As Congress considers how to shore up the Savings Association Insurance Fund, conflicts between banks' two major trade groups are opening the door for a fix that neither wants.

Longtime observers aren't surprised. They say it's only the latest example of the kind of damage the industry inflicts on itself when the American Bankers Association and the Independent Bankers Association of America bicker.

"Banking never gets what it wants because it doesn't know what it wants," said Karen Shaw Petrou of ISD/Shaw Inc. "It speaks with too many different points of view."

In part, that's because the two leading trade groups cater to different industry segments. The IBAA speaks only for community banks and often finds it easier to take positions on controversial issues.

The ABA, by contrast, represents the industry as a whole and often finds itself caught between the seemingly contradictory views of large banks and small.

The two trade groups do agree that bankers should not have to subsidize the thrift fund's rescue. But it's almost a given now that banks will be asked to help fund the bailout.

The ABA understands this and is ready to cut a deal, giving a little on capitalizing the fund in the hopes of gaining some new powers.

The IBAA also understands the politics of the bailout, but with the notable exception of regulatory relief, the small-bank trade group doesn't want anything from Congress. As a result, it has little incentive to bargain.

So, once again, the two groups are lobbying against each other.

The battles began early in the year, when the IBAA argued that leftover Resolution Trust Corp. money should be used to shore up the thrift fund while the ABA refused to admit that the thrift fund had a problem.

But then Senate Banking Committee Chairman Alfonse M. D'Amato made it clear he planned to move the fund bailout legislation as part of a must- pass budget bill, and the ABA quickly reversed course, concluding that stonewalling is no longer an option.

The ABA is now insisting on a "comprehensive" solution that would rebuild the thrift fund, merge it into the Bank Insurance Fund, and require banks to share the cost of the $780 million in interest due on Financing Corp. bonds through 2017.

In return, Congress would be expected to blend the bank and thrift charters, presumably bestowing the more liberal powers of the thrift charter on banks.

Those powers, particularly the right of banks and nonfinancial firms to affiliate, are anathema to the IBAA. So the group is endorsing a narrow, strictly financial fix for the thrift fund - but only if credit unions and government-sponsored entities like Fannie Mae and Freddie Mac chip in as well.

Politically, that probably won't fly. The plan with the most momentum would levy a one-time fee on thrift deposits to raise the $6.1 billion needed to capitalize the insurance fund. It also would merge the bank and thrift funds by 1998, and would push 75% of the Fico annual interest off on banks.

The Treasury Department, the Federal Deposit Insurance Corp., and the Office of Thrift Supervision are aligned behind this idea, which Sen. D'Amato also supports.

Despite the high cost, for the ABA and IBAA it is business - and animosity - as usual. The blame, representatives from each say, lies with the other guy.

"History will show the banking industry missed a major, major opportunity" with the RTC money, said Kenneth A. Guenther, IBAA executive vice president. "The ABA had it's head in the sand all year."

But ABA president Howard McMillan said there was little that his organization could do, because the IBAA was committed to a politically unworkable proposal.

"The ABA did everything possible to get the industry together. The regulators and Congress made it clear that they were not going to use any RTC or tax money."

House Banking's financial institutions subcommittee takes up the issue Thursday. Senate Banking is expected to move quickly as well.

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