WASHINGTON -- A regulatory proposal made Tuesday could putmutual thrifts under new pressure to go public - and provide commercial banks with takeover targets.

The Federal Deposit Insurance Corp. board proposed that mutuals converting to public ownership be required to hand over a portion of their net worth to depositors, charities, or even the government.

Mutually owned institutions would be strongly pressured to convert after depositors or other groups discovered they could receive cash in the transactions, industry and regulatory sources said Tuesday.

As a result, the nation's 1,201 mutual thrifts with $20 billion in equity and $222 billion in assets could be forced to sell stock or auction themselves, with commercial banks the likely buyers. The agency's proposal calls for mutuals to raise only the capital they can safely deploy.

Effort to Overhaul Rules

The FDIC's move is part of regulators' continuing effort to overhaul the way mutual thrifts sell stock for the first time. Criticism of the deals has centered on the vast sum of money insiders have pocketed in the deals.

FDIC Chief Operating Officer Harrison Young defended the plan.

"The process doesn't work," he said. "It is broke and it does need to be fixed," especially because the thrift industry is now healthy.

Current rules, Mr. Young said, "avoid answering the question - which matters now that mutuals have value - who should get that value?"

Breaking the usual solidarity on the board, Comptroller of the Currency Eugene A. Ludwig refused to vote for theplan. He objected to the tone of the FDIC staff's proposal.

While the comptroller abstained, acting Office of Thrift Supervision Director Jonathan L. Fiechter and acting FDIC Chairman Andrew C. Hove Jr. voted to solicit comment on the approach the board is considering.

Comments will be taken on the FDIC proposal for two months. An overhaul of mutual conversion rules is not expected until next year and could require legislation.

Objections Raised

Thrift lawyers were quick to object.

"How can this board in their right mind make a proposal to give away a substantial part of the net worth of the savings industry that was just bailed out by the taxpayers five years ago?" asked Eric Luse, a partner at Washington-bsed Luse Lehman Gorman Pomerenk & Schick.

The FDIC board unanimously approved a separate, proposed rule on conversions. This plan would bring FDIC conversion rules closer to those of the Office of Thrift Supervision while an overhaul of the rules is complted.

The proposal demonstrates that the agency's staff views the mutual thrift industry as more akin to charitable organizations with large endowments than financial institutions, even comparing mutuals to the March of Dimes.

"Mutuals were originally closer to charities or community organizations than to commercial enterprises," the request for comment reads. "As a by-product of doing what they were founded to do, they have accumulated net worth."

The thrift industry vehemently objected to the FDIC's proposal, "which argues for a radical restructuring of the conversion process," said Paul A. Schosberg, president of the Savings and Community Bankers of America. "Even as a notice for comment, we find this idea very troubling."

Douglas P. Faucette, a partner at the Washington-bsed law firm Muldoon, Murphy & Faucette, said, "The proposal is really not a conversion proposal at all, but an industry restructuring proposal.

"Not only will it put the mutuals in play, but it will cause massie shifts of funds from stock institutions to mutual institutions in anticipation of the windfalls," Mr. Faucette said. "The total industry capital would be depleted for the wrong reasons."

Even the politically powerful credit union industry coiuld find iteself under pressure if the FDIC changes go through, several thrift industry sources said. The reason: Their ownership structure is similar to that of mutual thirfts, and depositors might pressure them to give away the value they have built up over the years.

FDIC Denies Conversion Deals

Separately, at its closed meeting Tuesday, the FDIC board dened three conversion deals. Two state-chartered savings banks planned merger conversions were denied. HOme Savings Bank of Albemarle, N.C., will not be allowed to merge with BB&T Financial Corp., Wilson, N.C.

Also Jersey City, N.J.-based Statewide Savings Bank may not merge wtih Hubco Financial Corp. In addition, the FDIC denied Jefferson City, Mo.-based Mutual Savings Bank's plans to sell a minority share of stock to the public.

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