Magazine article American Banker

Thrift Group Officials Back FSLIC Bailout Plan

Magazine article American Banker

Thrift Group Officials Back FSLIC Bailout Plan

Article excerpt

WASHINGTON (AP) -- Two officials of major thrift trade organizations, responding Tuesday to proposals for shoring up the federal savings and loan insurance fund, endorsed the creation of new corporations to handle the assets of failed savings institutions.

Both also told the Senate Banking Committee that federal regulators should require higher capital ratios for institutions judged to be engaged in risky investment practices rather than requiring them to pay higher deposit insurance premiums.

"Premiums can't be set high enough to eliminate risk," said Gerald J. Levy, vice chairman of the U.S. League of Savings Institutions.

Among the proposals put forth by the FSLIC and the Federal Deposit Insurance Corp., which insures commercial banks, is a call for higher deposit insurance premiums on institutions with assets that are judged to be more risky.

Currently all federally insured banks and thrifts pay an annual insurance premium of 1/12th of 1% of thier deposits -- much of which is rebated against the following year's payment.

The private corporations envisioned to handle the assets already under control of the FSLIC would be set up somewhat differently under proposals from Mr. Levy's organization and the National Council of Savings Institutions, whose chairman, Kenneth F.X. Albers, also testified Tuesday.

But the idea would be the same: delegate FSLIC's responsibility to manage and dispose of an estimated $2.3 billion in assets -- mostly real estate held as collateral for bad loans assumed by the federal agency -- to specially chartered organizations that would attract specialists to dispose of the property at the best price.

Money realized from sales would go into the FSLIC insurance fund.

Both Mr. Albers and Mr. Levy said the Federal Home Loan Bank Board, which oversees the FSLIC fund, is hamstrung in efforts to manage its huge portfolio properly because it is under personnel constraints of the Office of Management and Budget. …

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