Administration’s Long-Term Proposal Opposed : S&L; Group Sticking to Its Bailout Plan

The U.S. League of Savings Institutions said Tuesday that it supported only a short-term effort to shore up the federal fund that insures deposits in savings and loan institutions.

League officials also warned that many of its members were considering bolting the fund altogether if its rescue package does not win congressional approval.

Federal Savings & Loan Insurance Corp., which insures deposits up to $100,000 at 3,200 federally insured S&Ls;, has been drained by record S&L; failures since 1980.

Its resources had dwindled to about $2 billion last month, forcing federal regulators to keep many technically insolvent S&Ls; open because they did not have the resources to close them.

The Senate Banking Committee is scheduled to hold hearings Thursday on a Reagan Administration proposal to raise $15 billion during the next five years through extra assessments on the S&L; industry. The measure, with industry backing, came close to passage in the past Congress before time ran out.

But Joe C. Morris, league chairman, told a news conference Tuesday that the league is now opposed to the Administration plan, preferring instead an alternative program which would raise $8.9 billion over two years rather than the $15 billion over five years in the Administration bill.

Industry officials said the Administration plan demanded too much money initially and subjected healthy S&Ls; to a larger debt burden for a longer period of time.

Morris said that if the league’s proposal is not adopted, then it is likely that many healthy S&Ls; will seek to leave the FSLIC insurance program in favor of the Federal Deposit Insurance Corp., which insures deposits at banks and some savings banks, or call for a merger of the two funds.

Such a merger until recently has been opposed by the industry, which has contended that a separate FSLIC is vital to maintaining an independent S&L; industry.

But Morris said the concern is that if too many healthy S&Ls; leave FSLIC, there will not be enough institutions left to service the debt obligations incurred under the Administration’s refunding proposal.

The FDIC has more than $18 billion in reserves, and its future expenses in dealing with commercial bank failures are believed to be manageable.

But officials estimate that the FSLIC will be perhaps $30 billion short of the funds it will need to close the more than 200 S&Ls; expected to fail during the next three years.