Debate Rages Over Bank Board Job : Garn, Gonzalez Head for Showdown Over Future of Wall

Sen. Jake Garn of Utah, the ranking Republican on the Senate Banking Committee, and House Banking Committee Chairman Henry B. Gonzalez (D-Tex.) are headed for a showdown over one of the most divisive issues in pending legislation to bail out the savings and loan industry: Whether the nation’s chief S&L; regulator, M. Danny Wall, deserves to keep his job.

Garn says yes. Gonzalez says no.

Wall, who was an aide on Garn’s staff for 14 year before being named chairman of the Federal Home Loan Bank Board, should be allowed to complete the four-year term he began two years ago, Garn argues.

Gonzalez says Wall has bungled the job by consistently underestimating to Congress the cost of the S&L; bailout and the need for taxpayer funds to clean up the industry. Wall should not automatically be given the new S&L; regulatory job that will be created under President Bush’s plan to revamp and bail out the S&L; business, Gonzalez says.

As members of the House and Senate Banking committees meet this week to reconcile their versions of the Bush rescue package, Wall’s nomination looms as one of the few issues on which the two sides may be unwilling to compromise.

The sticky question of how much money investors should have to invest in the S&Ls; they own essentially has been settled, with the stricter House capital rules likely to be adopted, according to congressional aides. All other important issues, such as whether part of the multibillion-dollar bailout will be kept off the federal budget, also are close to resolution, aides say.

The House version of the bill stipulates that the President would have to nominate and the Senate confirm the chairman of the new agency that will be set up to replace the bank board, which will be dissolved. That means that Wall might get the new job, but not automatically.

The Senate version stipulates that the current bank board chairman--namely, Wall--would automatically head the new agency.

Garn said he will go along with either version as long as the chairmanship of the Federal Deposit Insurance Corp., which now regulates banks and will get the additional duty of sharing oversight of S&Ls; under the Bush plan, is treated the same way.

As long as FDIC Chairman L. William Seidman is allowed to continue in his job, Garn argues, then Wall should be permitted to continue in his. But if the chief S&L; regulator must be nominated and confirmed, then the FDIC chairman should be too, Garn said.

“It’s not a substantive issue . . . but it’s a big small issue, if I can describe it that way,” Garn said. “Let’s just have fairness and treat both (Wall and Seidman) the same way. I will fight over that principle.”

Gonzalez says Seidman should not have to go through confirmation again because, while the FDIC’s duties are expanded under the Bush bailout plan, as an agency it is left intact.

By contrast, the bank board that Wall now heads will go out of business and a new regulatory agency will be created within the Treasury Department to replace it. The creation of a new agency requires that its chairman be confirmed by the Senate, Gonzalez argues.

For Gonzalez to get his way, Garn said, would be “unacceptable.”

The White House has sided with Garn, saying the Administration favors allowing Wall to continue to be the nation’s chief S&L; supervisor. But officials also said it’s not a major issue for the President and he will not veto the bill over it.

Campaigns for Job

In recent weeks Wall has appeared to be campaigning for the job. At a conference of the S&L; industry in June, he told reporters that he thought it would be unwise to change the nation’s chief S&L; regulator in the middle of a crisis.

A week later Wall called a press conference at which he repeated that he thought he should be allowed to retain his job automatically.

Gonzalez is preparing a report for the conference criticizing Wall’s performance since taking over at the bank board in July, 1987. The report contends that:

* Wall repeatedly underestimated the cost of the S&L; problem, which helped delay action by Congress, adding billions of dollars to the ultimate cost of closing hundreds of ailing S&Ls; across the country.

“Gonzalez doesn’t feel like Wall ever leveled with Congress on the depth of the problem,” said a spokesman for the congressman.

* Wall committed billions of dollars more than government auditors say was necessary to wealthy investors who agreed to take dozens of ailing S&Ls; off the government’s hands at the end of 1988. In addition, Wall kept Congress in the dark about the deals, which Gonzalez and other lawmakers say prevented legislators from blocking the sales and minimizing the cost to taxpayers.