To the editor:

As president of the Utah League of Insured Savings Institutions, I am responding to your editorial of March 12. In the editorial, you expressed a legitimate concern about cost to the taxpayers for the "savings and loan bailout."Your use of the term "savings and loan bailout" is incorrect, inaccurate and misunderstood by not only you but others. Unlike the Chrysler or New York City bailouts, there is not one savings and loan in America that will be "bailed out" to solvency through this process.

The money used is going to make good the federal pledge on guaranteed deposits as promised by the Federal Savings and Loan Insurance Corp., which has been in effect since 1934. The only ones receiving any money will be deposit customers in failed institutions where their accounts are federally insured.

This is necessary in order to maintain the confidence of our banking system in the marketplace. In reality the "bailout" is for a cash-short federal agency - the FSLIC.

The original purpose for deposit insurance was to provide confidence to the depositors so they could put their money in any federally insured institution with the assurance that their money would be returned as long as it was under the deposit maximums set by the government.

When the government takes over failed banks, credit unions or savings and loans, current stockholders immediately lose their investments and officers and directors are typically replaced.

The institution is then usually merged with a stronger company or liquidated. Not one penny goes to "bailing out" anyone other than account holders who have relied on the insurance of accounts guaranty.

Nationwide, there are trillions of dollars in deposits in all federally insured banks, savings and loans and credit unions. For those qualified, they all have the same government guarantee, and to date not one penny of federally insured deposits have been lost by the depositor. That record must be maintained.

The stability of our entire banking system stems from this one basic issue - government guarantee of deposits. You should not misunderstand nor should your readers misunderstand where the money being appropriated by Congress is going.

There is really a very small percentage of savings and loans that are actually in trouble. There are more than 3,000 savings and loans nationwide, and according to government figures, less than 5 percent of the total number represents nearly 90 percent of the problem.

Economic conditions nationwide have had a tremendous impact on the failure rate. Bad economic conditions contributed last year to as many bank failures as savings and loans. A lack of quality government supervision also contributed to this problem.

And, lastly, few people realize that the savings and loan industry has been paying two and one half times the insurance premiums that other federally insured institutions have been paying for the same insurance of accounts. To date, over $5 billion has been paid to the FSLIC in additional premiums by remaining savings and loans to resolve this problem.

I agree with you this problem must be resolved quickly. As an industry, we wholeheartedly support President Bush's plan to resolve this.

Paul A. Neuenschwander


Utah League of Insured Savings Institutions