Eye on the States: Setback for California Thrifts: Bid for New Charter Derailed

Lawmakers have sidetracked the thrift industry's push for a California state savings bank charter as an alternative to the state's thrift charter.

Thrifts argued that they would need the choice if Congress eliminated the federal thrift charter.

But the state's commercial banks lobbied heavily against the idea, and Monday the Assembly's banking and finance committee decided at a hearing in Sacramento to defer action on a bill at least until next year.

"The committee decided it didn't want to take sides between the two industries," said Edward Levy, senior vice president and legislative counsel for the Western League of Savings Institutions, the trade group representing thrifts.

Unlike the California thrift charter - in which thrifts are insured by the Savings Association Insurance Fund - the proposed savings bank charter would be backed the Bank Insurance Fund.

California bankers oppose the new charter because it would give savings banks even broader powers than they already have. They also argue that it violates an agreement between the two industries to phase out the thrift charter if and when the two insurance funds are merged.

"We think this is redundant and unnecessary," said John Stafford, a spokesman with the California Bankers Association. "And we also think that we would very much like to see the two kinds of institutions have a single charter going forward."

At the same time, the state banking group is taking steps to sign up the state's thrifts as members.

Just months after merger talks with the Western League collapsed, the bankers association's board voted unanimously this month to accept thrifts as members. The proposal will be presented to the membership at the bank officers and directors conference in San Francisco next month.

William D. Reid, president of the bank group, said the board voted to accept thrifts because, aside from a single difference on the future of the thrift charter, banks and thrifts share many concerns.

He added that many state thrifts had approached his group about membership so they could have access to its services, conferences, and educational programs.

The bankers association and the Western League began discussing a merger in early 1997. Talks broke off late last year when the bank group's members refused to side with thrifts in support of a federal unitary thrift charter.

The Western League's president, Louis H. Nevins, called renewed efforts to recruit thrift members "incomprehensible."

"Why would anyone belong to an organization that is dedicated to opposing the charter you have?" Mr. Nevins asked. "It's just astonishing that they would be wooing thrifts."

Several states - including Texas, Maryland, Virginia, and now Wisconsin (see story below) - have banking trade groups that banks as well as thrifts can join. The American Bankers Association also accepts thrifts as members.

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