Golden State Bancorp offered Thursday to settle its long-standing suit against the U.S. government for $1.5 billion and lend it to low- and moderate-income people.
Glendale Federal Bank, the consumer-bank unit of Golden State, and more than 100 other savings and loans have sued the government for changing accounting practices related to the purchase of thrifts in the 1980s. Glendale is seeking as much as $1.8 billion in its case.
By offering to devote the money to community investment activities, Glendale turned up the heat on the government to begin resolving the potentially expensive cases. Analysts estimate the total bill to the government will be $10 billion to $20 billion.
Glendale said its offer is good until Jan. 30.
David Cohen, the Justice Department’s top lawyer in the thrift lawsuits, said he was unaware of the proposal until he learned of it from a reporter. While Cohen said the government was “willing to entertain settlement offers,” he said the two sides weren’t involved in negotiations.
The suit is being watched by other S&L investors because it’s designed to be a test case. The Supreme Court already has ruled that the U.S. breached a contract with Glendale.
