THRIFTS : Home Federal Sues Agency Over Shift to FDIC System

Home Federal Savings & Loan sued the Federal Home Loan Bank Board on Monday in an attempt to force the regulator to allow Home Federal to escape from the ailing Federal Savings and Loan Insurance Corp.

San Diego-based Home Federal, which is seeking to become a California-licensed commercial bank, wants to join the Federal Deposit Insurance Corp. and believes that it is exempt from a federal moratorium on such conversions because it filed its applications before the ban.

“The bank board believes it has the authority to determine if an institution can exit the FSLIC in connection with converting from an S&L; to a bank,” said Kim Fletcher, chairman and chief executive of Home Federal. “We believe the bank board has exceeded its jurisdiction because there is no statutory basis for such regulation.

“We have a responsibility to our shareholders to take necessary steps to complete this conversion--even if that means taking our regulator to court,” Fletcher said.

A bank board spokesman declined to comment on the suit, adding that the agency had not seen the complaint.

The bank board has been anxious to keep healthy institutions like Home Federal within the FSLIC system, which is insolvent. Both the FSLIC and the FDIC systems protect deposits up to $100,000, but FSLIC charges its member institutions more for the same protection.

Home Federal had filed applications for the move with various state and federal regulatory bodies more than two years ago but did not apply to the bank board until June 9. And then it did so under protest because it contends that the agency does not have the right to approve or disapprove the switch. On Friday, the bank board asked for more information, prompting Home Federal’s lawsuit.

“We could have gone back and forth looking for more information for several months,” Home Federal spokeswoman Sheree Zizzi said.

The bank board last month rejected a request by Great Western Bank in Beverly Hills to merge with an FDIC-insured subsidiary and switch all its deposits from the FSLIC insurance system to the FDIC. Great Western, the nation’s second-largest thrift, plans to appeal a court ruling that backed the bank board’s decision.

Los Angeles-based Home Savings of America, the nation’s largest S&L;, also has applied to join the FDIC.

Home Federal said its case is different from Great Western’s--and is exempt from bank board scrutiny--because it does not involve the sale or transfer of assets.