WASHINGTON - The Shadow Financial Regulatory Committee says it has a Savings Association Insurance Fund rescue plan that would cost commercial banks much less than the Clinton administration's plan, and it wouldn't cost thrifts any more.

How? Tougher capital requirements for banks and thrifts, which, the committee contends, would allow Congress to safely abandon the 1.25% reserve requirement for the thrift fund.

Under the proposal floated this week by the committee, made up chiefly of academics, the fee on thrift deposits proposed by the Treasury Department and the Federal Deposit Insurance Corp. - 85 to 90 basis points - would be used not to capitalize the fund but to pay $6 billion of the $8.4 billion needed to retire the Financing Corp. bonds.

A levy on banks and thrifts of less than 1 basis point would take care of the remaining $2.4 billion in Fico obligations, the committee said. In the administration's plan, banks would pay 2.5 basis points for Fico.

This scheme could work, the committee said, if Congress doubled the critical capital level at which regulators must step in and take over a bank. By raising the capital level to 4% of assets, the committee contends, it would be unnecessary to keep the thrift funds' reserve ratios at 1.25%.

Also, to "ensure that the intended resources are available to protect the taxpayer," the committee recommended that regulatory capital be measured according to market value, not book value.

Before announcing their proposal in a press conference Monday, the members of the committee discussed it and other matters with their former colleague, John D. Hawke Jr., the under secretary of the Treasury for domestic finance and a key figure in the thrift fund rescue plan.

What did Mr. Hawke think of the idea? "These conversations are private and off the record," said committee co-chairman George G. Kaufman, a professor at Loyola University of Chicago.

In Monday's press conference, committee members also blasted the bank regulatory agencies for being years behind schedule in incorporating interest-rate risk into risk-based capital calculations.

The Office of the Thrift Supervision already has taken this step. But the FDIC, the Federal Reserve, and the Office of the Comptroller of the Currency aren't there yet. In August, they asked for comment on how they should measure banks' exposure to interest-rate swings.

"Interest-rate risk to many people is not a pressing issue at the moment," Mr. Kaufman said. "What we're trying to say is it could arise again any time."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.