By Leslie Wayne From New Jersey to Texas to California, savings and
loan institutions are trying to get state laws enacted that would
allow them to convert into savings banks.
Federal regulators say this is an attempt to evade strict new
federal rules - laws that the savings institutions say are so
onerous they can no longer do business under them.
The battle is being played out in state legislatures and in
Congress, where a bill has been introduced to halt these ``charter
Three states - Illinois, Indiana and Louisiana - have enacted
measures to permit the conversions and at least a dozen other states
are considering similar action.
In addition, such flips have been taking place in four other
states, including New York, where current laws permit the change.
``These efforts are blatant attempts to evade the reforms
enacted by Congress,'' said Timothy Ryan, director of the Office of
Thrift Supervision, which regulates savings and loans.
``I am greatly disturbed by the growing phenomenon of S&Ls
attempting to circumvent the requirements of Congress simply by
changing the form of their charter to become state savings banks.''
Ryan said he fears that switching from a savings and loan
charter to a state savings bank charter will give these institutions
the same freedoms that led to abuses and to the federal bailout of
the savings and loan industry.
These include the ability to own interests in real estate
projects, to buy risky ``junk bonds'' and to lend large amounts to a
Savings banks can engage in such practices, which were
prohibited for savings and loans by the 1989 bailout law.
Whether state or federally chartered, all savings and loans are
regulated by Ryan's agency and must follow the federal requirements.
Savings banks, which trace their origins back over a century or
more, have historically been similar to savings and loans in size
and in mission. Both are community-based lenders, taking local
deposits and primarily lending for homes and small businesses.
They differ from commercial banks, which are generally larger
and lend to big business.
While savings and loan associations exist across the country,
savings banks, which have about 9 percent of the total banking
market, are found in only 16 states and are most prevalent in the
For their part, savings and loan executives say they are not
trying to evade legislative reforms - only to avoid dealing with
They say that the thrift office's heavy assessments make it hard
for them to earn a profit and that the office represents a third and
unnecessary layer of regulation.
They already come under scrutiny from state regulators and
Federal Deposit Insurance Corp., which administers the insurance
fund that protects all depositors.
Besides, these savings and loans say, the thrift office was
created in response to institutions that went awry in the 1980s -
and that they did not. They contend that Ryan's attack on their
conversion effort is motivated by a desire to protect his office at
their expense, a charge he denies.
``This is not an attempt to convert to savings banks to do an
end run around anything,'' said Alan S. Kaplinsky, an attorney with
Wolf, Block, Schorr & Solis-Cohen, a Philadelphia firm that
represents several Pennsylvania savings and loans.
``What's driving this train is a desire to avoid unnecessary and
duplicative regulations. My clients feel the assessments are
extremely high, very expensive and unnecessary. It's like throwing
good money out the window.''
Ryan has also been opposed by L. William Seidman, the chairman
of FDIC, who has a strong following in Congress. In a letter to the
Senate Banking Committee, Seidman opposed a bill to halt charter
flips and said the motivation of those seeking to convert was to
avoid ``very costly, non-competitive'' assessments rather than to
circumvent the law. …