Creativity Must Regain Its Tarnished Credibility

Creativity is getting a bad name.

Everyone likes to be creative. In the best of cases, recognition and rewards follow.

If the entrepreneurial effort misses the mark, someone gets

hurt, mentally and financially.

In the world of journalism, a little bit of "creative writing" resulted in embarrassment for some respected publications after their writers mixed in a little fiction to help their stories along.

Even here in this section, we inaugurated a little bit of creativity to help prop up the cause of better business during the recent gloomy period of high interest rates. We introduced a boxed column labeled "Good News," hoping to attract some of that commodity.

And during that slow period, there wasn't any good news to print about affordably priced houses, dropping interest rates or lowering of prices. So, our so-called creativity backfired and the feature was used only when we found some good news.

Everyone remembers the recent involvement of real estate and creative financing. It became an almost overnight magnet for seemingly good deals in home and property buying and, as in some of the pyramid schemes of that same era, it was great for some and gruesome for others.

At the recent Pacific Coast Builders Conference in San Francisco, Kenneth Leventhal, a certified public accountant and a respected consultant to the housing industry, added another dimension to creativity. He declared that current fiscal ailments of many financial institutions--principal sources of home loans--stem from "creative accounting."

The publicly aired troubles of Bank of America, Financial Corp. of America, Beverly Hills Savings & Loan and San Marino Savings & Loan, for instance, would relate to his sharp assessment. When such a blue-ribbon assemblage of lenders is having the troubles they are, his description seems very close to the truth.

The cyclical and fragile affordability factor of real estate and the all-important interest rate, which determines the scale of activity, have always been concern enough for home buyers. Can they cope and understand that such giants as the Bank of America and FCA (parent company of American Savings & Loan) could be in trouble? After all, generations of would-be buyers have heard that if the Bank of America ever got into trouble, "we'd all be in trouble!"

The July issue of Perspective, a newsletter of Peat, Marwick, Mitchell & Co., certified public accounting firm, calmly discusses the structural changes needed in the wake of deregulation of savings and loan associations.

Steven C. McCollum, author of the article and a senior consultant with the firm, writes:

"The deregulation and continued reregulation of financial institutions combined with aggressive competitive pressure from banks, brokerage houses and insurance companies, have created an environment where change is a way of life. Those savings and loan associations that can adapt to change quickly will have a competitive advantage in their ability to capitalize on opportunity. As association's effectiveness in dealing with change will be dependent upon its organizational structure."

He notes that a regulated environment produces little change, stable profits and little competition. In a changing or deregulated environment, organizations change constantly to keep pace with the competitive flow.

The savings and loan industry is in transition, from a very stable, regulated environment to a rapidly changing, highly competitive environment, McCollum says.

"This new environment forces associations to compete with other types of institutions, enter new markets and introduce new products," he writes, and while attempting to compete in this new ballgame, their ability to seize new business opportunities can be inhibited, resulting in general declines in market share, productivity, growth and profitability.

Inevitably, he concludes, the lineup must undergo major changes to cope with the opposition and to ultimately assure successful continuance of the firm and its purposes.

Coming full circle, creativity can and must produce the answers for the necessary changes in the evolving constitution of the S&L; industry. Accomplishing that, its credibility will be regained.

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