UNITED STATES OF AMERICA, PETITIONER V. FIRST FEDERAL SAVINGS AND
LOAN ASSOCIATION OF TEMPLE

   No. 89-1927

   In The Supreme Court Of The United States

   October Term, 1990

   On Petition For A Writ Of Certiorari To The United States Court Of
Appeals For The Fifth Circuit

   Reply Brief For The United States

   1. Respondent argues that the question presented in the petition
should be limited to the issue that it views as the analytical source
of the conflict in the circuits -- i.e., the correctness of the Sixth
Circuit's interpretation of Section 165 of the Code in Cottage Savings
Ass'n v. Commissioner, 890 F.2d 848 (1989), petition for cert.
pending, No. 89-1965 -- and that that narrower question is not
sufficiently important to warrant consideration by this Court.  As we
explain in our reply in United States v. Centennial Savings Bank FSB
(Resolution Trust Corporation Receiver), No. 89-1926 (a copy of which
is being furnished to respondent), this suggestion is plainly
misconceived.  The lower courts are in disarray on all of the
subissues raised by the broader question on which the courts of
appeals are in conflict -- namely, whether an exchange of mortgages
pursuant to the FHLBB's Memorandum R-49 gives rise to a deductible
loss.  The confusion in the lower courts can best be alleviated if
this Court considers all the arguments relevant to this ultimate
question, which would otherwise remain open to dispute even after this
Court's decision.

   2. In our petition, we noted that we had urged the Court to grant
certiorari in Centennial as the lead case because it presents two
distinct issues of major administrative importance and on which there
exist conflicts in the circuits.  See Pet. 7;  Centennial Pet. 13
n.10.  We also suggested that the Court might wish to grant plenary
review in this case as well because it involved a solvent institution,
not one in RTC receivership.  Ibid.  We have now been informed by the
FDIC, however, that respondent went into receivership on August 24,
1990.  In light of this development, there no longer appears to be any
reason to grant plenary review in this case;  rather, like the
petition in Commissioner v. San Antonio Savings Ass'n and Subsidiaries
(Resolution Trust Corporation, Receiver), No. 89-1928, the petition in
this case should be held and disposed of as appropriate in light of
this Court's disposition of Centennial.  If the Court also wishes to
grant plenary review in a case involving a solvent institution, it
should grant certiorari in Cottage Savings Ass'n v. Commissioner, No.
89-1965, or, alternatively, in Commissioner v. Federal Nat'l Mortgage
Ass'n, No. 89-1987, although that case arises in an atypical factual
context.

   The petition for a writ of certiorari should be disposed of as
appropriate in light of this Court's disposition of United States v.
Centennial Savings Bank FSB (Resolution Trust Corporation, Receiver),
No. 89-1926.

   Respectfully submitted.

   JOHN G. ROBERTS, JR.

      Acting Solicitor General /1/

   SEPTEMBER 1990

   /1/ The Solicitor General is disqualified in this case.