A major roadblock in the way of a bill to help ailing savings institutions was removed yesterday when the powerful American Bankers Association decided to back the legislation, provided certain banking powers eliminated by the Senate Banking Committee were restored.
The legislation is designed to offer both short- and long-term aid to savings and loans and mutual savings banks, which have been experiencing their heaviest losses and deposit outflows since World War II.
There would be a cashless bailout to tide the institutions over until interest rates decline or their loan portfolio yields match their cost of funds.
Thrifts also would be given a number of new powers, the most important of which is the ability to put up to 20 percent of their assets into commercial loans.
When expanded powers for commercial banks, including underwriting of revenue bonds, were excised from the bill as being too commercial, the ABA said it could not support it. Finally, a compromise was reached, as the senators agreed that the quarter-point interest-rate differential that favors thrifts over banks would be removed earlier than anticipated by law, and that banks and thrifts would soon be allowed to offer new accounts truly competitive with money market mutual funds. There was also a provision allowing bank holding companies to continue underwriting insurance.
The amended version is expected to go quickly to the Senate floor, where passage is likely. One possible obstacle is a series of amendments to be offered on the floor by Sen. John Chafee (R-R.I.). These would restore controversial provisions allowing banks to underwrite securities and run mutual funds.
Similarly, the House made progress this week on the long-awaited legislation when the banking committee held hearings on provisions for additional powers for thrifts.
Hill sources said yesterday both bodies are ready to go to conference in the hope that final passage can be secured before the October recess.