The ever-independent L. William Seidman has criticized the American Bankers Association's lobbying on two key issues- financial reform and credit union taxation.

In a speech here at the ABA's 18th annual National Conference for Community Bankers, the former Federal Deposit Insurance Corp. chairman also advocated doubling the government's guarantee to $200,000.

"This is an idea that is just starting to emerge," he said, "but the fund is large enough to handle" the added liability. The FDIC will never refund excess reserves to bankers, Mr. Seidman argued, so the industry ought to push for more coverage for its money.

Increasing deposit insurance to $200,000 could reduce the liquidity problems facing many community banks, Mr. Seidman said Monday. In addition, adding more coverage would help smaller banks compete with institutions deemed too big to fail, he said.

While admitting his idea is "a long shot," Mr. Seidman noted that large banks have been pushing to privatize the FDIC. Community banks, he said, will have to "make some sort of deal with the devil-the big banks."

On the ABA's lobbying, Mr. Seidman predicted the group will not be able to convince Congress to eliminate the thrift charter.

"It's going to be a losing battle," Mr. Seidman said.

Too many forces are allied against the ABA, he said, including thrifts, large banks that own thrifts, and the dozens of nonbanks that are trying to charter thrifts.

"Small banks ought to be interested, not in eliminating, but in getting a thrift charter," Mr. Seidman told the bankers. "There's a huge raft of advantages" because thrifts are not subject to the Glass-Steagall Act, bank holding company limits, or interstate branching rules.

In an interview, ABA president William T. McConnell said Congress made a deal with bankers in 1996 that should be honored. In exchange for help in rebuilding the thrift industry's insurance fund, lawmakers agreed to merge the thrift charter into the banking charter and create a single, better charter, he said.

"Time is against us," Mr. McConnell admitted. "But we're not at all certain this is a fight we can't win."

While the ABA has no official position on increasing deposit insurance, Mr. McConnell said, "I think it's a dumb idea."

Acting FDIC Chairman Andrew C. "Skip" Hove agreed, though he put it more gently. "I don't think it makes sense," Mr. Hove said after his speech at the conference.

Mr. Seidman also told the bankers to ally with credit unions rather than fight them. Use the credit union movement's grassroots muscle to win policy battles that benefit both industries, such as doubling deposit insurance coverage, he said.

"It's wasted energy" to try and repeal credit unions' tax exemption, he said. "Even if you win, it's self-defeating." That's because if credit unions had to pay income taxes, they would still be able to undercut banks on price because credit unions are nonprofit organizations, he explained.

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