A Massachusetts bill meant to discourage mutual thrifts in from converting to stock ownership could have the opposite effect, according to bankers and trade groups.

Though few expect it to advance beyond the state Senate Banking Committee, where it is currently being debated, the banking industry has mounted an all-out attack against the legislation, which would require converting mutuals to distribute their capital to depositors.

At a hearing last week, bankers and trade group officials argued that if large depositors stood to receive a share of a thrift's capital they might pressure it to convert. Currently the only perk depositors get when their mutual savings bank converts is a chance to buy shares before they are offered to the public.

Bill Gothorpe, the president of the $835 million-asset Dedham Institution for Savings, a 172-year-old mutual thrift, said it has no plans to convert, but he sketched this scenario illustrating the bill's potential impact on depositors: If Dedham, which had about $585 million of deposits and $89 million of capital at the end of the first quarter, were to convert, a depositor with a $100,000 certificate of deposit would be entitled to a payout of $15,130.

The bill "would create an environment in which some depositors and activists could put tremendous pressure on a company to convert," he said. "It would encourage conversions that would not happen otherwise."

Though little more than anachronisms in most states, mutual savings banks are ubiquitous in Massachusetts, where there are 115 of them, along with 25 mutual holding companies - institutions that have sold a minority stake on the stock market but whose control remains vested in depositors.

Mr. Gothorpe said no one spoke in support of the bill at the hearing and that none of its three Democratic sponsors - state Sens. Dianne Wilkerson and Steven A. Tobias and Rep. Patricia D. Jehlen - attended.

None of the sponsors returned calls seeking comment, but others said the bill would discourage conversions because it would force converting banks to relinquish their hard-earned capital.

Charlotte Bahin, the senior vice president for regulatory affairs at America's Community Bankers, called the scenario Mr. Gothorpe outlined an "unintended consequence."

Under the bill, conversions would probably be motivated by "persons seeking a windfall, rather than the best interests of the mutual bank," she said.

Daniel J. Forte, the president and chief executive officer of the Massachusetts Bankers Association, said the lack of support shown for the bill at the hearing, and the absence of its sponsors, indicates it has little chance of surviving the Senate Banking Committee.

A similar measure, which was introduced in 2001 but died in committee, "was never reported favorably, and we're hoping this one gets the same treatment," he said.

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