WASHINGTON - Senate Banking Committee Chairman Alfonse M. D'Amato on Monday said a plan to rescue the undercapitalized thrift fund will be unveiled at a hearing Friday.
"I think we have a solution at hand," the New York Republican told reporters during an international banking forum at Chase Manhattan headquarters in New York.
"It may be one that requires some political courage, but it is one that I will work with the administration in encouraging," Sen. D'Amato said. The lawmaker declined to comment further on the proposal, saying it would be discussed in detail at a hearing before his committee Friday.
Exactly what will be included in the package to recapitalize the Savings Association Insurance Fund is far from certain.
Edward L. Yingling, chief lobbyist for the American Bankers Association, said Sen. D'Amato would prefer to include a narrowly crafted plan for the thrift fund rescue in the budget reconciliation bill, which is harder to block than free-standing banking legislation.
"That's what is driving the timing of this in Senate Banking right now," Mr. Yingling said.
A number of sources said they expect Sen. D'Amato simply to attach to the budget measure a one-time, 85-basis-point fee on thrifts to recapitalize the thrift fund.
Sources also said banks would be asked to pay a proportionate share of the annual $780 million interest on thrift cleanup bonds, known as Financing Corp., or Fico bonds.
Working within the constraints of the budget measure weakens the possibility of broad-based reform. However, some observers were optimistic that a broader solution - one that merges the thrift fund with the Bank Insurance Fund and eliminates the thrift charter - is in the works.
"The industry as a whole, the regulators, the Treasury, and the thinking people in Congress all recognize this as the way to go," said William A. Cooper, chairman of TCF Financial Corp., a $7.5 billion-asset thrift holding company.
Mr. Cooper said the process is so far along in the House that there have been discussions with House Ways and Means Committee Chairman Bill Archer, R-Tex., about the tax issues involved in eliminating the thrift charter.
One industry source said that Rep. Archer has agreed to move on the tax issues in tandem with a House thrift fund rescue plan.
Those tax problems, if not resolved, could cost thrifts a lot of money if they are forced to change to a bank charter.
Unlike banks, thrifts currently get a tax break on their bad debt reserves. However, if a savings and loan flips charters, it also has to pay back all the taxes it has saved.
"The thrift industry simply cannot afford to recapitalize SAIF and pay the taxes," Mr. Cooper said. "It is simply a technical issue in tax law that should be revised."
Karen Shaw Petrou, president of ISD/Shaw Inc., said creating a new single charter could be a sticky process, since thrifts currently can get into a number of businesses that banks cannot.