alternate means of funding would not upset the settlement.
The settlement would return $100 million of the estimated $106 million the 15,000 thrift depositors had in accounts before the state shut down the ILGC and placed the thrifts in liquidation. Depositors have already received more than $40 million from the liquidation.
Bangerter said he is seeking "100 percent peace for the state" through the settlement, and the bill asks for DOIT's attorneys to indeminify the state against any counter suits brought by other defendants named in the class action suit.
In hope of collecting the remaining $6 million and past interest, DOIT will continue its action against former thrift owners and advisers. But DOIT has agreed to indemnify the state by not accepting any judgments against third-party defendants, if that defendant turns around and sues the state to pay that judgment.