Lawmakers Want to Abolish Thrift Regulatory Agency

Members of the House Banking Committee are talking about abolishing the new office Congress established last August to regulate thrift institutions during the 1989 savings and loan crisis.

Rep. Charles E. Schumer (D-N.Y.) said Wednesday that he will introduce a bill when Congress reconvenes to eliminate the Treasury Department’s Office of Thrift Supervision and turn its authority over to two bank regulators, the Comptroller of the Currency and the Federal Reserve Board.

A similar approach has been advocated by Rep. Jim Leach of Iowa, the second-ranking Republican on the banking committee.

Schumer said M. Danny Wall’s resignation as the thrift office’s top official “presents us with a tremendous opportunity to straighten out a regulatory system that most agree has been jerry-built.”

Wall, after being harshly questioned by the House panel in six weeks of hearings last fall over his regulation of the now collapsed Lincoln Savings & Loan Assn. of Irvine, announced in December that he would step down from the job as soon as President Bush finds a replacement.

The new thrift office in the Treasury Department was established as part of a $160-billion taxpayer bailout of S&L; losses to replace the Federal Home Loan Bank Board as the industry’s chief regulator.

A former banking aide to Sen. Jake Garn (R-Utah) and one-time staff chief of the Senate Banking Committee, Wall had chaired the bank board for slightly more than a year prior to its abolition.

While effectively making S&Ls; come into compliance with federal banking rules, Schumer complained that last year’s bailout law also allowed them to retain their own separate regulator, “leaving open the potential for the same abuses that scarred the industry and depositors in the past.”

“Since the two agencies promulgate regulations that are required by law to have the same practical effect, it is clear that only one body is necessary,” he said of the thrift and comptroller’s offices.

Schumer said his bill would gradually merge the thrift office into the Comptroller of the Currency’s agency to coincide with the scheduled phase-out in 1994 of the Resolution Trust Corp., another new agency established in the bailout law.

The trust corporation’s primary function is disposing of up to $400 billion in real estate and other property collateralizing soured loans by failed thrifts that have been or will be taken over by the government.