Washington Mutual Inc. is charging that a government proposal to tighten thrift ownership rules would impede the Seattle-based banking company from making future acquisitions.
"If the proposal were adopted, the resulting restrictions on growth by acquisition could cripple thrift holding companies in today's highly competitive financial services marketplace," Washington Mutual chairman Kerry K. Killinger warned in a letter to the Office of Thrift Supervision.
The agency this winter proposed limiting when financial firms may buy additional thrifts without losing their status as unitary holding companies. Unitaries may engage more broadly in nonfinancial businesses than traditional thrift holding companies, but are supposed to be limited to owning a single thrift.
Regulators in the 1980s carved out an exemption to the single thrift rule to encourage the purchase of failed thrifts from the government. Fewer than 13 unitaries own more than one thrift, including Washington Mutual, which owns three.
The OTS proposal would limit how these unitaries could combine regular thrifts with institutions acquired from the government.
These restrictions could threaten future Washington Mutual acquisitions, Mr. Killinger said.
The rule also would be illegal, he said. "The proposal is inconsistent with the explicit words of the statute, inconsistent with the legislative history, and inconsistent with the public interest," he said.
As the industry rebounded over the last decade, many of the companies that bought so-called "sick thrifts" have merged them into healthy thrifts while retaining their right to own more than one institution. But that raises the question of whether additional acquisitions by unitaries are legal.
In its proposal, the OTS says no. Additional acquisitions would be permitted only if all the thrifts that had been merged together were failed institutions acquired from the government.
The proposal also states that if a supervisory thrift is sold a second time, the new owner is not entitled to the exemption.
Seven organizations filed public comments by the April 8 deadline, and most echoed Washington Mutual's objections.
"It is not within the authority of the OTS to deny savings and loan holding companies ... the right of transferability," wrote J. Bradley Johnson, general counsel of Temple-Inland Financial Services Inc., the Austin, Tex., parent of Guaranty Federal Bank in Dallas.
But consumer advocates urged the OTS to go further.
"Your agency should limit exempt multiple status much more aggressively than you have proposed," wrote John E. Taylor, the president of the National Community Reinvestment Coalition.
"This status should be terminated upon merger of the supervisory thrift, and much more scrutiny should be given before any new multiple exempt status is granted."
