Commercials for the new financial institution might show one well-dressed investor talking to another: "Well, my broker is Perpetual American Savings & Loan, and Perpetual American says, . . ."
Or they might feature John Houseman strolling through the New York Stock Exchange after hours, shuffling through paper scraps as if they were autumn leaves. "At Coast Federal S&L we make money the old-fashioned way," he would say, pausing for effect. "We eahhhhhn it." m
You can't yet buy stocks, bonds, and mutual funds at your neighborhood savings-and-loan. But, in a move watched by the whole industry, two S&Ls have asked for permission to set up a jointly owned brokerage operation. The firm would feature shelves well stocked with investment opportunities, and could show the way toward turning S&Ls into one-stop family finance centers.
Backers say new technology, securities, and investment strategy make it a logical step. But the request raises serious regulatory questions, and old-line brokerage houses are sure to regard it with icy disdain.
"It's a logical outgrowth of S&Ls' ability to act as financial counselor to households, but it is a step further than the regulations take us," says Edward Ollarvia, a service corporation specialist for the US League of Savings Associations.
The leading players in this drama are Perpetual American Federal Savings & Loan, of Washington, D.C., and Coast Federal Savings & Loan, of Sarasota, Fla. The pair have filed a request with the Federal Home Loan Bank Board, their government overseer, asking to start up a joint business with the staid title "Savings Association Financial Corporation."
SAFC would get a corner in the branch offices of both S&Ls. There, amid the tellers and loan officers, registered securities experts would sell stocks, bonds, mutual funds, and other securities. A shelf of reference material could provide customers with information on interest rates, corporate profits, and other relevant financial figures. SAFC employees could offer debit cards and general financial advice.
"It's not a bad idea," says Paul Mackey, an S&L analyst with Bache Halsey Stuart Shields. "It's a way of broadening their product line.And it's a good way to cement customer relationships."
In the old days, a bank was a bank and a stockbroker was a stockbroker, and never the twain did meet. But government deregulation and the rise of powerful computing tools have blurred the lines of province. Investment firms now offer cash-management accounts and credit cards; S&L service corporations operate across state bounderies; banks are preparing and hoping to become national chains.
"What we have now is confusion," says the SAFC prospectus.
Its backers say the new firm wouldn't change the whole mortgage orientation of S&Ls but that, if approved, it could be a first step toward the financial institutions of the future.
"The financial environment is changing rapidly," says Dan McConnell, who would be chief executive officer of SAFC. "We felt it absolutely essential to do something to give us a broader base of business."
Richard Pratt, the Home Loan Board chairman, has called for new financial technology. SAFC's backers say that is what they're giving him. But the proposed firm faces some high regulatory hurdles.
"The board welcomes the opportunity to review any innovative proposal," says Thomas Vartanian, its general counsel. "However, a cursory review of the application . . . raises various legal questions dealing with the authority of S&Ls to engage in the proposed activities." Mr. Vartanian adds that the proposal will require "intense analysis."
And established brokerages may not be too keen about the competition.
"It's an interesting development that further beclouds the financial services industry," says Edward O'Brien, president of the Securities Industry Association. "I think they have a formidable tasks ahead of them."
Mr. O'Brien says the "public already has all the brokerage services they need." He claims it would be quite difficult for S&Ls to quickly train the necessary experts.
The proposal now rests in the Home Loan Board's Atlanta office. It will soon be forwarded to Washington with a recommendation, and the board's final decision should be made in two or three months. If approved, the SEC must also go over the prospectus. Even if everything goes off without a hitch, says Stephen Ege, legal counsel for the proposed firm, SAFC couldn't be in operation until mid- 1982.