The Federal Home Loan Bank Board has decided to halt further conversions of federally chartered savings and loan associations to mutual savings banks pending congressional clarification of a 1948 law.
Saying that he was "disturbed by what appears to be a trend, particularly in the East," FHLBB Chairman Robert H. McKinney declared last week, "It would hardly be in the public interest to permit continuation of this practice if it results in the erosion of funds available for housing."
Although conversions were once rare, according to the FHLBB, there have been three in the past six months, including two this week. Arlington Federal Savings and Loan was permitted to merge with the Central Savings Bank of Baltimore, and Colonial Federal Savings and Loan in Philadelphia became a savings bank. Three more applications are pending from S&Ls in New York, where the trend is particularly strong, and Washington state. All of the conversions have involved S&Ls with large assets.
McKinney has asked Congress to state whether the board actually has the authority to permit these conversions, i.e., whether they should be allowed at all. The law contains no specific reference to mutual savings banks.
Louis Nevins, vice president of the National Association of Mutual Savings Banks, said it was "astonishing that (the board) is suddenly concerned about what Congress meant in 1948" when it gave the FHLBB jurisdiction over certain types of conversions. He noted with irony that the FHLBB had no difficulty in regulating the conversion of federally insured mutual savings and loan associations to stock corporations. (The board issued regulations March 21.)
At issue is the desire of some federally insured S&Ls to gain investment flexibility coupled with the desire of muutual savings banks for more branches