Bush Savings Bailout Seen as `First Step'. SAVING THE THRIFTS

BANKER Theo Pitt admits depositors in his Rocky Mount, N.C., thrift have shown a ``heightened anxiety'' recently over whether the government ``would stand behind the system in its hour of need.'' Thus, Mr. Pitt was hoping President Bush would reassure depositors that their savings were backed by the ``full faith and credit of the United States'' on Monday when he presented the government's $90 billion bailout plan.

On this score, Mr. Pitt, chairman of the Pioneer Savings Bank, believes President Bush got the job done.

But bankers, outside consultants, and some members of Congress say the government is still a long way from resolving the nation's stickiest financial problem in bailing out the Federal Savings and Loan Insurance Corporation (FSLIC), the fund that insures depositors in thrifts.

The United States League of Savings Institutions calls the President's $90 billion bailout plan ``a first step only.'' According to Dan Brumbaugh, author of a book about the thrift crisis and a consultant, ``It is a baby step in the right direction.'' And Alexandria, Va., consultant Bert Ely admits the government's numbers leave him confused. ``It's got some good trends, but it's not going fast enough,'' says Mr. Ely, who first depicted the size of the problem.

It is also possible that the administration is counting on the thrift industry to come up with more money than it actually has for its part of the bailout. The Bush plan envisions the thrift industry paying about half the total cost of the bailout, or about $40 billion to $45 billion.

However, as Mr. Brumbaugh points out, ``Sixty percent of the premiums are paid by institutions that are either insolvent or close to it. Those that are insolvent cannot make any new payments.''

President Bush admits that ``we may have a big selling job,'' when he takes his plan to Congress. One of the reasons the President will have to negotiate hard with the lawmakers is because some aspects of his plan are unpopular with the bankers - who are influential lobbyists.

For example, the thrift industry is unhappy with the administration's plan to place the Federal Home Loan Bank Board under the secretary of the Treasury. The US league would rather see the Bank Board independent.

The American Bankers Association, which lobbies for the commercial banking industry, says it is pleased that commercial banks are not being asked to bail out the thrift industry. But it adds, ``We will work hard to make sure this S&L plan does not discourage consumer savings, burden low- and moderate-income depositors, or harm the domestic and international competitiveness of the American banking system.

It is also unclear from the plan how quickly the administration will move to liquidate the insolvent thrifts. The General Accounting Office estimates there are 350 savings and loans that should be either sold off or closed down with depositors given their money back. GAO figures it will cost the government $50 billion to shut down these thrifts.

According to the Office of Management and Budget, these thrifts will be shut down over the next three years with the expenditure of $10 billion this calendar year, $25 billion next year, and $15 billion in 1991. William Seidman, Federal Deposit Insurance Corporation chairman, says the government will initially start by closing 220 of the worst thrifts.

Although bankers would prefer to shut down the insolvent thrifts right away, any move to close down these banks meets with approval.

For example, Bill Cooper, the chief executive officer of Twin City Federal Savings and Loan Association in Minneapolis, says his bank has to pay customers higher interest rates because of competition from the insolvent thrifts which offer higher rates to attract deposits.

``It's insidious,'' he explains. ``A broker calls up a client and says, `we can get you the best CD rate in town.' It turns out it's in a Texas savings and loan which is paying 100 basis points (1 full percentage point) more than the others,'' Mr. Cooper says.

In fact, once the insolvent thrifts are shut down, Cooper believes interest rates will fall. ``It could settle down interest rates,'' he says. A senior administration official, after the President's press conference on Monday, said the Bush plan was counting on lower rates to help the industry pay higher insurance premiums.

There is no question that the Bush plan, if enacted, would change the face of banking in the Southwest. As of last June, the entire savings industry had a negative net worth of $26 billion. Only 25 banks accounted for half the losses. And 21 of these were located in Texas, Louisiana, Arkansas, and Mississippi.

The six worst banks were in the state of Texas, which led bankers to refer to the higher interest rates that they had to pay to their own depositors as ``the Texas premium.''