Commercial bankers may not want to gloat about it,
but they may well turn out to be clear winners in the government's
rescue plan for the savings and loan industry.
After months of worrying that they would be asked to pay for the
bailout of hundreds of troubled savings institutions, commercial
bankers were relieved to learn that the rescue plan leaves them
largely unscathed financially and in a good position to expand.
``Looking ahead a couple of years, the government's plan is a
big plus,'' said Thomas Hanley, chief banking analyst at Salomon
Brothers, a securities firm. ``The banks should gain a greater
share of the consumer market and become more and more interested in
buying healthy thrifts.''
Key aspects of the plan would impose the same financial
standards on savings units as on banks in two years.
It would also remove obstacles to purchases by banking companies
of insolvent savings units, and after two years would allow the
purchase of healthy institutions as well.
Other parts of the plan require banks to increase the deposit
insurance premiums paid to the healthy Federal Deposit Insurance
Corp., which still has $16.3 billion in its fund, but would keep
that fund separate from the insolvent Federal Savings & Loan
Robert H. Smith, president of Security Pacific National Bank, in
Los Angeles, said the plan ``answers a long-term concern we have had
about a level playing field'' for banks and savings units.
By imposing the same standards on the two groups, he said,
neither one would have an unfair opportunity to grow.
In the case of the savings industry, rapid growth in the last
decade was accomplished by lending on real estate projects that have
``The lending limits imposed by capital standards will make for
a more rational financial market with better judgment,'' Smith said.
Besides the 350 insolvent institutions over which federal
regulators expect to assume control, analysts said the plan would put
pressure on hundreds of other savings units to find healthy merger
The impetus for mergers may come if regulators enforce a
proposed rule that savings units meet the same capital standards as
banks within two years. The capital is there as a cushion to carry
companies through lean times.
The bank capital standards are so far beyond the reach of many
savings units ``that you have a situation where unhealthy but not
yet insolvent thrifts will have no choice but to either reduce their
size dramatically or else be merged,'' said Walter G. Jewett, senior
vice president at Booz, Allen & Hamilton, a management consulting
Booz, Allen recently estimated that an additional 1,000
institutions with assets totaling $400 billion were so weak that
they could easily become insolvent if interest rates rose a few
percentage points or the economy entered a recession. …