WASHINGTON - Jonathan L. Fiechter, acting director of the Office of Thrift Supervision, has a sweet-and-sour vision of the S&L industry's future.

For thrifts, the good news is that Mr. Fiechter has "great faith that the individual institutions - a vast majority of them - will, if they choose to remain independent rather than merge with other institutions, have a bright future."

But the bad news is he believes "OTS-supervised institutions face a number of unique costs that can only be avoided by changing their charters."

Economic Incentive

Even though most of the nation's 1,752 private-sector thrifts are financially strong, the congressionally imposed burden of helping pay for the savings and loan cleanup could drive many of them to change their charters to state-chartered savings banks or commercial banks in the coming years, the nation's top thrift regulator said.

Discussing the industry's future on the rooftop deck at OTS headquarters, Mr. Fiechter said, "I don't want to suggest that the problem is all over with, but this industry and these institutions have never been in such good shape as they are now. I think that's a real tribute to the managers of these institutions."

The root of the problem, he said, is that soon the Bank Insurance Fund and the thrift insurance fund - called the Savings Institution Insurance Fund - will likely charge banks and thrifts different amounts for their deposit insurance.

The reason: Charges of roughly $772 million annually are added to the premiums that thrifts pay to SAIF for the interest on the Financing Corp. (FICO) bonds that were used to pay for part of the S&L crisis.

Lender of Last Resort

Taxpayers could be left with the tab if the nation's thrift industry changes its name. "The public in a sense is being left as a lender of last resort," Mr. Fiechter said. "If there aren't any thrifts around to pay FICO, the public's going to have to pay."

"I am concerned that the current structure is set up to discourage institutions that are OTS-supervised ... from any type of expansion because of this risk that as they grow, as their SAIF premium grows, a larger portion of their income will have to go to pay off this FICO debt. That, I think, is the major problem facing the OTS-supervised industry."

Now banks and thrifts pay about the same as they capitalize the two new FDIC-administered deposit insurance funds, BIF and SAIF.

But as each fund approaches the required reserves of 1.25% of insured deposits, the premiums are allowed to shrink.

Premium to Rise

BIF premiums are expected to drop from an average of 25 basis points per $ 100 in deposits now to an average of 11 basis points by 1998. But SAIF premiums are expected to increase soon to at least 35 basis points, according to a letter that Mr. Fiechter sent in mid-October to congressional leaders describing his concerns.

"The key issue out there for the institutions is the prospect that the SAIF premium will be significantly higher than the BIF premium going forward once BIF is recapitalized," Mr. Fiechter said. "This is not due to continued troubles in the thrift industry."

The OTS regulates all savings and loans and federally chartered savings banks, and they are insured by the SAIF. Many state-chartered savings banks are insured by the BIF, but only if they were insured by the same fund that insured commercial banks before 1989. The BIF insures commercial banks.

When the Moratorium Ends

As the law now stands, that moratorium on changing insurance funds ends next August, and thrifts can switch to the BIF after paying exit and entrance fees to both insurance funds.

"Fortunately for the institutions - though not for the OTS - we have been quite willing to allow our thrifts to convert, and we have approved since January 1992 almost 100 institutions changing charters," he said.

The regulatory agency's bills are paid for by the thrifts it regulates, and if many more thrifts leave the OTS, it will most likely cease to exist as a stand-alone agency.

Mr. Fiechter (pronounced FICK-ter), who arrives at the office each morning by 7 a.m., and often works into the evening, keeps photos and other reminders of his family on his desk. They include a note written two years ago on light-green paper in his daughter Elizabeth's careful printing.

Short and Sweet

Elizabeth Fiechter, now 12, wrote with a purple magic marker about closing a thrift. "She was concerned that I was spending too much time on weekends writing speeches, so she wrote that for me so I could use it as a speech," Mr. Fiechter said.

Elizabeth's would have her father give five-sentence speeches and end them a little abruptly, "If that's all, meeting closed," she wrote for him.

"Come August 1994, SAIF-insured institutions that we don't supervise can flip to BIF. If we supervise them, they are not allowed to get out of SAIF. So the only way they can get out of this FICO obligation is first to change the charter," he said.

Resources Are There

Mr. Fiechter, a six-foot-seven man who is rarely outspoken, also wants Congress to consider allocating money to the SAIF to cover the cost of the FICO bonds so the nation's S&L insurance fund can build its reserves without driving thrifts to find a way out of paying higher assessment fees than their commercial bank competitors.

"I think this industry has the resources to cover future thrift losses and recapitalize the fund. and while it will take a longer time" for the SAIF to build its reserves, "the industry can handle that," he said.

"What it can't handle is achieving those two objectives - the recapitalization plus covering future losses - and pay for the costs of the past resolutions through this FICO obligation."

Mr. Fiechter said some thrifts fear the government would turn to the Federal Home Loan Bank System to pick up FICO costs that the SAIF can't meet, and had asked to change their charters as a result. Members of the bank system are required to buy its stock.

Home Loan System Membership

That brings up another drawback to a federal thrift charter. "A second disadvantage to an OTS-supervised institution, is that, as of today at least, we continue to require our thrifts to be members of the Federal Home Loan Bank System," Mr. Fiechter said. "If they leave the OTS, they can remain a thrift, but it becomes voluntary as to whether or not they remain a member of the Federal Home Loan Bank System."

But Mr. Fiechter has some advice for the nation's thrifts. "What institutions today should be doing - which I think they are doing - is one, building up their net worth. Two, they ought to be focusing on what their business strategy should be over the next 10 years," Mr. Fiechter said.

Since June 30, 1992, 70 previously troubled institutions with $59 billion in assets raised capital or merged, making it off the OTS' internal watch list of thrift that could fail, according to OTS data.

Securitization Threat

"This clearly is a very favorable interest rate environment, but you do have the juggernauts out there, Fannie [Mae] and Freddie [Mac], that are very competitive, and at some point in time they are going to figure out how to effectively securitize adjustable-rate mortgages.

"The thrifts have to do all they can to keep their operating expenses down," Mr. Fiechter said. "Our best-performing thrifts are those that do a combination of maintaining really tight control on their expenses and doing proper underwriting. The only way with the kind of margins that I expect to see in the future that a thrift will survive is if it is the low-cost provider of these services and if they keep their credit losses under control."

So what lies ahead for individual thrifts, "is a somewhat different question from what is the future of the industry," Mr. Fiechter said.

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