SAIF Plan Would Cut Banks' Cost, Make Fed Ante Up

A wild House Banking Committee session Thursday produced a rescue plan for the thrift fund that would dramatically cut the industry's costs and would require the Federal Reserve to contribute financially.

Under the repayment formula that lawmakers approved, banks would pay roughly $320 million a year through 1999 on the controversial Financing Corp. bonds. Thrifts would pick up the remaining $450 million due each year on the bonds.

Toward the end of the markup, however, the committee unexpectedly approved a plan to further decrease the bank's share of the cost. Lawmakers agreed 22-18 to use the Fed's $3 billion in surplus funds to lower the amount due from banks by about $100 million a year.

Throwing the Fed into the mix was a surprise Thursday. The day before, a bipartisan group of key members struck a bargain on the thrift fund rescue, and that deal may be doomed by including the Fed funds.

Rep. Marge Roukema said she was "deeply concerned" about the Fed amendment, which was based on "fallacious assumptions" about the central bank's reserves.

"It causes huge problems in getting this thing passed," the New Jersey Republican said.

Still, the legislative fix for the Savings Association Insurance Fund has become increasingly more palatable to banks over the last two days.

"The proposal gives a slightly less disadvantaged position to banks and increases slightly the chances of bank support for the bill," House Banking Committee Chairman Jim Leach said.

But industry trade groups stopped short of endorsing the bill Thursday.

American Bankers Association is disappointed that House Banking refused to require Fannie Mae and Freddie Mac to help pay off the Fico bonds, said Edward L. Yingling, the group's executive director of government relations.

The committee did approve an amendment by Rep. Leach that would instruct regulators to restrict the flow of deposits from the thrift to the bank fund.

"We're disappointed that they didn't include Fannie and Freddie, but overall what they did do is construct a base from which we can go forward," Mr. Yingling said. "We're willing to work to get a bill this year."

Kenneth A. Guenther, executive vice president of the Independent Bankers Association of America, did not endorse the rescue plan. But he did say, "the Leach efforts have been profoundly pro-banking."

Mr. Yingling said ABA will work to sweeten the bill further. Adding regulatory relief might entice bankers to swallow the cost of paying off Fico, he said.

A committee spokesman said the rescue bill "may be attached to other legislation, either an omnibus banking bill, or a regulatory burden relief bill."

The thrift industry is desperate to fix the savings association fund, but as the rescue's tab grows, support may wane.

America's Community Bankers president Paul Schosberg called the plan "a mixed blessing."

In addition to the $450 million in yearly Fico bond payments, the rescue legislation would stick thrifts with a one-time fee to capitalize the fund. That fee would raise some $5 billion.

"I don't expect a standing ovation for us or the committee from our members today," he said. However, Mr. Schosberg said he is encouraged that House Banking members are pulling together on a bipartisan solution that could be enacted this year.

Separately, the Clinton administration turned up the volume on its lobbying efforts Thursday, sending letters to House Speaker Newt Gingrich and Minority Leader Richard Gephardt.

"Passage of this legislation remains one of this administration's foremost and urgent priorities," White House Chief of Staff Leon L. Panetta wrote. "There is little time left to legislate in this Congress. ... I urge that action be taken at the earliest possible opportunity."

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