A PROPOSAL TO TURN FAILED THRIFTS into community development banks will be studied by the Resolution Trust Corp.

The plan was developed by New Jersey Banking Commissioner Jeff Connor, who unveiled it at a community lending seminar held by the Woodrow Wilson School of Public and International Affairs at Princeton University.

Last week, he outlined the idea to Ross Ford, deputy vice president of the RTC's Norristown, Pa., office.

"It's something we'll investigate and explore with our Washington resolutions group," said Mr. Ford. "If there's a way to help communities with a new way of offering branches to the marketplace, we're always interested."

Under Mr. Connor's proposal, failed thrifts for which bids are not submitted would be reopened as community development banks with private and RTC funding. Mr. Connor devised his plan in the wake of a 1990 bank failure in Paterson, one of the state's largest cities.

"It was a week before Christmas, and people stood for hours to withdraw their deposits at [United Savings Bank of . Paterson]. Translators tried to explain [in Spanish] that their money wasn't lost forever. It was like a scene from the Great Depression."

What was lost, Mr. Connor said, was the opportunity to turn United Savings into a community development bank. The main office was brought to market as part of a branch package, and its assets were sold to an out-of-town bank.

"Bidders shun the offices in urban areas," he said. "They'd rather buy the deposits and take them to a suburban office."

United Savings is now a just a boarded-up eyesore in downtown Paterson, and Mr. Connor believes that the RTC at least should donate the parcel, and others like it, to start-up community development banks or community credit unions.

Otherwise, the RTC should help start a development bank by providing half the $6 million in capital New Jersey requires to start a bank, Mr. Connor said, adding that community groups would be given 90 days to raise the rest.

The development banks would be chartered as mutual savings banks and would, among other things, "tap into federal programs like Fannie Mae's below-market mortgage programs, for example, or the SBA."

Hopes Matching-Fund Legislation Will Pass

Mr. Connor also is hopeful that a proposal by Sen. Bill Bradley, D-N.J., to match the savings deposited by the poor, up to $2,000, will be enacted.

"It's astonishing, but the average poor person has just $88 in assets because they turn their checks into money orders, to pay their bills, and the rest into cash," Mr. Connor said.

Building up their savings eventually would enable the poor to qualify for a mortgage.

Mr. Connor said the RTC should retain any bad assets held by the original institution and replace them with performers in its portfolio.

New Jersey has eight failed thrifts awaiting resolution. "As we evaluate their disposition." said Mr. Ford, "we should explore the opportunity for minority or other kinds of acquisition. and we will ask our people to assess these opportunities."

Trade Group Expresses Concern, Support

Bob Schmermund, spokesman for Savings and Community Bankers of America, said the idea raises "obvious concerns over the amount of capital the failed thrift would really need to be viable. But we would support the thrust of the idea -- especially since it enables you to salvage what's left of the franchise value of the name and community good will."

Mr. Schmermund adds that "there will be a lot more flexibility for a plan like [Mr. Connor's] if Congress provides full funding for the RTC. The RTC needs money to be creative, and programs like the Accelerator Resolution Program, where thrifts were marketed before they were put in conservatorship, allowed it to cut its average resolution cost in half."

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