It's a Thrift! It's a Bank! It's a Super Bank!

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It's a thrift! It's a bank! It's Super Bank!

What's in a name? With apologies to Shakespeare's rose, a great deal.

Take the word "bank," for example. In recent years more and more S&Ls have changed their names to something more bankerly. They weren't banks in the first place, but they added the word "bank" to their names because they liked what the word denotes--safety, soundness, and confidence.

Just changing a name doesn't grant those qualities, however. Bankers know that not everything that calls itself a bank is, in fact, a bank. Hold on there! The name-change game took a new twist in late October. That's when the nation's second-largest thrift institution, Great Western Financial Corp., decided it wanted to look a lot more like a bank. The Los Angeles-based company asked that the insurance on its customers' deposits be moved out of the Federal Savings and Loan Insurance Corp. and transferred to the Federal Deposit Insurance Corp.

The average person might see such a request as a mere change of insurers. Both the FSLIC and FDIC are government agencies that insure depository institutions, so what's the big deal? "After all," a consumer might argue, "if I want to change car insurance companies, I can choose whoever I like, right?" Not so simple. Actually, a request like Great Western's raises a number of serious problems.

For starters, FSLIC is virtually bankrupt. The FSLIC fund needs the continued premiums of large thrift institutions like Great Western to help it continue the process of merging and liquidating bankrupt thrifts. The removal of Great Western's insurance premiums from FSLIC could only deepen a growing crisis.

Congress had cases like Great Western's in mind when it enacted a moratorium, contained in the Competitive Equality Banking Act of 1987. This moratorium concerned conversions of the type Great Western proposed. While there may be some question about whether the Great Western move would actually be illegal, it is highly likely that such a move runs against the intent of Congress.

And such a move by an institution as large as Great Western could undermine public confidence in the FSLIC fund, particularly if the move prompted other large thrifts to follow its example. …

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