Congress immerses itself this week in legislation designed to rescue the Savings Association Insurance Fund. Two separate bills are being considered in the House. House Banking Committee Chairman Jim Leach, R- Iowa, said he plans to tack his bill onto the budget package that must be enacted before fiscal year 1996 begins Oct. 1.
Rep. Marge Roukema, R-N.J., is writing the other bill, essentially a backup plan in case the thrift fund fix is stripped from the budget bill or it is vetoed by President Clinton. House Banking's financial institutions subcommittee plans to hold a hearing on Rep. Roukema's legislation on Thursday.
The measures now mirror each other, as Rep. Roukema on Tuesday decided go the same route as the Leach bill, which would combine the funds on Jan. 1, 1998. Originally, Rep. Roukema's bill would have merged the funds on Dec. 31, 1996.
Both measures are considered to be comprehensive, meaning they address all the issues involved. For example, both bills would capitalize the thrift fund through a one-time fee, merge the bank and thrift insurance funds, and require banks to pay about $600 million of the interest due every year on Financing Corp. bonds. The industries' charters would be merged, and certain thrift activities would be grandfathered.
Rep. Roukema's bill does go a few steps beyond Rep. Leach's by including a provision barring the Federal Deposit Insurance Corp. from charging more for insurance than it needs to maintain the reserve level required by law, currently $1.25 for every $100 of insured deposits. Rep. Roukema also would restore the agency's authority to refund money above the reserve ratio.
- Olaf de Senerpont Domis
Here's what Rep. Leach's plan includes:
Thrift Fund Rescue
*On the date of enactment, payments on thrift bailout bonds would be spread proportionately among all institutions insured by the FDIC.
*A one-time assessment on thrift deposits to capitalize the insurance fund would be due Jan. 1, 1996.
*Thrifts that would become undercapitalized by the fee could be exempted, and would continue paying the semiannual assessments until Jan. 1, 1999.
*Bank and thrift insurance funds would be merged on Jan. 1, 1998. Thrifts would pay the same premium banks pay.
*A special reserve would be established from any surplus funds generated by the one-time charge on thrifts.
Merging the Charters
*Thrifts would be required to convert to national or state bank charters by Jan. 1, 1998.
*Thrifts would have a maximum of four years to divest any nonconforming activities such as real estate development.
*Thrifts' 8% bad-debt tax deduction would be eliminated, but thrifts would not have to pay back taxes on accumulated bad-debt reserves.
*Mutual thrifts would get a mutual national bank charter.
*Existing intrastate and interstate thrift branches would be preserved. Future interstate acquisitions would be subject to interstate banking law.
*All savings and loan holding companies would become bank holding companies as of Jan. 1, 1998.
*As of Sept. 13, 1995, unitary thrift holding companies would be grandfathered. However, once a holding company or its thrift is sold, its grandfather protections would end. These thrifts would have to comply with the current 10%-of-assets commercial lending limit on commercial lending.
*The Office of Thrift Supervision would be abolished. The FDIC would regulate state-chartered thrifts, while the Federal Reserve would oversee holding companies.
Rep. Roukema's plan would do everything above, plus:
Deposit Insurance Issues
*The FDIC would have the power to return to banks any premiums collected above the 1.25% reserve ratio.
*The FDIC would be barred from setting assessments "at a higher level than needed to maintain the designated reserve ratio."