WASHINGTON - Government officials are expected to propose on Friday a narrow financial cure for the thrift insurance fund's ills.

The government will address other issues, such as melding the thrift and bank charters, in broader legislation later, according to sources working on the proposal.

The Federal Deposit Insurance Corp. and the Treasury Department want to nail down a plan to fully capitalize the Savings Association Insurance Fund and secure payment of the annual interest due on Financing Corp. bonds before moving on to ancillary issues.

The government's strategy to fix the thrift fund's problems in two stages raised the ire of the American Bankers Association on Wednesday.

"We will totally oppose" attempts to fix the thrift fund's finances first and address other issues later, said Edward L. Yingling, the ABA's executive director of government relations. "Given the difficulty they have passing legislation, how quickly are they going to be able to come back to the broader issues?"

The government opted for this route partly because Senate Banking Committee Chairman Alfonse M. D'Amato also wants to pursue a purely financial fix.

The New York Republican wants to use the thrift fund's rescue as a way to reduce the government's budget deficit. Once the fund was rebuilt, any insurance premiums paid by thrifts would be counted as surplus funds, or money that could be used to reduce the deficit.

Treasury Under Secretary John D. Hawke Jr. will be the lead witness at a Senate Banking Committee hearing Friday designed to detail the government's long-awaited plans for shoring up the thrift fund.

Representatives of the ABA, the Independent Bankers Association of America, and America's Community Bankers also are expected to testify.

House Banking's financial institutions subcommittee plans to hold a similar hearing Aug. 2. In early August, the FDIC also is expected to finally vote on a plan to reduce bank premiums by 83%.

As previously reported, the government's thrift fund proposal would require S&Ls to pay 85 cents for every $100 of deposits, or $6.1 billion, to capitalize the thrift fund. It also would force banks to pay $585 million of the $780 million in interest that's due annually on the Fico debt, the 30-year bonds floated in 1987 to begin the S&L bailout.

As of Wednesday, government officials had not decided whether to propose the use of taxpayer funds as a backstop for large unexpected losses from failed thrifts.

Paul Schosberg, president of America's Community Bankers, said Wednesday that he expects the government's proposal to include a merger of the bank and thrift insurance funds. Thrifts, he said, will not agree to buck up their fund unless the fund is merged into the stronger Bank Insurance Fund.

"I think a merger of the funds is going to be in the recommendation made at the hearing," he said. "I think they see a funds merger as a financial component."

Like the ABA, the IBAA also plans to oppose the government's thrift fund solution.

"Any fix - whether it is short term or long term - if it involves bank funds, we would have to be opposed to it," said Ron Ence, the IBAA's director of legislative affairs.

The ABA wants something in return for help on Fico. Combining the bank and thrift charters could allow banks to offer more products and permit broader affiliations with nonbanks.

Other potential inducements include passage of the regulatory relief legislation, including unfettered access to insurance sales, and repeal of the Glass-Steagall Act.

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