Industry Cited in Failure to Re-Fund FSLIC : Congress Leaders Say Plan Not Fully Backed
Congress’ recent inability to recapitalize the Federal Savings and Loan Insurance Corp. resulted in part because the savings and loan industry did not fully support the plan, two congressional leaders said Monday.
In blunt remarks at a national convention of savings and loan executives here, Rep. Fernand J. St Germain (D-R.I.) and Sen. Jake Garn (R-Utah) said division within the S&L; industry was a primary reason for the failure of legislation that was to provide the FSLIC with up to $15 billion in new funds.
“You are a house divided in many areas and on many subjects,” St Germain told the approximately 7,200 delegates at the convention, which is being sponsored by the U.S. League of Savings Institutions, an industry trade group.
“If there had been more unity (within the industry), we could have produced the legislation,” Garn added.
Landmark Legislation
St Germain is chairman of the House Banking Committee and Garn is the outgoing head of the Senate Banking Committee. The two men co-authored landmark banking deregulation legislation four years ago that has kept the savings and loan industry in turmoil ever since.
The House and Senate each passed its own version of a recapitalization bill this year, but an effort to reconcile the differences failed in the waning hours of the 99th Congress, which adjourned last month. The differences were not related to the recapitalization itself, but rather to what else should be included in the bill.
The recapitalization plan was designed to give the FSLIC the funds the agency says it needs to close or take over and sell hundreds of savings and loan firms around the country that remain open, even though they have negative net worths.
The FSLIC’s financial reserves may fall to as low as $1 billion by the end of the year, regulatory officials have warned. The agency insures accounts up to $100,000 should a savings and loan fail. The S&L; industry now has nearly $900 billion in deposits.
The comments by St Germain were particularly acerbic and came after the showing of a U.S. League of Savings Institutions film with the message: The problems in the savings and loan industry are history.
Not so, said St Germain. “I’m going to share with you the realities of life, and it’s not quite as upbeat as what I just saw” in the film, he said, later adding that the “FSLIC is in more trouble than ever before.”
The Rhode Island Democrat blamed Congress’ failure to pass the legislation on political and industry bickering over what it should include and if, in fact, it was even necessary.
He also blamed Garn, charging that the Republican senator’s attention had been diverted by his trip into space and a kidney transplant operation to help an ailing daughter.
