Give Bailout a Chance, Thrift Chief Urges

The nation’s top savings and loan official pleaded with Congress today to give President Bush’s thrift bailout program a chance to work before changing or scrapping it.

“What we need now is stability. Constant tinkering, even with the best of intentions, imposes tremendous costs on the industry, the regulatory system and the American public,” said Salvatore Martoche, acting director of the Treasury Department’s Office of Thrift Supervision.

Rep. Frank Annunzio (D-Ill.) and his House Banking subcommittee on financial institutions, are reviewing suggestions for changing the S&L; law enacted nearly eight months ago.

Proposals range from abolishing the thrift office and dividing its duties among commercial bank regulators to providing temporary relief from lending rules that some home builders say are crimping their credit.

Martoche conceded that some changes might improve the law, but said the benefits were outweighed by the potential harm of disruptive changes.

“I’ve been around legislative bodies long enough to know that when you do a reopener, everything but the kitchen sink gets taken up,” he said.

The S&L; law sharply reduced the maximum amount an institution can lend to one borrower. The intent was to prevent the bankruptcy of a single customer from severely hurting a thrift. However, builders complain that they can’t get the loans they need and say the limit should be phased in.

Martoche said the thrift office is leaning toward phasing in the restrictions over two years, but is uncertain whether the law will permit that. The agency has given industry lawyers 60 days to suggest a “creative solution” to the dilemma, he said.