THRIFTS : Home Savings Sues in Bid to Switch Deposit Insurers
Home Savings of America, the country’s largest savings and loan, is stepping up its fight to break free from the nation’s ailing thrift deposit insurance fund by suing federal authorities to allow it to make the move.
Home Savings, a unit of H. F. Ahmanson & Co. of Los Angeles, filed a lawsuit late Wednesday in U.S. District Court in Los Angeles, naming as defendants the Federal Savings and Loan Insurance Corp., the Federal Deposit Insurance Corp. and the Federal Home Loan Bank Board. Home Savings wants those agencies to give it permission to leave the bankrupt FSLIC thrift insurance system, which requires the thrift to pay $45 million a year to insure its deposits.
Home Savings wants its deposits insured instead by the FDIC, which operates the insurance fund for commercial banks and charges lower premiums. To do that, it wants to merge with a New York bank, Bowery Savings Bank, that it owns. Becoming an FDIC-insured institution would halve Home Savings’ deposit insurance premiums.
Whether Home Savings will be successful is uncertain, in part because the nation’s thrift bailout legislation would make it harder for Home Savings and other thrifts to switch to the FDIC system.
Similar Strategy
The Bush Administration and congressional negotiators reached agreement Thursday night on financing a sweeping $159-billion thrift bailout plan after Senate Republicans torpedoed a Democratic plan.
The compromise was reached after a series of fast-paced developments in which President Bush threatened to veto the bill, the Democratic-controlled House ignored him in on a 221-199 vote in favor of it and Senate Democrats fell six votes short of mustering the 60 needed to complete action.
Treasury Secretary Nicholas F. Brady and White House Budget Director Richard Darman accepted a compromise proposal splitting the cost of the bailout so that only 40% of the $50 billion needed immediately would balloon the federal deficit.
The bailout package has been crafted to prohibit thrifts from moving to the FDIC system for five years, even if they have regulatory approval. A Home Savings spokeswoman, however, said the thrift’s lawyers believe that Home Savings will still be allowed to convert to an FDIC-insured institution.
Federal officials said they had not seen the Home Savings lawsuit, which the big S&L; did not announce until Thursday, and would not comment on it.
In suing the agencies, Home Savings is using a strategy similar to one used by Home Federal Savings & Loan, an unrelated San Diego-based institution that this week won bank board approval to exit the thrift insurance system as part of its effort to become a state-chartered commercial bank.
Home Savings, Home Federal, Great Western Bank and other healthy thrifts have complained that they must unfairly pay high deposit insurance premiums to prop up ailing S&Ls.; Great Western earlier lost a bid with federal authorities to leave FSLIC because it missed an application deadline.
Federal officials have said Home Federal was granted approval because it met a technical deadline for applying to leave the FSLIC system. Only a small number of other thrifts have met the deadline, they added, and it was not clear Thursday whether they consider Home Savings to have met it.
The Home Savings spokeswoman said the thrift’s lawyers believe that it should be allowed to convert to a FDIC-insured institution because it notified authorities on March 30, 1987, of its intention to apply for FDIC deposit insurance--one day before the federal deadline.
