By voting to capitalize the Savings Association Insurance Fund, Congress set the stage for the next legislative battle - melding the bank and thrift charters.

The thrift fund rescue, signed into law Monday by President Clinton, calls for the insurance funds to be merged by Jan. 1, 1999, but only if the industry charters are combined.

The Clinton administration will push lawmakers to take up the issue.

"We expect that to be our first order of business in the next Congress," said Treasury Under Secretary John D. Hawke Jr. "We've got to find a way to eliminate the thrift charter so the funds can merge."

But Congress may go further than that.

Key lawmakers on the House and Senate Banking committees plan to tackle charter reform as part of a larger "financial modernization" package.

The broader bill would repeal the Glass-Steagall Act, expanding banks' securities underwriting powers, and could permit affiliations between banks and other financial firms.

"We're going to find areas where we have agreement and build on it," Senate Banking Committee Chairman Alfonse M. D'Amato said Tuesday. "Next year you will see some financial reform legislation.

"There's been prattle about it for years, but we're going to get it done."

House Banking Committee Chairman Jim Leach said on the House floor Saturday that he will revive his financial modernization legislation. The Iowa Republican also said he wants to require state licenses for bank employees when they sell insurance.

"These issues are not going away and will be addressed in the next session of the Congress," Rep. Leach said.

In an interview Thursday, Sen. Richard Shelby, R-Ala., said he backs broad financial reform. He plans to resurrect his regulatory relief bill, and this time he will try to eliminate the Community Reinvestment Act.

"We must make sure government doesn't stand in way as technology and markets develop," Sen. Shelby said.

Chief lobbyist Edward L. Yingling said the American Bankers Association is optimistic about winning next year. Though the industry had to accept a share of the thrift fund fix, banks were able to fight off insurance restrictions and win modest regulatory relief.

"All that is a big plus for getting a bill that has broad powers," Mr. Yingling said.

But Treasury's Mr. Hawke said charter merger must come first. "Merging the charters and the insurance funds is really a transitional effort toward financial modernization," he said.

If the administration gets its way, the thrift industry is likely to split, said lobbyist Ken McLean.

Many thrifts will oppose legislation that curbs their powers or changes their ownership structure. But the big thrifts are expected to lobby for a common charter even if that means taking the existing commercial bank charter.

"Larger thrifts have no problem with a unified charter. Their No. 1 objective is to see that the funds get merged," he said. "They are not happy in SAIF. They think it is the inferior of both funds."

Fighting hardest to preserve their powers will be small and state- chartered thrifts and unitary thrift holding companies, he said.

"We're very concerned," agreed Patrick Forte, president of the Association of Financial Services Holding Companies, whose group represents unitary thrifts. "We want a charter everyone can use."

Unitary thrifts are a small group of institutions owned by nonbank holding companies. The House Banking Committee's failed attempt at charter reform in 1995 would have forbidden unitary thrift holding companies from selling institutions or acquiring new ones.

Banks, on the other hand, will back charter reform in the hopes of getting an expanded charter - or demand that thrifts be forced to sell operations not allowed to banks.

"We want the broadest charter that the banks can get," said James H. Chessen, the ABA's chief economist.

While the Independent Bankers Association of America also backs charter reform, it will insist that unitary thrifts be banished. Without that, the traditional wall between banking and commerce is lost, said Kenneth A. Guenther, IBAA executive vice president.

Because Congress has traditionally been unwilling to grant new powers to banks, a deadlock might result.

America's Community Bankers president Paul A. Schosberg warned that industry intransigence could threaten new charter legislation.

"This is an enormously complex and contentious issue and there will be more divisions than there have been over the SAIF bailout," he said.

Because of the disagreements, industry analyst Bert Ely predicted charter reform will go nowhere.

"Thrifts that want a bank charter now have the opportunity to switch," he noted. "Those left behind in are those that believe the thrift charter is better."

Mr. McLean predicted that any attempts to expand the bank charter would be attacked by other industries as well.

"As soon as you do that, you bring insurance agents and securities brokers to the table and as we've seen that is very contentious," he said.

Phil Anderson, director of federal affairs for the Independent Insurance Agents of America, vowed to push for financial reform, but predicted banks would resist all legislation.

"There is no overriding or compelling reason from the perspective of banks to want legislation. SAIF has been fixed. They got regulatory relief and the comptroller of the currency is still on a path for granting additional authority and powers to banks," he said.

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