By Easton, Nina; Naylor, Bartlett
American Banker , Vol. 150
WASHINGTON -- The Federal Home Loan Bank Board's proposal to loosen interstate restrictions on federal thrifts would accelerate consolidation in the industry and prompt more large Claifornia institutions to establish a regional presence in the West, analysts said Monday.
The Bank Board's plan would accelerate an already "massive consolidation" in the industry, said Jonathan Gray of Sanford C. Bernstein & Co. "The opportunity exists to build a very large thrift institution." Mr. Gray added that the plan, if adopted, would further encourage nonfinancial companies to move into the savings and loan business.
Under the proposal unveiled by the Bank Board last week, a purchaser of an insolvent savings and loan would be rewarded with entry rights to three states in addition to the insolvent thrift's home state. The additional states need not be contiguous to the insolvent thrift's state. In addition, healthy federal thrifts would be granted the same interstate privileges as state-chartered thrifts operating under regional compacts.
Robert Chaut, a thrift analyst with Salomon Brothers Inc., said a number of large, profitable California thrifts are anxious to move into the nearby states of Washington, Nevada, Oregon, and Arizona. In order to gain access to these states, he said, they are likely to be willing to purchase a small failed thrift in the East or Midwest.
In addition, Roger Powell of Alex. Brown & Sons predicted a pickup in interstate activity between thrifts in North Carolina, south Carolina, and Virginia as a result of the provision permitting federal thrifts the same intersate expansion rights as state thrifts and banks. "To the extent that this will give [some thrifts] a headstart on interstate branching, it will be a benefit to them for the next 10 years," said Washington, D.C., attorney Thomas Vartanian.
Nationwide, "Hundreds" of institutions are in a financial position to expand interstate by acquiring failed thrifts, said Mr. Gray of Sanford Bernstein. However, analysts agree that only large institutions, particularly those with assets of more than $1 billion, are likely to make that move.
Despite the potential impact of the Friday's Bank Board proposal, Washington lawmakers and lobbyists responded calmly on Monday. Some observers read the apparent acceptance as a sign that fragility of the federal thrift insurance fund is taking precedence over the emotional issues associated with interstate expansion.
Rep. Charles Schumer, D-N.Y., a member of the House Banking Committee, lauded Bank Board Chairman Edwi Gray's move to bolster the weakened Federal Savings and Loan Insurance Corp. Mr. Gray "is, in general, doing his best. If this serves as a shot across the bow to wake up the [Reagan] administration to the problems of thrifts, it will be helpful."
Holidays have thinned many Washington offices, but some officials predict Congress may ask the Bank Board to amend its proposal when the second session resumes in late January.
Consumer advocates such as Rep. …