WASHINGTON -- Reversing its position of two weeks ago, the Federal Deposit Insurance Corp. now plans to overhaul the rules for mutual thrifts converting to stock ownership, agency staffers said Friday.
An agency task force is drafting a proposed regulation that, if adopted by the FDIC board, would require converting mutual thrifts to give their depositors transferable stock rights. The FDIC proposal will be "an approach to more equitabbly distribute the net worth of the institution," a staffer said.
OTS Rules Apply
The FDIC's advance notice of proposed rulemaking is not expected for several months. Until then, the FDIC board will generally apply the newly tightened Office of Thrift Supervision rules to the two dozen deals pending before the agency, the staffers said.
Congress and consumer groups strongly criticized regulators for allowing insider abuse in the wave of stock conversions over the last three years. Top thrift executives have pocketed at least $146 million in those deals, Charlottesville, Va.-based SNL Securities estimated.
In response to that criticism, the OTS on April 21 announced its overhaul of conversion regulations. The OTS banned many management benefits and tightened other requirements.
Acting FDIC chairman Andrew C. Hove Jr. insisted at an April 21 press conference that "our rules will parallel the OTS." But FDIC staffers on Friday said that while that will be true for now, the FDIC is likely to adopt a different approach.
"We are going though an indepth, lengthy, intellectual debate over a complex issue," the FDIC staffer said. The result "may be a whole new approach that has to do with how you deal with conversions."
The ongoing review is akin to, "The permanent quest for a better mousetrap," he said.
The thrift trade group objected to the FDIC's rejection last week of a stock conversion deal -- the first ever. The agency's rejection of Fort Wayne, Indian-based Home Loan Bank was puzzling because "all these months they have been insisting they don't have legal authority," said Paul A. Schosberg, President of the Savings and Community Bankers of America.
Returning to the Fold
"I don't think anybody wants this to be a moving sidewalk," Mr. Schosberg said.
The hundreds of mutual thrifts that changed their OTS charters to FDIC-regulated state-chartered savings bank may be back in the OTS fold soon, thrift lawyers said.
Timothy B. Matz, a senior partner at Washington-based Elias, Matz Tiernan & Herrick, said, "If there is continued uncertainty, there will be a major movement back to the OTS charter."