Choices for the Treasury In Leach's Latest Plan To Pump Up Thrift Fund

House Banking Committee Chairman Jim Leach plans to give the Treasury Department a "narrow menu of options" from which to design a new plan to shore up the thrift insurance fund.

The Iowa Republican said he wants to devise a new plan because the thrift fund fix should be enacted this year and the current administration-backed proposal is "stuck."

Rep. Leach unveiled his new plan Thursday morning after a meeting of committee Republicans.

Banking trade groups praised Rep. Leach for floating a new plan. "The most significant thing is that the chairman of the House Banking Committee is saying the current proposal is all but dead," said Edward L. Yingling, chief lobbyist for the American Bankers Association.

The industry lobbied furiously and blocked the administration's original plan, which would have forced banks to pick up most of the $750 million in yearly interest payments on Financing Corp. bonds that were used to bail out the thrift industry in the late 1980s.

Like the current legislation, Rep. Leach's new plan calls for thrifts to pay a one-time special assessment to recapitalize the savings association fund.

But Rep. Leach wants Treasury to design a new formula to pay for the Fico bonds by picking a combination of these alternatives:

*Forcing all banks and thrifts to share the cost, but limiting their portion to $390 million a year.

*Requiring Fannie Mae, Freddie Mac, and the Federal Home Loan Banks to chip in.

*Tapping interest earned on the $30 billion held by the bank and thrift insurance funds or on sterile reserves held by the Federal Reserve.

*Using $2 billion of the Fed's surplus funds or the $200 million in exit fees earned by the Savings Association Insurance Fund.

One lobbyist complained that Rep. Leach is again trying to end opposition to legislation by offering options rather than staking out a firm position - a strategy that doomed his financial modernization bill.

"Everybody is so tired of Jim Leach," he said.

Most options in Rep. Leach's plan have been proposed previously and failed to gain significant support. But Rep. Leach said lawmakers have no choice but to reconsider. "The closer one gets to the potential of Fico default, the larger the problem becomes," he said.

Many thrifts are threatening to flee the savings association fund because it levies a 23-cent fee on every $100 of domestic deposits while the Bank Insurance Fund charges no premium. If enough deposits are withdrawn, the thrift fund's income would not cover repayment of the Fico bonds.

Rep. Leach said a new thrift fund fix might be introduced as independent legislation or attached to another banking bill, such as regulatory relief.

Banking committee members, however, balked at letting Treasury choose the new Fico formula. Rep. Richard Baker, R-La., said he wants Congress to decide who should pay for the bonds. "I'm not ready to give the final determination to anybody else," he said.

Rep. Leach said he plans to hold a committee vote on the plan after lawmakers return from the July 4 break.

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