Top Court's Goodwill Ruling Due Today

The Supreme Court is expected to decide today whether the government is liable for breaking its promise to let some thrifts carry regulatory goodwill as capital for 40 years.

The ruling in United States v. Winstar - one of the last of the court's 1995-96 term - will affect more than 100 current and failed thrifts that have filed similar claims seeking more than $10 billion in damages.

The case harks back to the savings and loan crisis of the 1980s. The Federal Savings and Loan Insurance Corp., desperate to avoid depleting its cash reserves, tried to entice healthy thrifts to takeover weaker peers. In exchange, the agency said the thrift could count the difference between the ailing institution's assets and liabilities as capital.

Congress charged that the accounting practice left many institutions undercapitalized. Lawmakers included a measure in the 1989 thrift-bailout bill requiring thrifts to write off their goodwill within five years.

The accounting change weakened many of these thrifts, leading to dozens of failures. Two failed thrifts and Glendale Federal Bank, which managed to survive, sued the government for breaking its word. Both the U.S. Court of Federal Claims and the U.S. Court of Appeals for the Federal Circuit have ruled that the government must compensate the thrifts. If the thrifts win today, the case will return to the claims court, which will decide how much the government must pay.