Is the Thrift Crisis Over? Maybe Yes, but Maybe No

THE savings and loan industry is dramatically stronger after a decade-long shakeout. But once again, the fund that insures thrift deposits is severely undercapitalized. Some say that unless Congress acts, it is doomed to depletion.

Taxpayers are shelling out $90 billion plus interest to cover the losses of just those 750 thrifts that toppled after August 1989. That's when the Resolution Trust Corporation (RTC) was set up by Congress to deal with the S&L debacle that had begun four years earlier. Now a fight looms over who will get stuck with the tab for the thrift-fund shortfall. Owners of certain government bonds, financial-institution stockholders and depositors, and taxpayers have a stake in the outcome.

Nowhere is the issue debated more hotly than Texas. The mid-1980s collapse of the oil industry turned the state into a Boot Hill for banks and thrifts by gunning down the value of their real estate-backed assets.

The national banking industry, however, recovered from its problems in Texas and elsewhere without taxpayer assistance. There are fewer banks today, but the industry's total deposits are much greater. Earnings average a healthy $1.17 per $100 of assets, which exceed $4 trillion.

And the Bank Insurance Fund recently exceeded the federally required capitalization of 1.25 percent of insured deposits. As a result, in September regulators will reduce the BIF premiums that banks pay from 23 cents per $100 of deposits to 4 cents or even nothing.

Banks relish the advantage the reduction will give them over thrifts. Once the two institutions had more-separate financial missions. By now their areas of competition have grown. Thus, banks are of no mind to help the thrift industry with its current dilemma.

''Banks are basically greedy. They don't want to be part of the solution,'' complains Douglas Kadison, chairman of a thrift in Austin, Texas. Surviving S&Ls did not cause that industry's problems; they deserve help from banks and taxpayers, he argues.

But John Heasley, general counsel of the Texas Bankers Association, accuses the S&L industry of ''Chicken Little'' stories. ''Now they're trying to get the banks into this. [We] will fight that attempt to evade responsibility,'' he says.

The profit ratio of thrifts is less than half that of banks; their assets, one-fifth of banks and falling. Assets of the Savings Association Insurance Fund amount to a piddling 0.28 percent of insured deposits.

Last Saturday, the six-year-old SAIF assumed responsibility from the RTC for protecting thrift deposits. Until then, SAIF had received more than $9 billion in insurance premiums from the S&L industry - enough to bring the fund's capitalization ratio above the required 1.25 percent.

But, ''Congress was in a punitive mood'' when it created the fund in 1989, Mr. Kadison says. Lawmakers allowed $7 billion to be sucked out of the SAIF to defray some of the costs of cleaning up the thrift industry. Further, the fund is saddled with annual interest payments of $780 million to owners of government bonds issued to cover pre-1989 S&L failures; the payments last another 25 years.

Tax dollars were supposed to reimburse the SAIF for the interest payments. But Congress never appropriated the money. Depending on how the economy fares, 60 thrifts stand in danger of becoming insolvent, federal regulators say. The likely $4.5 billion total loss on these thrifts would break the SAIF twice over.

''Thrift CEOs are going to act to protect their shareholders,'' says Jonathan Fiechter, acting director of the Office of Thrift Supervision. Some giant California thrifts, for instance, have applied to regulators for permission to create a parallel banking operation in each of their branches.

By letting their banking operation offer a slightly better interest rate, they could siphon deposits from the thrift side, evade the troubled SAIF altogether, and stay afloat. Regulators are delaying approval, but the thrift industry holds the maneuver is legal.

Congress has taken note of the thrift mess, but whether it will act in a timely fashion is another matter, Mr. Fiechter says.

Fiechter believes thrifts could afford a one-time payment to the SAIF to bring it up to full capitalization, even though it would cost the industry 18 months worth of profits. But it could not do that and keep making the interest payments, he adds.

One idea pushed in Congress is to strengthen the SAIF with extra premiums from thrifts or with the billions that will be left over from sales of thrift assets when the RTC goes out of business at year's end. Then, that fund and the BIF would be merged, and banks would share the interest-payment burden with thrifts.

Mr. Heasley says banks might agree if Congress gives them the right to sell insurance and other powers they crave.

Settling the question of how to bolster the SAIF could eliminate a barrier to the eventual melding of banks and thrifts into one industry with the powers of both predecessors. Kadison and Heasley, as well as some regulators and congressmen, believe the changing marketplace for financial services make such evolution necessary.

Already, commercial banks have expanded their role in residential lending, once the province of the thrift industry. And S&Ls like Kadison's, ironically named Horizon Bank & Trust, have aggressively pursued commercial deposits and make Small Business Administration loans.