Former savings and loan operator Thomas M. Gaubert sees the issue in simple terms: He wants his money back.

Gaubert, the former owner of a now-failed Texas thrift called Independent American Savings Association, claims that federal regulators elbowed him out of the way and then ran his savings and loan into the ground.

Their mismanagement, Gaubert alleges, cost him $25 million in personal assets that federal banking officials had required him to contribute to the thrift. Gaubert, a political backer of former House speaker Jim Wright (D-Tex.), asserts that when the regulators squeezed him out of the day-to-day operation of Independent American it was worth at least $54 million; six months later, a board of directors handpicked by banking officials announced that the thrift was $400 million in the red.

The federal government views the case in equally clear terms: no way.

Even if regulators were negligent in their supervision of Independent American -- and the government does not believe that they were, suggesting instead that the thrift's problems stemmed from "unsafe and unsound practices" under Gaubert's management -- the government cannot be sued under such circumstances, government lawyers argue.

They lost before a federal appeals court, and the dispute in United States v. Thomas M. Gaubert is now before the Supreme Court. The legal issue involved could scarcely be drier: the scope of the discretionary function exception to the Federal Tort Claims Act. But the practical significance, in the government's view, is enormous: There are 132 similar cases, seeking more than $3 billion in damages, pending in federal courts.

Exposing the government to being sued for the allegedly negligent acts of banking officials, the Justice Department told the court, "can only hobble and confine federal efforts to deal with the current crisis affecting the savings and loan industry" and "poses an extraordinarily grave danger" of "staggering financial losses" on top of the current cost of the thrift cleanup.

But Gaubert's lawyer, Abbe D. Lowell, told the justices at oral argument last month that the government was using the S&L crisis as a "cover" for insulating itself from liability.

"The United States wants this court to consider the context, but we would submit that the immunity they seek takes one important player, the Federal Home Loan Bank Board, out of the context of the checks and balances that now exists," Lowell said.

"Directors and officers are liable civilly for their actions. Congressmen can be voted out of office or disciplined for their actions in the savings and loan crisis. Only the Federal Home Loan Bank Board would be taken out of the loop if the government gets the extent of immunity they want."

Traditionally, the federal government, like the British king, enjoyed "sovereign immunity" from being sued. In 1946, Congress, concerned about the unfairness to injured people left without recourse from injuries inflicted by government personnel, adopted the Federal Tort Claims Act, which allowed the government to be sued in an array of cases.

But Congress carved out an exception for situations in which government employees or agencies are engaged in a "discretionary function." The term is not defined in the statute, but the Supreme Court has said the exception is designed to "prevent judicial 'second-guessing' of legislative and administrative decisions grounded in social, economic, and political policy."

The question before the court in the Gaubert case is whether the discretionary function exemption includes "operational" activities -- in other words, not just bureaucrats in Washington making grand policy choices, but all sorts of daily decision-making by federal workers on the ground.

(One example of the difference is deciding where to build a lighthouse -- discretionary, and not open to a lawsuit -- versus failing to maintain it in working order once built -- non-discretionary, and a basis for suing.)

In this case, according to Gaubert's complaint, federal regulators put in their own former associates to run the thrift, selected consultants, negotiated salaries, reviewed drafts of litigation papers, intervened in dealings between the thrift and Texas banking officials, and generally "participated in, and actually directed, {the thrift's} day-to-day technical and business operations."

Gaubert claims that the federal officials' involvement in "individual day-to-day management decisions" took them out of the realm of regulators whose policy judgments Congress intended to shield in adopting the discretionary function exception.

The government argues that in advising the savings and loan how to conduct its affairs, banking officials were engaging in "part of the judgmental process of enforcing the regulatory program."

Since regulators clearly would have been exercising discretion if they had chosen to take formal steps against Independent American, such as issuing cease and desist orders or imposing a receivership (the thrift's ultimate fate), their decision to seek to avert the thrift's failure through informal means should likewise be immune from suit, the government says.

The 5th U.S. Circuit Court of Appeals decision allowing Gaubert's suit to go forward, the government told the court, "has the effect of restricting regulatory options at a time of urgent need for swift and flexible intervention. That is precisely the result Congress sought to avoid by enacting the discretionary function exception."

At oral argument in the case, some justices were struggling to find a limit to the government's argument, asking Assistant Attorney General Stuart M. Gerson what banking regulators seeking to salvage failing S&Ls could do that would not be a discretionary function, other than the classic example of a non-discretionary function: an employee who plows his government car into another driver.

Gerson suggested some possibilities -- a regulator who insisted on having the board hire his brother-in-law as the consultant, in violation of federal conflict of interest standards; a regulator who lost critical papers; or who ordered the lights on top of the bank's tall building turned off and caused a plane crash. But, he said, "I can't think of anything with respect to Mr. Gaubert as the regulated person . . . in this case, on these facts, that would fall without the exception."

Gaubert attorney Lowell mentioned the historical origin of sovereign immunity -- the notion that the king can do no wrong -- in complaining about the breadth of immunity the government was seeking.

Government lawyers, he said, "seek a rule not so much that the king can do no wrong, but that the king can do wrong only when he is driving his royal carriage."