Independent Bankers Offer Own Plan for Rescue of S

A group of independent bankers called on Congress on Monday to revise President Bush’s savings and loan rescue plan by limiting a proposed increase in premiums on bank deposits while broadening the types of deposits to be assessed.

Directors of Independent Bankers Assn. of America, meeting in Anaheim for a 3-day national conference, adopted four recommendations as “interim positions” on the Bush Administration’s proposal.

The group’s recommendations would eliminate the second of two premium rate increases proposed by Bush. It also would increase the amount of premiums paid by big banks but lessen the financial impact on its own members, primarily smaller institutions that collectively form a majority of the nation’s 12,000 banks.

Large banks base less of their business on deposits and use such methods as issuing promissory notes to large depositors to get around the regulatory definition of “deposits” used to determine premiums, said Kenneth Guenther, IBAA’s executive vice president.

The IBAA plan would include money brought in under those methods in the calculation of premiums to be paid on deposits. And it would include deposits placed by foreigners in U.S. banks here or abroad, regardless of whether the money is in dollars or another currency.

“By broadening the assessment base, we won’t have to go as high on premiums,” Guenther said. The trade organization’s plan also would generate about $7 billion more than the estimated $50 billion that the Bush Administration proposal would raise over the next 5 years, he said.

The organization figures that in this fiscal year alone, its recommendations could raise an additional $500 million above the $14 billion that is expected to be generated by current assessments.

Guenther and most small bankers believe that the large money center banks get extra protection for their insurance premium. That’s because regulators tend to quickly close an insolvent independent bank but rarely let a big bank fail because of the possible effect on the banking system and public confidence.

Because of that, Guenther said, large banks should pay more in premiums.

The IBAA plan also would require money-market funds and brokerage houses to maintain unspecified levels of reserves in the Federal Reserve System.

Finally, the plan would set up the Federal Deposit Insurance Corp. as an independent agency with seven members serving staggered terms to avoid the political machinations that can sway banking decisions.

The S&L; industry has been racked for years with failed institutions, and the Federal Savings and Loan Insurance Corp. fund has paid out or pledged all the money it has to close or sell insolvent S&Ls.; While it has paid or pledged nearly $40 billion so far, it cannot handle up to $60 billion more in estimated future losses.

Banks and S&Ls; pay premiums to separate agencies--the FDIC and the FSLIC, respectively--to insure their deposits up to $100,000 per account. The president’s plan would raise premiums on assessed deposits and merge the FSLIC into the FDIC, which would manage the FSLIC funds separately.

Healthy S&Ls; now pay FSLIC $2.08 for every $1,000 on deposit, while banks pay the FDIC 83 cents for every $1,000 on deposit. The Bush Administration wants to increase the S&L; premium to $2.30 in 1991 and drop it to $1.80 in 1994, and it wants to raise the bank premium to $1.20 in 1990 and to $1.50 in 1991.

The IBAA plan would freeze the assessment on banks at $1.20 per $1,000 in deposits.

What county banks, S&Ls; would pay under plan, Page 10.