Treasury Developing Sweeping Bank Reforms : Banks: The rising costs of the S&L; bailout add impetus to the movement for change.

WASHINGTON —  Treasury officials, spurred by the enormous cost of the savings and loan catastrophe, are developing proposals for what could be the most sweeping changes in banking regulation since the 1930s, government and industry sources said.

Officials in the Reagan and Bush administrations have sought many of the changes since the early 1980s, but the effort now has a new urgency because of the breakdown of the S&L; bailout program unveiled by the White House a year ago. The cost of the bailout has been projected at more than $300 billion over 30 years, and the estimates continue to rise.

Officials want to air the proposals in coming months, but do not plan to propose formal legislation until after fall elections. Among proposals being discussed within the administration are a major change in deposit insurance, the possible elimination of a separate thrift industry, revamping the jurisdictions of regulators and eliminating the barriers between commercial banking and the securities business, government and industry sources said.

The Treasury’s goal is to further deregulate the financial services industry--for example, allowing banks to sell insurance and stocks--and to ensure that supervision is strengthened to prevent abuses, the officials said. The officials also are trying to promote and protect the industry as foreign competition increases.

Such broad legislation likely would touch off intense lobbying by banks and securities firms seeking to protect special market niches, industry and administration officials said.

The Treasury, which is leading the effort, asked the Federal Reserve Board, the Federal Deposit Insurance Corp. and the Securities and Exchange Commission to submit recommendations for how to accomplish these goals, an administration source said Sunday.

Treasury Secretary Nicholas F. Brady has decided to use a congressionally ordered study on federal deposit insurance reform as a vehicle for the comprehensive package of financial laws and regulatory revisions, administration officials said.

The S&L; bailout legislation passed last August required the Treasury to submit such a report to Congress within 18 months. Administration officials said they cannot revamp deposit insurance without other fundamental restructuring.

In the past week, Deputy Treasury Secretary John E. Robson and other Treasury officials have discussed the proposals in private with industry officials and key Capitol Hill lawmakers. Robson, speaking to the Independent Bankers Assn. of America in Washington on April 2, outlined three of the major legislative changes that the administration intends to seek, said bankers who attended the meeting.

According to congressional staff members and industry officials, the administration proposes to combine the thrift industry’s deposit insurance fund with the fund that guarantees commercial bank deposits, and to abolish the new Office of Thrift Supervision.

Many S&Ls; would be merged with banks, and the thrift industry’s role as a government-backed housing finance industry would end, these sources said.

Treasury officials also are considering a number of ways to change the federal insurance of consumer deposits, including reducing the maximum deposit insured from $100,000 to $50,000, limiting customers to one federally insured account per bank and introducing some combination of government and private insurance of accounts.