Steep Charges Proposed to Rescue S&L; Insurance Fund : Finance: Plan calls for one-time $6.6-billion assessment on thrifts and payment of $550 million a year by banks.

The Clinton Administration and federal regulators on Friday proposed steep new charges for the nation’s banks and savings and loans to bolster the thrift deposit insurance fund and avert another taxpayer bailout.

The proposal calls for an assessment of $6.6 billion on the S&L; industry and payments of more than $550 million a year by commercial banks until well into the 21st Century.

The Administration also wants a single insurance fund, protecting deposits up to $100,000. Eventually, the actions could lead to a single government charter for commercial banks and thrifts.

Without a rescue, the S&L; insurance fund is in jeopardy of going broke, as it did in the 1980s, when hundreds of high-risk lenders failed, eventually costing U.S. taxpayers an estimated $120 billion.

The fund now has only $2 billion, equal to just 0.32% of deposits, a margin that could be wiped out by a failure of one or two major institutions.

The commercial bank fund, by contrast, has ample reserves, about $22 billion, or 1.22%, of deposits.

The independent federal regulators, in coordination with the Administration, formally unveiled their rescue plan before a hearing of the Senate Banking Committee. The highlights include:

* Creating for the first time a single federal insurance fund for commercial banks and savings and loans--but not credit unions.

* Requiring the S&L; industry to pay a one-time assessment of $6.6 billion, meaning each thrift would have to ante up 85 to 90 cents for every $100 in deposits.

* Requiring all banks and S&Ls; to share in the costs of repaying the bonds issued to pay for the S&L; cleanup of the 1980s. Currently, only the S&Ls; pay for the interest on the special Financing Corp. (FICO) bonds--a charge that costs them about $800 million a year.

The new plan would levy a charge of 2.5 cents for every $100 in deposits on all financial institutions to repay the FICO bonds. But commercial banks, which have 70% of the nation’s insured deposits, vociferously object because they would have to pay about $560 million a year on the FICO bonds through 2019.

Several regulators--including Federal Reserve Board Chairman Alan Greenspan and Jonathan Fiechter, acting director of the Office of Thrift Supervision--joined in calling for rapid adoption of the rescue plan.

The thrift insurance fund is in financial trouble because industry deposits have shrunk from $950 billion in 1989 to $725 billion this year, leaving a smaller base on which to base premiums.

In addition, about 45% of the assessments go to interest payments on the FICO bonds rather than to the insurance fund itself.

Many committee members, notably Chairman Alphonse D’Amato (R-N.Y.), find the idea of a single insurance fund appealing. “Congress must address the financial problems before the fund is further weakened and a crisis occurs,” he said.

Banks and thrifts now pay the same insurance premium: 24 cents for each $100 in deposits.

Since the bank fund has been rebuilt, however, the bank premium is scheduled to be reduced to 4.5 cents.

A 19.5-cent point differential would put the S&Ls; at an enormous competitive disadvantage and force even more thrifts to seek to switch to banking charters. Two giant thrifts, Great Western Bank and Home Savings of America, have already announced plans to charter commercial banks to take advantage of a lower bank insurance cost.

But the bankers are balking, saying they want something in return. For the banks to pay more, the real issue is “what’s in it for us,” as one banking industry lobbyist said in a moment of candor outside the hearing room.

What the banks want is the broader benefits of a thrift charter. S&L; holding companies can go into the businesses of insurance and securities, powers long sought by banks, as well as virtually any other businesses.

But the expansion of bank powers is always a controversial political issue. Treasury Undersecretary John D. Hawke Jr. said Congress should solve the insurance fund problem quickly, while Treasury experts will study and report on the charter issues later.

Sen. Chris Dodd (D-Conn.) urged the adoption of the regulators’ plan, telling the banking industry, “If the cost is just a few cents, it is well worth it” and predicting that the next step will be a single charter, clearing the decks for the long-sought goal of “financial modernization.”

D’Amato warned the bankers against trying to block the plan, saying “the easiest thing in the world is to say, ‘Hell no, I’m not paying.’ ”