The 1990s haven't been easy on Dean Schultz, president and chief executive of the Federal Home Loan Bank of San Francisco. The bank, which provides liquidity to mortgage lenders in California, Arizona, and Nevada, is the giant of the 64-year-old Federal Home Loan Bank System, holding almost one-fourth of the system's assets.

But the San Francisco bank has been battered since Mr. Schultz took the helm, in April 1991 - by savings and loan failures, a sagging California economy, and a congressional thrift-bailout scheme that sticks the bank with a much bigger share of Resolution Fund Corp. costs than its size or earnings would dictate.

Attempts to rework Refcorp funding have fizzled in Congress, and the San Francisco bank and the system in general have been subjected to withering congressional criticism.

In an interview in his San Francisco office, Mr. Schultz responded to some of the scolding and said his bank's problems are mostly behind it.

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Are you satisfied with the dividends you have been able to pay your members?

SCHULTZ: Well, no. We've consistently said that regardless of our level of earnings, we have been impacted by the Refcorp charges in a way that's disproportionate to the other banks.

The earnings capability of the banks, and the dividend levels they pay, vary dramatically from bank to bank. We don't have retained earnings, so there's a deep difference in this bank. Some of the other banks - Boston, for example, or Seattle - are able to pay a dividend much closer to the actual earnings that the bank had.

But your return on equity is also lower than the other banks.

SCHULTZ: In '92 we had an adjusted ROE of 6.5% and the system was at 8.6%. But in '93 we were right at the system average, which was 8.7%.

In '94 we were at 8.6%, and the system was at 8.8%. In '95 we were low again - we were at 6.89%, the system at 8.78%.

So we've been at the midpoint or lower, in terms of earnings before Refcorp.

What held it down in 1995?

SCHULTZ: In '95 we were working off the impact of how we handled nearly $14 billion in prepayments that came in from failed institutions, plus those that acquired institutions that failed. So you had the debt on the books; you had high-cost debt that had to be either liquidated or hedged.

It's tough to liquidate that much debt; most of it we hedged.

At that time, the financial management policy was focused more on maintaining the market value of equity than maintaining evenness of income. And we're paying the price for that as some of that high-cost debt rolls off through 1995 and into probably the first half of '96.

Do these burdens from the past make it harder for you to recruit new institutions to join?

SCHULTZ: I think in 1992 in particular our dividend was not attractive, and that was because we were liquidating the deficiency that resulted when retained earnings were taken from all the banks and more was taken from San Francisco than it had.

So I think it held back recruiting in 1992, and the memory of the low dividend in '92 probably had an impact into '93.

Our recruiting now is such that commercial banks are equal in number to savings institutions. We have 178 members - 83 are commercial banks, 83 are savings institutions, seven are thrifts and loans, and five are credit unions.

Are you concerned that a big California thrift will switch to a state charter to quit the Home Loan Bank system?

SCHULTZ: We are aware of that possibility and try to operate the bank in a way that makes it attractive to those folks. And one of our legislative objectives has been to have voluntary membership, to have membership equal for all types of financial institutions. So clearly we can't be too afraid of it.

What else do you want out of Congress?

SCHULTZ: There are three central issues that we've been focused on.

You need to deal with the Refcorp charge in a way that makes it not quite the driver of system activity that it currently is, and makes it equal from bank to bank.

We need to equalize membership. That means voluntary membership for everybody; it also means equal stock purchase requirements, equal access to products.

And then we've also felt from the outset that the capital requirements result in too much capital in the system.

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