The Federal Deposit Insurance Corp. is under attack for its handling of Crossland Savings Bank.

The General Accounting Office claims the FDIC provided no proof that taking over and operating the failed Brooklyn, N.Y.-based thrift was the least costly rescue. The GAO also questioned the assumptions that went into the FDIC's calculation of least costly.

Since the Crossland takeover, the action has been criticized by Wall Street, influential members of Congress, the Association of Bank Holding Companies, the Shadow Financial Regulatory Committee, and press commentators in the context of the $400 billion-plus taxpayer burden in the S&L bailout.

The management of this insolvency deviated from the FDIC tradition of liquidating or finding a bank to purchase Crossland after removing the bad assets. Instead, the FDIC decided to invest $1.2 billion in Crossland and brought in a new management team.

|Hospitalized' or |Nationalized'?

The FDIC says it has "hospitalized" the bank to clean up the problems, restore profitability, and then sell Crossland.

Opponents claim that the FDIC has "nationalized" Crossland, putting the government in direct competition with private-sector banks and giving Crossland an unfair advantage.

A large part of the controversy stems from statute requiring the FDIC to find the least costly method for managing bank failures. Congress had sought to preserve the assets of the Bank Insurance Fund in order to protect the taxpayer.

Calculating what is least costly depends on assumptions about the future. After deducting the cost of bankrupt assets, measuring future values of the remaining assets depends upon such variables as:

* Rate of growth of the national economy and in the insolvent bank's market area.

* Future interest rates.

* In the case of real estate -- the cause of many today's problems -- the rate of absorption of existing properties.

Educated Guesses

No one, including the FDIC, has a reliable crystal ball. Calculations may be reasonable but are inherently educated guesses.

The FDIC received only two initial bids for Crossland, at such low prices that remedial action seemed likely to eventually bring a higher price and thereby prove over time to be least costly.

The FDIC was over a barrel. It decided to experiment in an attempt to reduce the costs of insolvency. The hospitalization of Crossland gave the agency room to maneuver.

We should applaud thoughtful experimentation by the FDIC. Since the measure of "least costly" is highly subjective, trying different techniques will, at the very least, give guidance for the future.

Five years from now, the cost of the Crossland resolution will be accurately measurable against the cost of other banks that have been sold or liquidated. Only then will we know if the FDIC's experiment worked.

Long-Term Issues to Resolve

Since there are a goodly number of near-terminal depository institutions, we should be dealing with questions of a broader and more substantive nature:

* Should insolvent or close-to-insolvent institutions be saved at all, beyond protecting insured deposits? Would it not be better to let such institutions disappear?

* If government chooses on the basis of public policy to save a near-terminal bank, would it not be just for existing shareholders to be wiped out, or at least made subordinate to government assistance?

* Should the FDIC adopt a standard that the least costly way to liquidate in the public interest is preferable to the narrowly defined least costly method of liquidating a specific institution?

In the preelection atmosphere of 1988, the woes of the savings and loan system were hugely understated. In the present election year, there will doubtless be some political sport in kicking the FDIC around.

It would serve the nation far better to debate the substance of these questions than to indulge in meaningless rhetoric.

Meanwhile, credit the FDIC for at least trying to reduce the costs of bank failure by openly experimenting with a new technique. Mr. Heimann is chairman, global financial institutions, at Merrill Lynch & Co., New York.

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