State S&L; Regulators Hobbled by Lack of Funds, Report Says
The California Department of Savings and Loan is almost as bad off as the industry it regulates, according to a report released Friday by a legislative study commission.
The state agency is inadequately staffed, may run out of funds by the end of the fiscal year and is hobbled because its budget comes from the institutions it is supposed to regulate, said the study and its authors.
“The report . . . concludes after two years of study that inadequate support of our state’s regulatory system contributed significantly to the financial disaster we are now faced with,” Senate President Pro Tem David Roberti (D-Los Angeles) said at a press conference in Los Angeles.
The study was done by the Senate Advisory Commission on Cost Control in State Government. It evaluated the effectiveness of both the state banking department and the savings and loan department, but most of the criticism was directed at the savings and loan agency.
The department regulates the 135 thrifts that operate under California charter. The remaining 70 or so thrifts in the state are federally regulated. All insured institutions, whether supervised by the state or federal regulators, are insured by the federal government.
The state S&L; department’s $9-million budget comes solely from assessments on the institutions it regulates. Many of the biggest state thrifts converted to federal status in the early 1980s, leaving the state agency to cope with a declining budget as regulatory problems became more complex as a result of the new powers granted to thrifts.
According to the study, the department was forced to relax its supervision of thrifts under threat that they would convert to federal status and further reduce the agency’s budget.
William J. Crawford, commissioner of the department, acknowledged the need for a new funding mechanism, but he disputed the assertion that the agency has gone easy on any institution.
May Combine Regulators
Crawford said he cut his own budget last year when he refused to approve a state charter for the new American Savings & Loan after its purchase by Texas investor Robert M. Bass and others. Crawford objected to some of the activities that were being allowed of the new owners, and American eventually obtained a federal charter.
The study said new funds must be found to keep the agency afloat and increase spending for training its examiners. But Roberti acknowledged that persuading the Legislature to appropriate money for the agency might be difficult.
“We have to factor this into our priorities,” Roberti said.
Kirk Hallahan, a spokesman for the California League of Savings Institutions, said its members might be willing to increase the assessment they pay the agency. He also said there has been talk in the Legislature about combining the S&L; regulators with the banking regulators, which would save some money.
