S&L; Aide Wants Supervisory Agency Abolished : * Thrifts: A California League of Savings Institutions executive suggests merging the OTS into the office of the federal comptroller of the currency.

The president of the statewide trade group for savings and loans said Friday that he thinks the Office of Thrift Supervision ought to be abolished and its regulatory powers transferred to the federal agency that oversees national banks.

Dean Cannon, a longtime California League of Savings Institutions executive, said in an interview with league officers that he favored merging the OTS into the office of the comptroller of the currency, which regulates banks.

“We don’t need the OTS,” he said. “But the industry would not be abolished. Whatever name we’re called, there is going to be a need for home loans, and there could be different rules under one agency to fit the functions of what we do.”

OTS Director T. Timothy Ryan has said he also wants to see his agency merged with a banking agency. Once uncertain of whether the industry should survive, he recently has told thrift executives that there is a need for a separate mortgage-lending industry.

Cannon also said Friday that a separate deposit insurance fund for thrifts at the Federal Deposit Insurance Corp. should be merged with the fund for banks and that the FDIC should get out of the business of regulating financial institutions.

League members have long complained that financial audits by regulators have become a burden because up to three different agencies audit thrifts now, the agencies each send in a number of agents who take up valuable management time, and the thrifts have to foot a much bigger bill for the audits.

Stephen W. Prough, president of Western Financial Savings Bank in Irvine, said about 18 examiners from the FDIC, the OTS and the state Department of Savings and Loans simultaneously converged on his institution recently for a routine audit.

The trade group and the healthy institutions remaining in the industry--about half the S&Ls; that once existed--must resume lobbying efforts to fashion thrift laws that make sense for the industry, Cannon suggested. Current laws are too restrictive--even punitive--and keep healthy institutions from getting stronger.

“We can’t sit around and let Congress and the regulators continue to destroy the healthy part of the industry,” Cannon said.