
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: TUESDAY, February 1, 1994                   TAG: 9402010091
SECTION: BUSINESS                    PAGE: B-7   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

REGULATORS SLAP MORATORIUM ON S&L MERGERS

In a crackdown on windfall profits for some insiders, federal regulators imposed a moratorium Monday on mergers in which the stock of a depositor-owned savings and loan institution is sold to the public.

In calling a temporary halt to the merger activity, the Office of Thrift Supervision said it also intends to review standard conversions in which mutual S&Ls decide on their own to offer stock to the public. The agency said it will continue to process applications for standard conversions during the review.

Texas Rep. Henry Gonzalez, chairman of the House Banking Committee, urged the Federal Deposit Insurance Corp. to impose a similar temporary ban on merger conversions for mutual S&Ls.

The FDIC and OTS share responsibility for regulating the savings industry.

At a House Banking subcommittee hearing last week, several lawmakers expressed concern that some insiders are getting rich in the deals.

Acting FDIC Chairman Andrew Hove promised the panel the FDIC will examine the conversions more closely. He said the agency is considering requiring mutual savings institutions to issue special vouchers to depositors when they sell stock. The vouchers would let the holders buy stock, or they could be sold by depositors who choose to do so.

Acting OTS director Jonathan Fiechter said the moratorium will remain in effect until the agency drafts rules to protect depositors.

Fiechter testified last week: "We had 2,000 mutuals; now we're down to 800. If we study this for two years, there won't be any mutuals left."

Mutual S&Ls have some $250 billion in assets, about one-fourth of the nation's savings and loan industry.

Last year, 112 mutual S&Ls converted to publicly owned stock - including 29 that were bought by banks, industry groups reported.

OTS said that managers of the mutual thrift institutions often get lavish stock options and retirement pay when the S&Ls merge. Also, it said, acquiring banks can reap big profits by purchasing the mutual at a steep discount from its market value.

In contrast, the depositors can be shortchanged in a merger conversion, because the stock of the new company usually goes up only a modest amount.

by CNB