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...chairman who will answer to the Treasury Secretary. The exhausted Federal Savings and Loan Insurance Corp., which guarantees deposits, will be overseen by its healthier and better-staffed counterpart for the banking industry, the Federal Deposit Insurance Corp. Banks and thrifts have traditionally had separate regulators and roles: S & Ls specialized in taking long-term savings deposits and issuing residential mortgages, while banks typically held shorter-term accounts and concentrated on making commercial loans...
...thrift industry seemed to meet the proposal with grudging acceptance but a fair amount of grumbling. Healthy S & Ls object philosophically to paying excessive cleanup costs for their fraudulent and incompetent brethren. Says Adam Jahns, chairman of Chicago's Craigin Federal Savings & Loan: "I don't think we should have to pay for serious crimes committed by others." Another complaint by S & Ls is that by combining thrift and banking supervision, the Bush plan may blur the distinction between the two and eventually remove any competitive advantage the thrifts still have, principally the ability to borrow long-term funds from...
Bankers were miffed too about being tied up with the S & Ls. The symbolic point of contention was the trusted FDIC decal that banks display prominently on their premises and in their advertising. The Administration at first told thrift owners that they would be able to display the symbol under the new plan. To many depositors, the seal represents greater safety and security than the thrift industry's own logo. Bankers therefore vociferously oppose sharing the FDIC seal, maintaining that it would be effectively tarnished if given to the thrifts and would lead to the complete merging...
...FDIC wasted no time in wielding its new authority over the thrifts. Within a day after the Bush announcement, the Government agency took charge of four insolvent S & Ls and three days later assumed control of six more. The agency intends to take over the 224 most hopelessly insolvent S & Ls within the next month. The FDIC also decided to freeze temporarily all negotiations for the sale of ailing thrifts. Last year the FSLIC completed a flurry of deals -- 34 in December alone -- in an effort to offer investors tax breaks that expired on Dec. 31. Because of the rich...
Seidman said talks with investors will resume after the FDIC takes control of the remaining insolvent S & Ls. But since the FDIC said it would then allow only deals that were supported by the cash of the FSLIC -- a fund that is currently bankrupt -- more Government-assisted sales would seem unlikely. The FDIC might also try to renegotiate some of last year's sweet deals...