The Treasury Department and the Federal Home Loan Bank Board asked Congress yesterday to set up a new corporation that would pump as much as $15 billion into the ailing federal fund that insures savings and loan institutions.
Members of the House Banking Committee gave a warm welcome to the rescue plan and gave a cordial, though less hearty, endorsement to a previously announced proposal to grant regulators more power to close or merge banks suffering from falling oil and farm prices.
Treasury Undersecretary George Gould and Bank Board Chairman Edwin J. Gray were praised by several lawmakers for the plan to aid the Federal Savings and Loan Insurance Corp., which insures individual deposits up to $100,000.
The fund, which faces the failure of at least 216 thrifts during the next three years at a cost that could exceed $20 billion, needs the multibillion-dollar infusion to bolster its current reserve of $6 billion.
Under the rescue plan, a corporation would be set up to use an unusual three-step process to the raise money: first, it would receive cash from the 12 Federal Home Loan Banks; then, it would use that cash to buy zero-coupon Treasury bonds; and finally, it would use those bonds as collateral to sell bonds to raise the $15 billion.
The emergency banking powers bill, given to Congress two weeks ago, would permit federal takeover of banks while they are failing and not just, as now, when they have failed. It would lower the threshold for institutions eligible for acquisition from $500 million in assets to $250 million. It also would expand the interstate branching rights of healthy institutions buying failed banks.
Comptroller of the Currency Robert L. Clarke testified that the Department of Justice said it would back the bill if it is amended to give the attorney general the right to review any case in which the period between approval of a merger and its completion is shortened to less than five days. He said the Justice Department has suggested changing the bill to make it clear "that antitrust laws continue to apply to acquisitions under this bill."