‘Cleaning Up Thrift Mess’
In its editorial “Cleaning Up the Thrift Mess” (April 5), The Times counsels a prompt and efficient resolution of the difficulties faced by the savings and loan industry. I endorse your thinking on several accounts.
First, Sen. Donald Riegle’s (D-Mich.) initiatives to move resolution financing under Treasury will reduce the direct cost to taxpayers of the Administration’s program.
Second, I believe that bringing the Home Loan Bank under direct control of the Treasury Department will assure the long-term success of the program.
Third, efforts to introduce more direct control of state-chartered thrift institutions should be applauded.
I would differ with your position on the timing of new capital standards for the thrift sector. The capital requirements timetable suggested by Treasury Secretary Nicholas Brady is likely to be neither efficient nor equitable. By permitting banks a longer period to phase in new capital standards than that allowed thrift institutions, and by potentially introducing more stringent standards for thrifts than banks, the Brady proposal is short-sighted.
As these regulations potentially hinder the deposit-gathering and real estate lending efforts of healthy thrifts, they serve to reduce competition in both markets. Further, the Brady treatment of regulatory capital, if unamended, will make it difficult for healthy savings and loan institutions to assist the government in resolving the problems of hundreds of insolvent institutions.
Treasury’s draft legislation of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 was hastily conceived--so hastily that the Administration was forced to offer no less than 452 technical amendments within three weeks of the bill’s introduction. The effect of this hasty conception is to potentially reduce the competitiveness of our financial markets and impede the resolution of currently troubled institutions.
If the Administration’s bill can be amended to permit a realistic timetable for implementation of new capital standards and to constructively treat the good will on the books of healthy thrift institutions, then that amended bill should be passed with all deliberate speed.
JOHN R. TORELL III
Chairman and President
CalFed Inc.
Los Angeles
