Unless legislation capitalizing the Savings Association Insurance Fund is enacted, thrifts will yank their deposits and the fund will collapse, a congressional advisory group predicts.

The SAIF Industry Advisory Committee said in its April report to the House and Senate Banking committees that savings and loans would move deposits from the high-premium SAIF to the low-premium Bank Insurance Fund if Congress fails to approve the bailout bill by next Wednesday.

That day is the deadline for lawmakers to pass a budget bill funding the government's operations through September.

"Migration of deposits from the SAIF to the Bank Insurance Fund will increase as SAIF members seek to move SAIF deposits to BIF affiliates," the committee said.

Thrifts with $37 billion of deposits already own BIF affiliates, and a second group of thrifts holding $120 billion of deposits have applied for bank charters, according to the report.

The capitalization bill would shore up the thrift fund with $6 billion raised through a one-time fee on deposits. The bill also would require banks to help thrifts retire Financing Corp. bonds, which were used to finance the first S&L bailout in the 1980s. The banking industry's share would amount to $600 million annually for 21 years.

The committee warned that a migration of thrift deposits would hurt banks, too. As the bank fund swelled, its ratio of reserves to insured deposits would fall. Such a dilution could require a premium increase and eat away at a potential rebate for BIF members, the committee said.

Banks paid about $500 million more in insurance premiums last year than the fund needed to maintain its required reserve level. The thrift fund rescue bill would return that money to banks. However, this provision is in danger of being deleted because it would cost the government money.

The committee told Congress not to let budget scoring rules stand in the way of doing what's right. "Rebate of excess premiums paid by BIF members in 1995 is fair, logical, and appropriate," it said.

Mr. Smith writes for the Medill News Service.

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