Bush Aide Asks Bankers to Back S&L; Overhaul

The architect of President Bush’s plan to rescue struggling savings and loan associations urged bankers Tuesday at a convention in Anaheim to “play a major role” in supporting the industry overhaul.

Richard C. Breeden, an assistant to the President, told members of the Independent Bankers Assn. of America that they should encourage “neighbors, customers and your local newspapers” to lobby for swift approval of the legislation, which was introduced in Congress last week.

“Losses continue to accrue at $40 million per day while we analyze and debate, and a large part of those losses will ultimately be borne by the nation as a whole, including banks,” Breeden told the group.

Breeden received a standing ovation from bankers attending the annual convention of the nation’s second-largest trade organization. But his remarks were tempered by Barney R. Beeksma, chairman of the U.S. League of Savings Institutions, the thrift industry’s major trade group.

Following Breeden to the podium, Beeksma said he was encouraged that an S&L; rescue plan has been proposed, but he cited several troublesome points that he said should be corrected before Congress enacts the legislation.

In a later interview, Beeksma termed the bill a “power grab by the Treasury,” which would oversee the S&L; industry’s regulatory system and sit on the board of the Federal Deposit Insurance Corp. under the Bush program.

“If the bill is adopted as presented, thrifts will die or disappear,” Beeksma said.

The battle over the bill may indeed become a fight for survival because deregulation of the financial industry already has made banks and S&Ls; more alike.

In fact, IBAA members--primarily smaller institutions that collectively form a majority of the nation’s 12,000 banks--are moving more aggressively into home mortgage lending, the traditional preserve of S&Ls.;

The independent bankers generally supported Breeden’s proposals, but the association has said it wants some modifications to ensure the independence of FDIC from political pressure and to classify more bank liabilities as deposits so that bigger banks would pay more in deposit insurance premiums.

Breeden, however, urged bankers to accept the plan as is. The need to restructure the industry, raise $50 billion in a bond program and hike deposit premiums at banks and S&Ls; is too great to afford delays, he said.

Later, in a press conference, Breeden said Bush is “not at all” willing to compromise on the issue of FDIC oversight, which Breeden said was a key element of the bill.

The bill would turn the independent Federal Home Loan Bank Board into an agency of the Treasury Department. It also would merge the bank board’s Federal Savings and Loan Insurance Corp. into FDIC, which would manage S&L; deposit insurance separately from banking deposit insurance.

In the process, FDIC’s independence would be weakened because the reconstituted agency would include the Treasury secretary as a member, bankers said. But Breeden told reporters that Bush “owes it to the public” to guarantee oversight of the reconstituted FDIC.

Bush has formed a joint task force of banking and S&L; regulators to seize about 300 insolvent S&Ls; nationwide to limit further risk-taking and begin preparing them for sale or closure.