The Oklahoma Bankers Association on Wednesday released its
recommendation for solving the crisis in the Federal Savings and
Loan Insurance Corp., which backs deposits in the nation's savings
and loan industry.
The plan said the commercial banking industry must take the lead
in assuming the role of financing the nation's housing demand, and
the savings and loan industry as it now exists would be eliminated.
"I think it's viewed by many as an opportunity to perhaps
liquidate what's perceived to be some very viable competition from
the marketplace," said Mike Toalson, president of the Oklahoma
League of Savings Institutions.
Central to the plan would be the creation of an off-budget
agency to pay off depositors of insolvent thrifts, which the
association said should be closed immediately.
The General Accounting Office, Congress' auditing and
investigative agency, said this month that $77 billion will be
required to close savings and loans that are insolvent but still
open. There were 434 institutions in that category at the end of
Moreover, $10 billion is needed to finance borrowing by the
FSLIC, and $5 billion for losses that have occurred but haven't been
discovered yet. The GAO said an additional $20 billion should be
set aside as a reserve against future losses.
The FSLIC, which guarantees savings and loan deposits up to
$100,000, expects to receive $27 billion through 1998, so it will
need an additional $85 billion, the report said. The rest might have
to come from the federal government unless such sources as
commercial banks and depositors are willing to share the cost, the
The GAO recommended against merging the FSLIC with the Federal
Deposit Insurance Corp., which backs deposits in commercial banks.
The problems facing the thrift industry are affecting commercial
bankers, said Roger Beverage, executive vice president of the
The group hopes to gather a coalition of bankers from other
states and take their plan to Congress, he said.
The off-budget agency would work similarly to the $4 billion
system designed to provide a 15-year bailout of the Farm Credit
System, Beverage said.
Securities would be sold in public markets, and the agency would
issue bonds backed by the U.S. Treasury Department.
Repayment of the interest would be shared over the 15 years
between the treasury department and the industry, he said.
The off-budget agency would have to borrow about $50 to $75
billion to pay off depositors, and would be capitalized by funds now
included in the Home Loan Bank System, including FSLIC funds, the
policy statement said.
The bankers association said it opposes merging the FSLIC and
FDIC insurance funds. Toalson said his membership agrees.
The bankers' plan said savings and loan associations that
qualify under FDIC regulatory, supervisory and accounting standards
should be converted to state or national bank charters. …