U.S. to Pay $41.4M in Third Goodwill Settlement

The government agreed Friday to spend $41.4 million to settle a regulatory goodwill suit brought by Dollar Bank, Pittsburgh.

The Federal Savings and Loan Insurance Corp. persuaded the mutual savings bank in 1984 to acquire the ailing Continental Federal of Cleveland by promising to let it count $191 million in regulatory goodwill as capital.

Congress voided this and hundreds of similar deals in the 1989 thrift bailout law. More than 100 institutions sued the government for breach of contract. The Supreme Court ruled in 1996 that the government had broken its word, and it ordered the Federal Claims Court to decide how much, if anything, the government must pay.

This is the third settlement of a goodwill case this year, though none have involved institutions with large damages claims, such as Glendale Federal Bank, which is seeking nearly $2 billion.

Also on Friday, Chief Judge Loren A. Smith of the U.S. Court of Federal Claims ruled that the government broke its contract to let California Federal Bank count regulatory goodwill as capital. He assigned the trial on damages to Judge Robert H. Hodges Jr. A trial date has not been set.