The crisis at Financial Corp. of America, the nation's largest savings and loan association, has illuminated the dark side of the deregulation of the thrift industry, officials and experts say.

The plight of the California S&L symbolizes the unprecedented risks some S&L executives have courted in hopes of higher profits.

A deregulated environment allowed the California S&L to expand too rapidly through aggressive marketing and lending, questionable accounting and a multibillion-dollar acquisition, experts said. In the last six months, the company's assets have grown from $22.7 billion to $32.7 billion, a dollar change greater than the total assets of all but four other S&Ls in the United States.

After a dispute with the Securities and Exchange Commission over its accounting techniques last month, Financial Corp. was forced to restate its $31.3 million second-quarter profit as a $107.5 million loss.

On Aug. 15, the company reported that it experienced a net deposit outflow in July of $582 million, due mainly to a decline in large institutional deposits.

While experts said they believe the resignation last week of the S&L's embattled chief, Charles W. Knapp, and the Federal Home Loan Bank Board's endorsement of the selection of longtime industry executive William J. Popejoy as chairman will go a long way toward restoring confidence in the S&L, its fate is uncertain.

About $15 billion in certificates of deposit and other term accounts at Financial Corp. were scheduled to mature in the three months ending Sept. 30; some already have been withdrawn while others have been renewed, but the amounts are not known.

There is concern that the crisis has weakened investor confidence throughout the industry, although that is hard to measure, and there are renewed calls for closer regulatory supervision to prevent what happened at Financial Corp.

"There is no way the bank board should let any other companies have such a large proportion of its portfolio in riskier construction and business loans," said Robert Gordon, an analyst with Bateman, Eichler, Hill & Richards in Los Angeles. "And is it appropriate for S&Ls to have such large amounts of institutional versus retail deposits to fund mortgages? I say no. It is too dangerous."

Retail depositors generally leave their money in the same bank or S&L for extended periods, while pension fund managers and other institutional depositors wire billions of dollars around the country on a regular basis to earn the highest interest rate possible. Financial Corp.'s heavy reliance on institutional money poses considerable risk, analysts said.

Prior to deregulation, almost all S&Ls conducted business in a similar manner and were subject to a similar degree of risk in managing their affairs. Interest rates on savings accounts were fixed, and the S&L's investment activities were limited. But the environment has changed dramatically in a short time.

Although many S&Ls are chartered federally and are subject to more conservative operating guidelines, others, such as Financial Corp.'s principal subsidiary, American Savings and Loan, are state-chartered and free to engage in riskier management practices in the hope of greater profits.

Despite tremendous differences in the degree of risk among S&Ls, all pay the same premiums to the Federal Saving and Loan Insurance Corp. to insure depositors' accounts up to $100,000 each.

"When savings and loans were all alike because their authority was so narrow, it made sense to have all of them paying the same premium for insurance," said Anthony M. Frank, chairman of First Nationwide Savings and a director of the San Francisco Home Loan Bank.

"With the wide latitude we have now, charging the same premium for every institution is like Prudential Insurance charging the same life insurance premium for Barney Clark and Bruce Jenner," Frank said.

"The problem is that somebody has to step forward and say one institution is riskier than another and therefore should pay higher premiums. To have bureaucrats rating risk is worrisome to some people in the industry."

Frank suggested private insurance companies do the rating, and he criticized industry executives "With the wide latitude we have now, charging the same premium for every institution is like Prudential Insurance charging the same life insurance premium for Barney Clark and Bruce Jenner." -- Anthony M. Frank, chairman of First Nationwide Savings who attract deposits on the basis of government guarantees of their safety (up to $100,000) while opposing attempts to publicly recognize the varying degree of risk among S&Ls.

He also pointed out that, even though Financial Corp.'s principal subsidiary is state-chartered and state-regulated, federal regulators have made all the decisions and public statements in recent weeks. An examination of the division of labor between state and federal regulators must take place, Frank said, adding that, unless state regulators take a more active role than they have with Financial Corp., they will find federal authorities usurping their power.

