850
Opinion of Souter, J.
make up the difference between a failed thrift's liabilities and assets, the Bank Board had to offer a "cash substitute" to induce a healthy thrift to assume a failed thrift's obligations. Former Bank Board Chairman Richard Pratt put it this way in testifying before Congress:
"The Bank Board . . . did not have sufficient resources to close all insolvent institutions, [but] at the same time, it had to consolidate the industry, move weaker institutions into stronger hands, and do everything possible to minimize losses during the transition period. Goodwill was an indispensable tool in performing this task." Savings and Loan Policies in the Late 1970's and 1980's: Hearings before the House Committee on Banking, Finance, and Urban Affairs, 101st Cong., 2d Sess., Ser. No. 101-176, p. 227 (1990).6
Supervisory goodwill was attractive to healthy thrifts for at least two reasons. First, thrift regulators let the acquiring institutions count supervisory goodwill toward their reserve requirements under 12 CFR § 563.13 (1981). This treatment was, of course, critical to make the transaction possible in the first place, because in most cases the institution resulting from the transaction would immediately have been insolvent under federal standards if goodwill had not counted toward regulatory net worth. From the acquiring
6 See also 135 Cong. Rec. 12061 (1989) (statement of Rep. Hyde) (observing that FSLIC used goodwill as "an inducement to the healthy savings and loans to merge with the sick ones"); Brief for Franklin Financial Group, Inc., et al. as Amici Curiae 9, quoting Deposition of Thurman Connell, former official at the Atlanta Federal Home Loan Bank, Joint App. in Charter Federal Savings Bank v. Office of Thrift Supervision, Nos. 91-2647, 91-2708 (CA4), p. 224 (recognizing that treating supervisory goodwill as regulatory capital was " 'a very important aspect of [the acquiring thrifts'] willingness to enter into these agreements,' " and concluding that the regulators " 'looked at [supervisory goodwill] as kind of the engine that made this transaction go. Because without it, there wouldn't have been any train pulling out of the station, so to speak' ").
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