Fed to Consider Easing Rules for Buying Thrifts

The Federal Reserve Board agreed Wednesday to consider easing restrictions on the purchase of savings and loan institutions by bank holding companies, a step that could expand the interstate reach of big banks and possibly weaken bidding for ailing thrifts.

At a meeting in Washington, the regulators voted to seek public comment on a proposal to permit banks to purchase healthy savings and loans in other states, if the states allow interstate banking. Until now, banks have been restricted to buying only failing thrifts, as a way of protecting their federally insured deposits.

If the proposed change in regulations is approved, the nation’s big banks would be provided with a cheaper vehicle for expanding outside their banking region. Savings and loans have most of the attributes of commercial banks, but even healthy thrifts generally are less expensive acquisitions than banks.

The nation’s major banks have pressured the Fed to ease restrictions on their expansion into other financial-service areas. The decision to reconsider the prohibition on purchases of healthy thrifts appears to be a response to that pressure.

Bad News for Ailing Thrifts?

Some observers worried that the change would make it difficult for the Federal Home Loan Bank and its insurance arm, the Federal Savings and Loan Insurance Corp., to attract buyers for failing thrifts.

“The FSLIC is having enough trouble bringing in buyers for troubled institutions,” said Timothy D. Naegele, a former Senate Banking Committee staff member whose Washington law firm represents investors in thrifts. “Why should banks go after the troubled thrifts if they can buy a healthy one?”

The eased restrictions would allow banks to cross state borders to buy thrifts in states that allow interstate banking. California was opened in July to interstate banking in the western region. That means California thrifts could be sold to banks in the West upon approval of the change, and California banks could begin shopping for thrifts elsewhere in the region.

Alan S. Greenspan, the new Fed chairman, did not express an opinion on the proposal. Several members who commented on the plan generally favored loosening restrictions.

The Fed will accept public comments for 60 days before deciding on the change.