FADA Is Said to Seek $10-Million Bailout

A government organization created to raise cash by selling property from failed savings and loans is instead losing $1 million a month and has asked for a $10 million infusion to stay alive, federal regulatory sources said Wednesday.

The Federal Asset Disposition Assn. (FADA) requested the money three months ago to make up for a $10 million operating shortfall in 1987, the sources said. It wanted to cover the shortfall, the sources said, to avoid embarrassment at a time when it is being investigated by two congressional committees, the Justice Department and the Federal Home Loan Bank Board, on allegations of mismanagement and conflict of interest.

Disclosure of the $10 million operating loss in 1987 is likely to intensify a debate in Congress over whether FADA ought to be scrapped or sustained to fulfill its intended mission of selling repossessed property. The money the bank board supplies to FADA comes from the beleaguered insurance fund that also must be used to guarantee deposits at S&Ls.;

FADA Wednesday defended the $10-million request, insisting the money represents fees that the Federal Home Loan Bank Board, the federal agency that regulates S&Ls;, owes it for managing government-owned property.

The bank board said the $10- million request was in addition to $18.9 million in fees the bank board paid FADA in the first 11 months of 1987.

But bank board sources said that some board officials dispute the method FADA used to calculate the $10 million charge. The bank board said it is reviewing the request.

In addition, Rep. James Florio, D-N.J., on Wednesday issued a statement questioning FADA’s request for funds and asking the bank board for a full accounting of how FADA spends its money and charges for its services.

“I am concerned that FADA is asking for substantial additional federal funds, while its performance is subject to serious question,” Florio said in a letter to bank board chairman M. Danny Wall.

The bank board created FADA in 1985 with $25 million in seed money, half of which it has used. The other half is needed for collateral for a $50-million line of credit with the government. The bank board expected the government-owned company to earn a profit within one year.