WASHINGTON - House Banking Committee Chairman Jim Leach announced plans Wednesday to infuse money into the undercapitalized thrift insurance fund, but dashed bank industry hopes for new powers.
In a speech to the American Institute of Certified Public Accountants, the Iowa Republican outlined a proposal that, in effect, calls for absorbing the nation's thrifts into the banking system.
"The intent clearly would be that the savings and loan system would come under similar types of powers and constraints as the banking system, and not vice versa," Rep. Leach said.
Bankers have largely resigned themselves to helping pay for the rescue of the Savings Association Insurance Fund, but they had hoped to add some of the thrift industry's special powers to their charter.
Industry lobbyists said Wednesday that they have not yet given up hope of winning a better charter, but said the powers issue could be dealt with in separate legislation.
"As to what actually goes into that new charter, that could be dealt with as part of the Glass-Steagall bill, which might pass before the effective date of the charter mergers in the SAIF bill," said Edward L. Yingling, chief lobbyist for the American Bankers Association.
In describing what he referred to as the "galactic" plan for merging the bank and thrift industries, Rep. Leach said he would grandfather - or protect - existing forms of thrift ownership.
Mutually owned thrifts - those that are owned by their depositors - will be protected, even though that form of ownership does not exist in the banking industry.
Likewise, existing unitary thrift holding companies will be permitted to continue, even though they have a number of powers -including the freedom to affiliate with nonfinancial companies - denied to banks.
However, Rep. Leach warned that the powers of unitaries would not be allowed to spread to other types of institutions.
"If you allow certain privileges of unitaries to be transferred, you in fact immediately breach commerce and banking, which in some ways is a far more profound issue than BIF-SAIF," Rep. Leach warned.
The financial portion of the House thrift-fund rescue is expected to track a plan unveiled by the administration in July. That proposal calls for banks to pay the bulk of interest due on thrift bailout bonds and for thrifts to pay an up-front fee based on deposits.
While the Senate Banking Committee is expected to move this narrow financial fix by attaching it to the budget reconciliation bill, Rep. Leach said that he did not intend to follow suit.
Rep. Leach added that excess Resolution Trust Corp. funds might provide "backup" for thrift losses, but that there "won't be much appetite in Congress" to use the money to bolster the thrift fund.
