Industry Groups Compromise On Shifting of Thrift Deposits

Bank and thrift trade groups agreed Monday to ask Congress to prohibit thrifts from shifting deposits to bank affiliates until Jan. 1, 2000.

The issue has blocked passage of legislation to shore up the Saving Association Insurance Fund and give banks regulatory relief. The American Bankers Association has threatened to oppose the thrift fund fix if thrifts are not permanently barred from entering the Bank Insurance Fund.

But a deal struck Monday by ABA and America's Community Bankers gives a boost to legislation sponsored by House Banking Committee Chairman Jim Leach, which faces a key Rules Committee vote today. Approval from the Rules Committee would allow a House vote on the bill Wednesday, which sources said is too close to call.

"We have agreed on this compromise in an effort to move the process forward in the few days remaining in this Congress," ABA president Donald G. Ogilvie and ACB president Paul A. Schosberg wrote in letters to the banking committee chairmen.

Rep. Leach immediately inserted the provision into his bill. But Senate Banking Committee Chairman Alfonse M. D'Amato has not indicated whether he will follow. On Monday, a spokesman for the New York Republican said Sen. D'Amato will delay introduction of his thrift fund fix/regulatory relief bill until the House has taken action.

Sources said Sen. D'Amato, whose regulatory relief package has bipartisan support, is hoping Rep. Leach bill's will be defeated in the House. If that happens, Sen. D'Amato will seek Senate approval for his bill and then try to persuade the House to adopt it, too.

Although the trade groups have defused the deposit shifting controversy, industry opposition to Rep. Leach's bill is mounting.

A growing number of big banks - including Barnett Banks Inc., Chase Manhattan Corp., Fleet Financial Group Inc., and Banc One Corp. - are leading a fight against the rescue package by asking Rules Committee members to vote against it. Helping them rally opposition are several state ABA affiliates including those in Texas, Ohio, and Massachusetts. On Friday, representatives of most state affiliates voiced opposition to the legislation during a conference call with ABA leaders in Washington, according to lobbyists familiar with the talks.

The opponents are fighting insurance provisions tacked to Rep. Leach's bill, arguing that the legislation would roll back a recent Supreme Court decision allowing national banks to sell insurance from small towns.

Opponents also argue they are getting too little regulatory relief in return for paying some of the interest due on Financing Corp. bonds, which were issued in the late 1980s to finance the first S&L cleanup.

House Democrats also are opposed to Rep. Leach's bill, saying it rolls back many consumer protection laws.

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