Magazine article American Banker

S&Ls Fear Loss of Special Powers If Glass-Steagall Law Is Repealed

Magazine article American Banker

S&Ls Fear Loss of Special Powers If Glass-Steagall Law Is Repealed

Article excerpt

WASHINGTON -- Legislation aimed at repealing the Glass-Steagall Act would also deprive thrifts of the few powers that give them an advantage over commercial banks, industry spokesmen charged last week.

The bill, introduced last Wednesday by House Banking Committee Chairman Jim Leach, R-Iowa, attacks the special powers available to unitary thrift holding companies -- companies that own a single thrift.

Those powers make it possible for unitary thrifts to sell insurance, branch interstate, underwrite mutual funds, and invest directly in real estate. In addition, the special powers make it possible for industrial companies such as Ford Motor Co. to own thrifts.

Although Ford sold First Nationwide Savings Bank, the thrift's new parent, investor Ronald Perelman, could be affected by the Leach provision, industry sources said.

Patrick Forte, president of the Association of Financial Services Holding Companies, said the primary impact of the provision would be on thrifts' real estate holdings.

The 1989 thrift bailout, the Financial Institutions Reform, Recovery, and Enforcement Act, barred thrifts from investing directly in real estate. Many responded by moving their real estate business into a new holding company subsidiary outside the insured thrift.

"In order to do that, they had to have substantial capital or the ability to raise capital," said Mr. Forte, whose organization represents large thrift holding companies.

"Now many of those companies that moved real estate activities to comply with FIRREA will be forced to dump real estate into a declining market," he added. …

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