U.S. seizes "unsound" Downey Savings
Federal regulators seized Downey Savings & Loan and PFF Bank & Trust late Friday, saying that hundreds of millions of dollars in bad loans from the housing bubble had rendered the Southern California banking fixtures unsound.
Government officials said the banks’ branches would continue operating as usual under the ownership of Minneapolis-based U.S. Bank, one of the country’s largest banks. No depositors will lose any money because of the failures, regulators said.
Newport Beach-based Downey lost $547.7 million in first nine months of 2008, largely because of risky “option ARM” mortgages -- adjustable-rate loans that included teaser rates so low that the loan balance rose. PFF, short for Pomona First Federal, specialized in loans to developers and home builders in the Inland Empire, between Los Angeles and the desert to the east, running up $289.5 million in losses from January to September.
Downey was founded in 1957 by developer Maurice McAlister, a bass fisherman and nickelodeon collector who built shopping centers that included Downey branches. Co-founder Gerald McQuarrie died 15 years ago. McAlister remained chairman until July, when Downey’s problems were apparent.
--E. Scott Reckard and Tiffany Hsu
Photo: Lori Shepler/Los Angeles Times
