The Federal Deposit Insurance Corp. requested comments last week on whether and how to revamp rules governing initial public offerings by state-chartered mutual savings banks.

The provocative approach, designed by Harrison Young, the FDIC's acting chief operating officer, ran into immediate trouble. Comptroller of the Currency Eugene A. Ludwig objected to its speech-like tone.

"There's a lack of judiciousness," Mr. Ludwig said after Mr. Young presented the plan to the FDIC board May 31. The document is "just too bombastic. I would like to see a more analytical piece of paper."

Edited excerpts follow:

The most vexing question facing everyone who has ever dealt with mutual-to-stock conversions is: "Who owns mutuals?" That may be the wrong way to ask the question. Mutuals were originally closer to charities or community organizations than to commercial enterprises.

As a byproduct of doing what they were founded to do, they have accumulated net worth. The trustees hold that value in trust. The right question more likely should be: "If the trustees decide to convert, to whom should that value be delivered?"

Purpose Is Obsolete

Mutuals were created for reasons that have now largely disappeared. People now have plenty of places to put their savings. A host of private- and public-sector entities facilitate homeownership.

The trustees of a mutual savings institution, having regard for their fiduciary duties, might liken their situation to that of the board of the March of Dimes, which had to redefine its mission after polio ceased to be a major threat.

Some observers believe it may be appropriate for a portion of the value of a converting mutual to be transferred to one or more community organizations or charities.

The idea that some of the value should be delivered to the "community" it was chartered to serve is as strongly opposed by some as it is supported by others. It would be easy to arrange shouting matches. This is another excellent example of the political (rather than regulatory) character of the issue.

We would observe that being exempt from constituent "pressure" is unhealthy for all organizations. Legislators have to face the voters. Independent agencies are subject to oversight. Athletes get booed. Movie stars have critics. Stock organizations can be taken over. Why should mutuals be allowed a cocoon?

However one decides the value-distribution issue, that does not answer the (meaningless) question, "Who owns a mutual?" It does not, in our view, give anyone standing to demand that an institution convert - any more than a group of private citizens could demand that the Red Cross "convert."

Conversion is a decision for the trustees, and until they make such a decision, the FDIC will not get involved - except where inadequate capital makes it desirable from a safety and soundness standpoint.

As we have studied the mutual-to-stock conversion process, it has become clear that there are two intertwined problems to solve. One is technical: How to do it? The other is political: Who should get the value? The first problem is interesting and challenging, but the second one is fundamental.

A National Treasure

The integrity of a banking system is a national treasure. Careless distribution of the value of converting institutions undermines that integrity.

A form of transaction in part designed to avoid the value-distribution question - though it worked well for a while - today forces well-meaning bankers and lawyers and trustees and regulators to wink at polite fictions.

Life is full of compromises. There is no "right" answer to the value-distribution question. But there is a right process for addressing it. We invited broad participation in fashioning a compromise, as only democracy can, with which no one is entirely satisfied but in which all can take pride.

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