As concern for troubled savings and loan associates continued to mount, confusion persisted yesterday over what type of rescue operation, if any, the government intends to mount.
Meanwhile, another supervisory merger of a failing institution was announced yesterday in New York City.
Last Friday, after the administration said it would not support a bailout proposed by federal financial regulators but was evaluating other proposals, Deputy Treasury Secretary R. T. McNamar indicated that the Treasury is considering a plan to provide ailing thrifts with temporary lines of credit to tide them over until interest rates subside. The program, which Treasury officials said could be put into effect without new legislation, would subject the government to a contingent liability of $2 billion, less than under the regulators' plan.
A Treasury spokesman said a formal draft of the plan probably would not be issued for several days. He also said it already had been discussed with banking regulators.
Rep. Fernand St. Germain (D-R.I.), chairman of the House Banking Committe, issued a statement yesterday saying he had not been informed of the latest proposal. "If the administration did have an alternative plan, I am puzzled about why they decided to keep it in their desks while the regulators and the Congress wrestled with the programs through these many months," he declared. St. Germain said no legislation is being contemplated.
Federal Home Loan Bank Board Chairman Richard Pratt remarked that one plan his agency is considering is to "lessen net-worth pressures," the essence of the Treasury proposal. He added, "Any such program ultimately implemented will be based on policy directives initiated and developed by the Federal Home Loan Bank Board, an independent agency." The message seemed to be that Pratt wants to run any rescue operation.
U.S. League of Savings Assocations President Rollin Barnard hailed the proposal and said it was exactly what the industry itself had been suggesting for the past 90 days. According to Barnard, it will enable thrifts to circumvent the "antiquated rules" under which the Federal Savings and Loan Insurance Corp. operates: "walk in and buy the place when the alarm signal rings [when an S&L's reserves fall to 2 percent of deposits] and then wait around to liquidate the assets to get its money back." Under the Treasury plan, an S&L's line of credit will be added to the assets in a paper transaction to bring the reserves back up to 2 percent and avoid the costlier forced-merger process.
Yesterday FSLIC effected the merger of two New York City banks, Anchor Savings Bank and New York and Suburban Federal Savings and Loan. For the surviving institution, Anchor, this is the second involuntary acquisition in a month. The first was Guardian Federal of Northport, Long Island.