Q&A: Thrift Group Chief: It's Crunch Time for Thrift Fund Bailout

It's down to the wire for Paul A. Schosberg, president of America's Community Bankers. The thrift trade group has been pushing Congress to rescue the Savings Association Insurance Fund since 1994, and if lawmakers don't enact the legislation before adjourning in late September, thrifts will be stuck paying more than banks for deposit insurance until at least next spring.

A compromise was crafted this summer that requires thrifts to ante up about $5 billion to capitalize their fund and spreads the cost of paying off Financing Corp., or Fico, bonds to banks. As part of the deal, banking's share of the costs was reduced for three years and the industry was given relief from some government red tape.

Mr. Schosberg this week discussed the bill, its components, and its chances.

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What is it going to take to get the thrift fund legislation passed this month?

SCHOSBERG: I really think the White House, the Democratic leaders, and the Republican leaders are simply going to have to sit down over the next 10 to 12 days. ... You may well see the Senate act first. ... The Senate's got the capability with its more permissive rules to take a House-passed bill, put a BIF/SAIF component on it, and send it back and say let's really get down to brass tacks ...

My sense is that the end-of-session continuing resolution (could also be a vehicle). It is going to be asked to carry a lot of things and will be crafted by a relatively small group of leaders.

Will regulatory relief be a part of the SAIF package?

SCHOSBERG: I really want to see the environmental lender liability issue resolved this year. To me, it's a must. The industry is needlessly exposed to hundreds and hundreds of millions of dollars in liability. ... All of us are committed to more comprehensive Superfund legislation, too, but we can't pretend that has a snowball's chance in hell for this year. Right now, all of us should be saying we want to get the best possible bill. The operative word is possible. Let's focus first on the things where we think we've got reasonable agreement. Let that be the core of the bill. And then say how much further can we properly make the case that we can go and who are the political allies and adversaries. We're at the point where we have to make some very hard-nosed assessments.

If regulatory relief is watered down, are you afraid the American Bankers Association will yank its support?

SCHOSBERG: The ABA feels they've reestablished their credentials as being good citizens, that they're working toward a solution. If they walk away from the process because they're not getting everything they want and bad things happen, then they may be cast in the role of not being public spirited, not being participants working toward a balanced solution.

Who knows what's going to happen if we don't get this behind us this year? You've got the uncertainty of the elections, and you've got the uncertainty of this deposit shifting.

On deposit shifting, what do you think of the provision in the bill approved by the House Banking Committee that instructs the regulators to prevent thrifts from moving money out of SAIF?

SCHOSBERG: I find it an anomaly that Republicans want to meddle with market forces. We think it sets a bad precedent. We've made it very clear that we don't like it. We don't see any great appetite on the Senate side.

But that's another provision the banking industry has insisted on.

SCHOSBERG: At the end of the day all of us have to decide what we absolutely want to see in the bill and what can slide. I have a feeling it won't be a deal breaker on either side. If you could get environmental lender liability resolved this year, to me that seems far more important than deposit migration language.

How hard has it been to keep your members united?

SCHOSBERG: I've got more than 1,800 members, a quarter of them are BIF insured. Every vote we've taken on this issue over two years on our board, which is 47 people, has been unanimous. That is really striking. Through all the life cycles of this issue these people have really hung in there.

Will America's Community Bankers adjust its strategy for the last month?

SCHOSBERG: I don't see a radical change. I think we're going to run to our strengths. We've got a private-sector solution to a public policy problem. We've got the regulators totally united. There is no taxpayer money involved. And you have at least the broad outlines of an industry consensus, so you don't have to chose sides between people you want to be your buddy.

Do you think the legislation will pass?

SCHOSBERG: I'm being paid to influence the odds, not to quote them. I can't be preoccupied with that; it's too elusive.

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