By Keith Bradsher
N.Y. Times News Service
WASHINGTON _ Federal regulators and lawmakers have moved to
stop the reaping of huge profits by executives and trustees when
mutual savings and loans sell stock to the public or merge with
The Federal Deposit Insurance Corp. said Wednesday that it
would draft rules to protect depositors at mutual institutions
that sell stock, as Green Point Savings Bank in Queens is trying
A federal district judge Wednesday temporarily put on hold
Green Point's efforts to sell stock this week, saying that a suit
against the bank by depositors may have merit.
In the executive branch, a Treasury Department official said
that his agency was moving to halt action on all requests by
mutual savings and loans to sell their institutions to commercial
"We will certainly stop processing them today," said Jonathan
L. Fiechter, the acting director of the department's Office of
Thrift Supervision. But he then stopped in midsentence and said
that no formal decision for a moratorium had been made. Fiechter
made his comments to reporters after testifying before a
The Democratic chairman and the ranking Republican on the
Senate Banking Committee introduced legislation Wednesday that
would restrict executive compensation in all sales of mutual
institutions, which are owned by depositors.
The legislation offered by Donald Riegle, D-Mich., who heads
the committee, and Alfonse M. D'Amato, R-N.Y., would ban the
granting of most stock options and would impose other limits.
They said their move was needed to prevent abuses by insiders
that shortchange depositors.
Legislation that would impose less stringent limits has
already been introduced in the House by the Democratic and
Republican leaders of the House Banking Committee.
Fiechter told the House Banking Committee's panel on financial
institutions that prompt federal action is needed because
hundreds of mutual savings and loans have been sold in recent
years, often enriching their directors and executives, but not
the depositors who technically own the institutions.
"We had 2,000 mutuals, now we're down to 800," Fiechter said.
"If we study this for two years, there won't be any mutuals
With $250 billion in assets, mutual savings and loans make up
about a quarter of the nation's savings and loan industry, and
hold 5 percent of the entire American banking and savings
Last year alone, 111 mutual savings and loans in the United
States ceased to be owned by their depositors, including 29
bought by banks, according to figures compiled by SNL Securities
L.P., a brokerage firm in Charlottesville, Va. The rest sold
stock, as Green Point is trying to do, or created a parent
company and sold some stock in it.
It is unclear how many potential deals would be affected by
The issue of whether executives and trustees are profiting
unreasonably from such transactions has been highlighted by the
case of Green Point, based in Flushing, Queens.
The bank had originally won the approval of the New York State
Banking Department for a plan to sell stock to the public, with
provisions that would give its officers and directors large
blocks of stock and options. Many other mutuals had rewarded
their executives and directors in a similar manner.
The planned stock sale took a twist when the Republic Bank of
New York made an unusual counter-offer to buy Green Point that
included cash payments to depositors. Only after that did the
state banking department balk and attention began to be focused
on the generous compensation.
If Green Point stock had doubled after being issued _
paralleling the experience of other mutuals _ the stock and
options that would have been granted to 16 officers and trustees
would have been worth an estimated $85 million. …