If bankers want to be able to sell insurance, securities, real estate and otherwise expand their traditional list of consumer services, they had better find ways to reform the deposit insurance system first.

That's the word from Robert Parry, president of the Federal Reserve Bank of San Francisco - parent to the Salt Lake City Fed branch - who was in town this week meeting with the local Fed's directors, the Utah Bankers Association and various community leaders.Congress failed to enact a bill expanding the powers of federally-chartered banks during 1988 and Parry believes that until the problems plaguing the nation's deposit insurance plans - the Federal Savings and Loan Insurance Corp. (FSLIC) for S&L's and other "thrift" institutions and Federal Deposit Insurance Corp. (FDIC) for banks - are solved, it never will.

Congress believes that expanded powers for financial institutions automatically means higher risk, and considering the number of S&L and bank failures - or rescues from failure - in 1988, additional risk is to be avoided at all costs.

Personally, Parry disputes the premise that, for example, selling insurance or underwriting revenue bonds are high-risk enterprises, but he concedes that any expansion of powers is viewed in that light by lawmakers.

Although it's basically a national issue, he is urging state entities such as the Utah Bankers Association to get solidly behind deposit insurance reform as the first step in obtaining the expanded powers they have lobbied so heavily - and so far unsuccessfully - for in Washington.

There is a good deal of talk about taxpayers being asked to bail out FSLIC and its $50 billion to $100 billion "problem." But Parry believes there is no alternative. The only question, he said, is whether Congress and the upcoming George Bush administration will choose to solve it via the "front door or the back door."

Using Fed surplus funds, as has been suggested as a way around a tax hike, is going in the back door, said Parry, because that money would otherwise go into the Treasury. It's another way of increasing taxes without actually saying so.

Parry said reforms of deposit insurance must revolve around an early warning system in which bank capital requirements are raised and troubled institutions are spotted early and, if necessary, closed.

He said the current incentive loopholes that encourage financial institution stockholders and management to gamble with deposits - if they win, they make money; if they lose the government insurance fund picks up the tab - must be closed.

"Any time an institution has zero net worth we should close it," Parry said.