WASHINGTON -- New York State's unprecedented rebuke of Green Point Savings Bank will turn up the heat on other states and the federal government to prevent insiders from gaining windfall profits by converting mutual thrifts to stock ownership, experts said Tuesday.
New York State's banking regulator on Monday forced Green Point's managers and trustees to forfeit $40 million in stock benefits from a planned initial public offering, charging that they had not obtained a fair appraisal of the thrift.
The action came at a time of increasing criticism that insiders were unfairly enriching themselves by taking their companies public.
"There is going to be pressure in the other states and in the federal system to tighten the conversion rules," said one thrift attorney who did not want to be named.
"It is likely over the next couple of years that you are going to see lower percentages of insider compensation because of the attention."
Bert Ely, a bank consultant, agreed. "Green Point is one more situation that is pushing us towards some sort of overhaul of the conversion rules," he said.
And Green Point itself, which settled the regulator's charges by agreeing to drop the stock payments, issued a statement saying that the revised conversion plan "should serve as a model for future conversion activity."
Even before the settlement was announced Monday, Congress had planned hearings about mutual thrift conversions. Meanwhile, the Federal Deposit Insurance Corp. on Monday issued proposed new guidelines about such conversions. But Comptroller of the Currency Eugene A. Ludwig, an FDIC board member, criticized the proposal as not going far enough.
In a sign of the increasing scrutiny being given the subject, Mr. Ludwig on appeared Tuesday on ABCs "Good Morning America" to voice his opposition to lush stock payments made to thrift insiders.
Thrift executives are urging federal regulators to take action on the issue for fear that if they don't, Congress will.
George L. Engelke, Jr., president and chief executive officer of Lake Success, N.Y.-based Astoria Federal Savings and Loan Association, said, "The regulators must take care of this problem, and must jawbone the state regulators," in states with liberal laws on executive compensation to bring their laws in line with federal rules. …