The thrift industry is balking at a provision in the bill designed to shore up the Savings Association Insurance Fund.

Led by the largest thrifts, the industry is battling a requirement that regulators prevent institutions from shifting deposits from the higher- premium thrift fund to the Bank Insurance Fund.

"Is it the last straw? Yeah, it is," said Charles J. Koch, chairman of Charter One Financial Inc. The Cleveland-based thrift company is awaiting approval from the Comptroller of the Currency to open a national bank so it can join a handful of other thrifts that have begun transferring deposits to the no-cost bank fund.

This snag further complicates enactment of an already beleaguered bill. The biggest obstacle is time. Congress returns to work Tuesday, but only for a month. Beyond that, the banking industry's support for the bill remains tenuous.

"We will oppose a bill that doesn't have significant restrictions on deposit shifting," American Bankers Association chief lobbyist Edward L. Yingling said Thursday.

Congress is concerned that deposit migration will rob the thrift fund of income needed to pay off the Financing Corp. bonds, which were issued in the late 1980s to pay for the first phase of the savings and loan bailout.

But thrifts contend the price of the legislation is getting too high.

"It's unconscionable," said Louis Nevins, president of the Western League of Savings Institutions. In a letter Wednesday to House Banking Committee Chairman Jim Leach, R-Iowa, the trade group said it "cannot support" the ban on deposit shifting.

"This industry has given an awful lot," Mr. Nevins said. The rescue calls for thrifts to pay about $5 billion to capitalize the savings association fund and defray most of the interest on the Fico bonds until 2000. "Banks have four more years of virtual Fico freedom," he said.

Preventing thrifts from wooing consumers to bank affiliates would be tantamount to "confiscating the investments institutions have already made," Mr. Nevins said.

While Mr. Nevins was talking tough Thursday, he stopped short of saying the Western League would withdraw its support of the rescue bill.

"I'm hoping it won't come to that," he said. "I'm not in a position to say that we'd walk away from it, but an awful lot of our members would walk away."

Even Mr. Koch admitted Charter One could live with the deposit-shifting provision if Congress agrees to firm up language merging the bank and thrift charters and insurance funds.

James Butera, a Washington attorney with many thrift clients, said the issue is dividing the industry. "Thrifts with BIF affiliates are against it. Thrifts that didn't go down that route want to see the prohibition remain in the bill."

Paul Schosberg, president of America's Community Bankers, seemed to be trying to appease both camps. While his group "obviously was not happy" when the deposit-shifting prohibition was included last month, he insisted it is "not a deal breaker."

Other legislative insiders questioned whether thrifts had enough clout to kill a deal, even if they wanted to.

"We're trying very hard to get that language changed," Washington consultant Kenneth McLean said of the deposit shifting provision. But Mr. McLean, whose clients include thrift giants H.F. Ahmanson & Co. and Golden West Financial Corp., said: "We don't have the power to issue an ultimatum like that."

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