Losses by the nation's savings industry dropped sharply last summer as the government transferred to its own books billions of the industry's accumulated red ink, a government economist said.

Final figures for the July-September quarter aren't due out until next month, but James Barth, chief economist of the Federal Home Loan Bank Board, said Tuesday that the nation's 3,048 S&Ls lost about $2 billion.That's substantial, but it's down significantly from losses of $3.6 billion in the previous quarter and $3.9 billion in the first three months of this year.

S&Ls, hard hit in depressed oil regions of the Southwest, are suffering their worst year since the Depression.

Barth, speaking at the U.S. League of Savings Institutions annual convention, attributed shrinking losses to regulators' stepped-up pace of S&L rescues and closings, totaling 137 so far this year.

"Losses, rather than being reported on the books of the institutions, are being transferred to the books of the (deposit) insurance fund," he said.

Also, because most of the rescue packages guarantee restructured institutions against future loss as well as taking away past loss, there is no way of telling from industry numbers if losses in those institutions are continuing.

R. Dan Brumbaugh, a private analyst and former bank board economist, said the new loss number does not necessarily indicate the cost of cleaning up the S&L mess, estimated by regulators at $45 billion to $50 billion, is getting better.