tracks for what one bank lobbyist called "the coming train wreck." With the introduction last week of a bill to eliminate the thrift charter, the rancorous debate that consumed the House Banking Committee in the past few months will move to the Senate. Though Sen. D'Amato's bill is a copy of the plan approved by the House panel, industry lobbyists are already vowing to exact changes. Sen. D'Amato conceded as much, calling the bill a "starting point" and listing more than a dozen major issues that must be worked out before the legislation is acceptable. It's hard to resolve these concerns without confronting the larger issue of financial modernization, lobbyists say. Sen. D'Amato may be indicating he's willing to take a back-door approach to Glass-Steagall repeal. "There may be a way for a truly galactic approach that moves everybody forward," said Samuel J. Baptista, president of the Financial Services Council. "All in all, these issues are on a collision course anyway." The bill that Sen. D'Amato introduced last week is designed to be the second step of the government's rescue for the thrift insurance fund. Lawmakers have linked a bailout of the fund to elimination of the thrift charter. According to an analysis prepared by Senate Banking Committee staff members, Sen. D'Amato's concerns include: *Transition period. Currently, thrifts would be forced to convert to banks or state thrifts in two years. That may not be enough time, and Sen. D'Amato may consider up to 10 years. *Continued existence of state thrifts. Sen. D'Amato is asking why federal insurance should be continued for state thrifts if the charter is so risky, as the House bill asserts. *Extensions of thrift powers. Deciding whether individual thrifts may have additional time to terminate activities not allowed banks will create headaches for institutions and their regulators, according to Sen. D'Amato. *New rules for thrift holding companies. Sen. D'Amato has found little evidence that thrift holding companies are a problem. Thrift holding companies will be glad to hear Sen. D'Amato's reservations. They have argued strenuously against the tight, two-year grandfathering in the House bill. "Grandfathering has not worked," said Patrick Forte, president of the Association of Financial Services Holding Companies. "The problem is, no one can foresee needs in business or changes in regulators. Besides, no one has pointed to a compelling need to change thrift holding companies." Unless Sen. D'Amato is willing to discuss broadening the bank charter to let in nonfinancial holding companies, his attempt to resolve the charter problem will face the same resistance that killed the "galactic approach" to the thrift fund rescue pushed by Rep. Jim Leach, chairman of the House panel. "We think the modernization issues need to be dealt with in the same setting, so nobody has an unfair advantage and nobody is damaged," Mr. Forte said. Without considering expanding powers, there will be tremendous resistance to charter reform, said Bert Ely, a consultant in Alexandria, Va. "A lot of thrifts are going to say, what is the point of giving up our charter? "I think we'll see a lot of heels digging in," Mr. Ely said. The Senate Banking Committee staff paper also addressed related issues, including: *Sen. D'Amato is concerned that it is unfair to bar federal thrifts from withdrawing from the Federal Home Loan Bank System. *By blocking the chartering of new thrifts through January 1998, the law could prevent rescues of troubled institutions and mergers. *If thrift rules governing loans to one borrower are changed, legal loans may have to be liquidated. *If the Office of Thrift Supervision is abolished, adequate provisions for the transfer of its employees to other agencies have yet to be determined. *The mortgage market could be damaged if standard cost-of-funds indexes are replaced.
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