All of a sudden, the lowly thrift charter is looking more attractive.

Two years ago, the thrift-bailout law placed such onerous restrictions on savings and loans that their franchise values were severely undermined.

But now, thanks to changes in the new banking bill, thrift characters have regained some lost luster.

Robert H. Dugger, director for policy and development at the American Bankers Association, called the reversal a "Cinderella story."

"The [thrift] charter has perhaps rounded the corner," said Patrick Forte, president of the Association of Financial Services Holding Companies.

Indeed, the Office of Thrift Supervision said it got a dozen calls from commercial bankers inquiring about converting their charters in the days after the bill was passed.

To be sure, no one is expecting widespread charter conversions or large amounts of capital to suddently flow into S&Ls. The industry still has an image problem, earnings are weak, and one reason the thrift charter looks better is that the bank charter is looking worse.

Envy Among Bankers

Still, the bank legislation has improved thrift's status.

"There's a lot that bankers envy about the thrift charter," Mr. Dugger said. "The value of a thrift charter relative to a bank's must have improved as a consequence of this legislation."

Thrifts already had a few advantages over banks. For one thing, unlike banks, they could be acquired by commercial companies. Also, they are not barred from interstate banking, and thrift holding companies are permitted to engage in real estate development and insurance

Thrifts Gained Leeway

The banking bill, which is expected to be signed into law soon by President Bush, bolstered the thrift charter in several ways.

Perhaps most important, it gave thrifts more leeway to book assets by easing the so-called "qualified thrift lender test."

S&Ls will now have to hold 65% of their loans in real estate-related assets, down from 70%. The measure also lets thrifts count stock held in the Federal Home Loan Banks, Fannie Mae, and Freddie Mac toward the 65% requirement.

And the bill doubles the share of consumer loans permitted in a thrift's portfolio, to 10%.

"That obviously is a big improvement," said Bud Koch, president and chief excutive of Charter One Financial, a Cleveland-based thrift holding company. Consumer loans are "a way for a thrift to get sopme variable-rate assets on their books, which tend to balance out the fluctuations in interest rates."

The legislation enables thrifts to acquire banks and conslidate the institutions into their operations, even if they are across state lines.

Banks have been able to acquire thrifts but still can't consolidate operations. They argue that current law is costing the industry millions of dollars a year.

The regulatory landscape has also been leveled. Now, both banks and thrifts are operating under a tough new regulatory structure that allows for early intervention in troubled institutions. Both also must meet the same capital rules.

In addition, the discrepancy in deposit-insurance premiums has been erased - both now pay 23 cents for every $100 in insured deposits, and the Federal Deposit Insurance Corp. can raise premiums whenever it determines a need.

"We feel we have a leg up on the bankers," said J. Denis O'Toole, chief lobbyist at the U.S. League of Savings Institutions. "The thrift industry is two years further along in learning how to deal with this micromanaged regulatory environment."

"The general atmosphere about thrifts is chaning," said T. Timothy Ryan, director of the Office of Thrift Supervision. His agency argued that changes in the law would improve the thrift industry's safety and soundness. "We found there was real receptivity on [Capitol] Hill," he said.

Good Omens for Industry

Mr. Ryan said he believes the thrift charter has been enhanced by the banking bill. And three straight quarters of profits for the thrift industry testify that money can be made in the business, he said.

"It is clear to me . . . that there is a significant portion of the industry that will survive and will have a place in the financial sector," Mr. Ryan said.

Some industry followers even believe thrift chartes will become as attractive as bank charters, which have lost their luster amid increased failures, the real estate debacle, and Congress' current inclination to limit any expansion of powers.

But others said such suggestions may be premature.

"The attractiveness of the thrift charter depends largely on how profitable thrifts can be compared to commercial banks," said Eric Luse, a lawyer with Brownsten, Zeidman & Schomer in Washington.

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