Many experts believe the industry needs more supervision because of deregulation. Companies are free to engage in a broader range of activities both in attracting deposits and making loans, and thus need to be monitored more closely, Frank and other experts say. This would permit earlier detection of problems to prevent them from becoming crises, a critical factor in an industry where companies rely so heavily on public confidence for their survival.

Liberal state charters, particularly in California, Texas and Florida, are attracting more entrepreneurial managers to the industry, analysts said. However, some of these managers are more interested in making oil loans, financing takeovers and aggressively investing their portfolios in common stock than they are in lending money to enable the construction and purchase of homes, they said.

Financial Corp., for instance, agreed to provide New York financier Saul Steinberg $200 million for his attempted takeover of Walt Disney Productions. In addition, analysts said they believe the company purchased a significant number of Disney shares, estimated at $750,000, for investment purposes.

Industry experts pointed out that this raises public policy questions because these institutions receive government guarantees for deposits up to $100,000 and special tax treatment so long as they are classified as S&Ls.

Another question raised by Financial Corp. employes in the last few weeks is the role played by industry competitors who also serve as directors of regulatory bodies. Financial Corp. employes believe some industry leaders who were quoted widely but refused to allow reporters to identify them were taking competitive advantage of their dual roles to attract deposits before Knapp was ousted.

These industry leaders, who sharply criticized Knapp's management style and called for his resignation from Financial Corp., gained deposits by adding uncertainty to the environment, Financial Corp. employes said. Some Financial Corp. employes believe that this was unfair and should be investigated.

Bank board officials indicated at the end of the week that they will work closely with Financial Corp. to ensure its survival. They stopped short of announcing a blanket guarantee for all deposits, suggesting instead that they will wait and see if Popejoy's leadership and the continuing ability of Financial Corp. to borrow from the government will restore confidence.

An outright guarantee of all deposits, following the example set earlier this year at Continental Illinois National Bank & Trust, would be designed to prevent mass withdrawals by extending federal insurance to all deposits, even those above the $100,000 cutoff point. This practice has been criticized by small banks and S&Ls, many of which have been allowed to fail without the additional aid the regulators were willing to provide to Continental.

Although Financial Corp. already has borrowed more than $2 billion to replace deposit outflows, the company legally can borrow up to $16 billion, analysts said.

Popejoy spent his first day on the job last week in New York apparently trying to convince money managers to renew their jumbo certificates of deposit and trying to get the help of investment bankers to line up alternative sources of funds to offset the outflow of deposits at American Savings and Loan, Financial Corp.'s principal subsidiary. On Friday the company ended speculation by announcing it will pay its regular quarterly cash dividend of 17 cents a share, payable Sept. 28 to stockholders of record Sept. 11.

On Friday, the company received a commitment for $2 billion in new cash from the Federal Home Loan Mortgage Corp. to help meet deposit outflows. A separate $1 billion transaction with the Federal National Mortgage Association will improve the S&L's liquidity beginning on Tuesday.

Popejoy is expected to reduce the size of the S&L and decrease its reliance on institutional deposits. Meanwhile, he must figure out a way to increase the company's liquidity ratios and net worth levels, which must be maintained at higher-than-industry norms as part of an agreement Knapp made with regulators when they allowed Financial Corp. to acquire First Charter Financial Corp. last year for $734 million in cash and stock.

The direction of interest rates is one of the key ingredients in Financial Corp.'s future. Rising rates have hurt the company because a large part of its holdings are in fixed-rate mortgages, which earn interest rates below current market levels. If interest rates drop, many of the company's assets could be sold profitably, providing cash to pay off investors in the company's CDs.

Other S&Ls have avoided the risk Financial Corp. faces if interest rates rise by making variable-rate loans. Many experts believe that playing the interest rate guessing game to the degree Knapp did at Financial Corp. should not be permitted.

Some longtime industry executives welcome the increased responsibility and challenge posed by deregulation. They believe it makes a once sleepy industry exciting.

But dynamic management does not always work in this industry, as Knapp explained in the resignation letter he sent to Financial Corp. shareholders last week.

"It takes a particular entrepreneurial style of management to build a company and another style to preserve and run an organization when it becomes as large and complex as Financial Corp. of America," he wrote.