Financial reform legislation may cost the thrift charter one of its most appealing features, but fans say it's too soon to write the industry's obituary.

Congress is on the verge of passing legislation that would bar commercial companies from owning a single thrift, closing the so-called unitary thrift loophole. It would also repeal the law prohibiting securities and insurance firms from offering depository services.

"They don't have to take the end run through thrifts" to get into banking, said Lawrence J. White, a former thrift regulator who is now a finance professor at the Stern School of Business at New York University. "There's not much in it any more," he said of the thrift charter.

But others insist the charter retains key advantages.

"Our expectation is that a number of companies will continue to retain thrift holding companies or in the future choose to form them," said Robert Davis, director of government relations at America's Community Bankers, a thrift trade association in Washington.

For one thing, Mr. Davis said, federally chartered thrifts enjoy "preemptive" rights -- they can engage in activities that state regulators would not permit. For example, federal savings associations can open branches anywhere in the country, regardless of state law, though national banks still face restrictions in some states.

Federally chartered thrifts enjoy "one set of uniform federal guidelines for consumer protection across the board," Mr. Davis said, making operations less expensive and more efficient for thrifts than for multistate banking companies, which must deal with many regulatory regimes.

For this reason, he noted, Citigroup Inc., the financial services giant, does all its banking activities that are outside New York through a federally chartered thrift, Citibank FSB.

Another difference is that thrifts' operating subsidiaries may develop real estate but subsidiaries of national banks would not be allowed to under the proposed law. About 160 of the 1,115 federally chartered thrifts have subsidiaries, known as service corporations, that own or develop real estate of some kind, according to the Office of Thrift Supervision.

At the holding company level, Mr. Davis said, many institutions may prefer to be regulated by the Office of Thrift Supervision than by commercial bank regulators -- particularly those affiliated with businesses other than banking. Some companies, he said, fear the Federal Reserve would try to regulate their nondepository activities.

"Right or wrong, some people feel the Fed is more likely to be the greater interventionist, trying to regulate activities outside their functional jurisdiction," Mr. Davis said. "Whether well-founded or not, it's certainly a factor that has led some to prefer the holding company option."

But one executive who switched from a thrift to a bank charter said many will do the same, especially once the new law takes effect.

"When we flipped the charter, nothing happened," said William Cooper, chief executive officer of TCF Financial of Minneapolis. "We have a different regulator, we mail our reports to different people, but those are the only changes from a management perspective."

More important, he said, is that thrift stocks trade at a discount to bank stocks because investors view thrifts as more vulnerable to interest rates. Shares of TCF, which converted from a thrift holding company to a bank holding company two years ago, trade at about 14.8 times projected earnings, which compares with about 14.9 for the median large bank and 12.6 for thrifts, according to First Albany Corp.

Ellen Seidman, director of the Office of Thrift Supervision, said the thrift charter "remains attractive for anybody who wants to do consumer business, especially if that business is focused on mortgages."

She said that many institutions would prefer to be regulated by her agency because it is focused on housing finance and understands interest rate risk, the chief danger faced by mortgage portfolio lenders. "In contrast to bank regulators, the folks who want to do mortgage business feel we understand their business," she said.

The OTS is a relatively small organization, she added, with only 1,300 employees, compared with 7,200 at the Federal Deposit Insurance Corp. and 2,900 at the Office of the Comptroller of the Currency. As a result, she said, "we are accessible."

Ms. Seidman argued that having a separate charter and regulator for institutions focused on mortgages is important for the public good "because there's a voice and probably a louder one than there would be otherwise" for housing finance.

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