President Clinton removed a major obstacle to mergers between banks and thrifts by signing legislation Tuesday that relieves the thrift industry of a $3 billion tax liability.

The provision was attached to a bill increasing the minimum wage and providing new tax breaks for small businesses.

The legislation brings thrifts under the same tax rules as banks and eliminates a deduction for reserves set aside to cover potential loan losses. However, thrifts won't have to pay taxes on the "bad-debt" reserves made prior to 1988.

"This allows us to move ahead and create a charter for the 21st century that does not have draconian tax consequences," said Paul A. Schosberg, president of America's Community Bankers, the thrift trade group.

Because the bank charter does not limit commercial lending, many big thrifts hoping to expand loan portfolios beyond residential mortgages will be better off converting, said Robert L. Freedman, a banking attorney with Silver, Freedman & Taff, Washington.

Douglas P. Faucette, a partner with Muldoon, Murphy & Faucette in Washington, also expects thrifts to take advantage of the new law quickly.

"As much as one quarter of the thrift industry's assets could convert in the next year," he said.

Already, many of the country's biggest thrift holding companies have begun setting up commercial bank subsidiaries. In the last two months, the Office of the Comptroller of the Currency allowed Minneapolis-based TCF Financial Corp. and Chatsworth, Calif.-based Great Western Financial Corp. to charter national banks. Five other thrift companies have similar charter applications pending at the OCC.

The law also makes life easier for banks acquiring thrifts. For example, Memphis-based Union Planters Corp. is in the midst of acquiring a local thrift competitor, $3.1 billion-asset Leader Financial Corp.

Without the tax forgiveness in the new law, merging Leader into Union Planters would have increased the the $11.3 billion-asset bank's tax bill by about $6 million, according to Kirk Walters, senior vice president, treasurer, and chief accounting officer at the bank.

For that reason, the bank planned to operate the thrift as a separate subsidiary. But now that won't be necessary, Mr. Walters said. "The bottom line is it enables us to achieve the efficiencies of total consolidation more quickly."

All these conversions and mergers make it more likely that Congress next year will finally meld the bank and thrift charters.

Beside the bad-debt plan, the minimum wage/tax law contains several other banking-related provisions, including:

*The maximum for individual retirement account contributions for nonworking spouses is being increased to $2,000 from $250.

*Nonmortgage loans may be bundled and sold as a new type of instrument called a "financial asset securitization investment trust," or Fasit. By using Fasits, banks can sell more short-term debt, including credit card receivables and home equity and auto loans.

*Small financial institutions may structure themselves as "Subchapter S" corporations, allowing income to be passed to stockholders without being taxed first.

Celia Viggo Wexler contributed to this story.

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