Bankers Would Displace Savings, Loan Industry

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The Oklahoma Bankers Association on Wednesday released its recommendation for solving the crisis in the Federal Savings and Loan Insurance Corp., which backs deposits in the nation's savings and loan industry.

The plan said the commercial banking industry must take the lead in assuming the role of financing the nation's housing demand, and the savings and loan industry as it now exists would be eliminated.

"I think it's viewed by many as an opportunity to perhaps liquidate what's perceived to be some very viable competition from the marketplace," said Mike Toalson, president of the Oklahoma League of Savings Institutions.

Central to the plan would be the creation of an off-budget agency to pay off depositors of insolvent thrifts, which the association said should be closed immediately.

The General Accounting Office, Congress' auditing and investigative agency, said this month that $77 billion will be required to close savings and loans that are insolvent but still open. There were 434 institutions in that category at the end of September.

Moreover, $10 billion is needed to finance borrowing by the FSLIC, and $5 billion for losses that have occurred but haven't been discovered yet. The GAO said an additional $20 billion should be set aside as a reserve against future losses.

The FSLIC, which guarantees savings and loan deposits up to $100,000, expects to receive $27 billion through 1998, so it will need an additional $85 billion, the report said. The rest might have to come from the federal government unless such sources as commercial banks and depositors are willing to share the cost, the agency said.

The GAO recommended against merging the FSLIC with the Federal Deposit Insurance Corp., which backs deposits in commercial banks.

The problems facing the thrift industry are affecting commercial bankers, said Roger Beverage, executive vice president of the bankers association.

The group hopes to gather a coalition of bankers from other states and take their plan to Congress, he said.

The off-budget agency would work similarly to the $4 billion system designed to provide a 15-year bailout of the Farm Credit System, Beverage said.

Securities would be sold in public markets, and the agency would issue bonds backed by the U.S. Treasury Department.

Repayment of the interest would be shared over the 15 years between the treasury department and the industry, he said.

The off-budget agency would have to borrow about $50 to $75 billion to pay off depositors, and would be capitalized by funds now included in the Home Loan Bank System, including FSLIC funds, the policy statement said.

The bankers association said it opposes merging the FSLIC and FDIC insurance funds. Toalson said his membership agrees.

The bankers' plan said savings and loan associations that qualify under FDIC regulatory, supervisory and accounting standards should be converted to state or national bank charters. …