Magazine article American Banker

In Focus: Banks and Thrifts Square off on Issue of Unitary Charters

Magazine article American Banker

In Focus: Banks and Thrifts Square off on Issue of Unitary Charters

Article excerpt

A showdown is looming over the unitary thrift charter as financial reform legislation moves to the Senate and House floors next month.

Bankers have demonized the unitaries, equating them with the risk-taking savings and loans of the 1980s that later collapsed. Other foes claim unitaries resemble the overseas industrial conglomerates that have been blamed for the Asian economic crisis.

But thrift lobbyists are digging in.

"We will work without letup and use every resource at our disposal and enlist every ally we can muster to make sure there is no significant damage to any aspect of the savings institution charter," vowed Paul A. Schosberg, president of America's Community Bankers.

Under current law, any company-even commercial companies with no other finance-related businesses-may own a single thrift. Today 838 such unitary thrift holding companies exist; applications for 68 more are pending at the Office of Thrift Supervision.

Critics such as Federal Reserve Board Chairman Alan Greenspan, House Banking Committee Chairman Jim Leach, and Sen. Paul S. Sarbanes, the ranking Democrat on the Senate Banking Committee, refer to unitaries as the "loophole" in the legal prohibition on nonfinancial companies owning banks.

Treasury Secretary Robert E. Rubin recently sided with the critics.

Defenders argue that unitaries have a safe track record and that the S&L crisis would have been worse if commercial companies had not pumped more than $3 billion into 79 dying thrifts. These advocates include Senate Banking Chairman Phil Gramm, Office of Thrift Supervision Director Ellen Seidman, and House Banking's top Democrat, Rep. John J. LaFalce.

Kerry K. Killinger, chairman and chief executive officer of Washington Mutual Inc., a Seattle-based unitary and the biggest thrift company, has pressured lawmakers not to fiddle with something that he says is not broken. …

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