They're back. Written off for dead after sinking in a swamp of bad loans and corruption a decade ago, savings and loans are gaining in numbers and strength. Regulators are pondering 56 applications from insurers, securities dealers, manufacturers, and even retailers wanting to operate savings banks. And that could complicate Congress' dogged efforts to overhaul the nation's banking laws.

Why does everybody suddenly want to run an S&L? Until Congress enacts reform--a struggle now into its third decade--a thrift charter is the only way for companies that aren't commercial banks to get into full-service banking. A thrift can be owned by any type of company and can do almost everything a bank can, short of serving big corporate customers and actively trading bonds. But it faces less regulation.

If some congressional leaders had their way, new banking legislation would wipe out the industry. But with such influential players as State Farm Insurance, Ford, and Nordstrom signing up to run S&Ls, "the thrift industry is building an increasingly powerful lobby to keep its charter alive," says Bert Ely, a banking consultant in Alexandria, Va. That could encourage Congress to try tearing down barriers between the insurance, banking, and brokerage businesses--the sort of market-driven reforms championed by Senator Phil Gramm (R-Tex.), the Senate Banking Committee's new chairman.

Bankers argue that they're hobbled in competing against the new thrifts. Banks and their holding companies are regulated separately, and both must meet minimum capital requirements set by the Federal Reserve. While thrifts now face tougher capital rules than their 1980s ancestors, owners don't have to maintain that extra capital base and are scrutinized only by the Treasury Dept.'s Office of Thrift Supervision--perhaps the least feared regulator in Washington.

The new applicants "are building a parallel banking system with looser rules," gripes Edward L. Yingling of the American Bankers Assn. The Fed also frets about what Governor Laurence H. Meyer calls "a relentless search for loopholes" to evade stricter regulation.

Bankers are most riled by State Farm Financial Services, launched in November by the big auto and homeowner insurer. The new thrift will open only one office, at State Farm's Bloomington (Ill.) headquarters, depending on its agents to sell certificates of deposit, mortgages, auto loans, and lines of credit.

PILING IN. While State Farm is starting out in just two markets--central Illinois and St. Louis--bankers have visions of a nationwide network of 16,000 agents. And it is just one of 30 insurers trying to open thrifts. Brokers like PaineWebber Inc. and A.G. Edwards Inc. are also piling in, although most just want the power to serve as trustees for customers without having to comply with 50 different state laws.

The new thrifts aren't likely to recreate the threat to the financial system that the '80s S&Ls posed. Most will focus on originating loans that they'll quickly sell to investors--cutting the odds that they'll be caught with bad assets when rates rise. And few plan to get into the commercial real estate development that dragged down the old S&L industry.

Even so, the specter of the S&L cleanup and its $150 billion taxpayer tab will hang over next year's banking-reform debate. House Banking Committee Chairman James A. Leach (R-Iowa), who tried in 1998 to wipe out S&Ls, will pick up the fight to block nonfinancial companies from owning new thrifts. Gramm is more inclined to tear down barriers and let institutions duke it out. The thrifts, which not so long ago were all but counted out, could put up a pretty good fight.

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