Magazine article American Banker

Some Banks with S&L Deposits Backing Rescue of Thrift Fund

Magazine article American Banker

Some Banks with S&L Deposits Backing Rescue of Thrift Fund

Article excerpt

Most banks oppose a plan in Congress to capitalize the Savings Association Insurance Fund, but there are defectors in the industry's ranks.

Remember the Oakars?

Those are the 771 banks that must pay higher premiums on $215 billion in thrift deposits. The savings association fund charges 23 cents for every $100 in deposits, while the Bank Insurance Fund levies no premium at all.

So while most banks oppose the thrift fund rescue, some Oakar banks named for former Rep. Mary Rose Oakar, the Ohio Democrat whose amendment allowed the deposit purchases - have an economic incentive to back the bailout legislation.

Under the plan now before Congress, Oakar banks would receive a $350 million cut in their share of a one-time fee on thrift deposits designed to rebuild the fund. While most thrifts would pay an assessment of 85 cents per $100 in insured deposits, Oakars would pay 20% less.

For the roughly 300 Oakar institutions with thrift deposits comprising at least 20% of total deposits, the bill's costs are offset by special breaks.

Lobbyists for Oakar banks last fall won the break after arguing that much of the thrift deposits they acquired had run off.

"We think right now we're paying insurance premiums on deposits we don't own," said James D. Barr, executive vice president and treasurer at Crestar Financial.

The industry as a whole opposes the legislation because it would require banks to pony up about $600 million a year for the next 21 years to retire Financing Corp., or Fico, bonds, which were issued in the late 1980s to begin the first S&L bailout.

Oakars supporting the plan include Barnett Banks Inc., Crestar Financial Corp., First Union Corp., Amsouth Bancorp., First Maryland Bancorp, and a host of smaller institutions, according to Carol Van Cleef, a Washington attorney representing Oakar banks.

In a letter last month, 33 banks urged Republican leaders to enact the thrift fund fix. …

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