FDIC Chairman Seidman Will Resign : Sentiment in Congress Leans Toward Overhauling RTC, Giving It Independent Chief

L. William Seidman’s replacement won’t be wearing his two hats, as a bank regulator at the Federal Deposit Insurance Corp. and as a savings and loan asset salesman at the Resolution Trust Corp., Congressional experts and financial analysts agreed Tuesday.

Congressional irritation with the Resolution Trust Corp., often deflected by Seidman, is coming into full bloom. The RTC has been plagued by charges of ineptitude and inefficiency in handling the assets of hundreds of failed thrifts, and many members of Congress seem determined to push for a major structural overhaul.

Seidman’s unique powers, as the director of both agencies, may be parceled out if Congress decides to change the law and give the RTC a strong, independent chief executive.

“Seidman has done his best, and that hasn’t been good enough because of the confusing nature of the governing structure of the RTC, two boards and no chief executive with real powers,” said Bruce Vento (D-Minn.), head of a House Banking Committee task force.

Robert Litan, a senior Brookings Institution analyst and S&L; expert, said, “Seidman always hinted that the jobs were different. The new RTC chief’s major objective should be to sell stuff,” whereas the FDIC chief is primarily concerned with bank supervision.

In just two years, the RTC has become a vast holding company for the debris of failed S&Ls.; The agency has $163 billion in assets, and two-thirds of that is in overdue loans and foreclosed real estate.

The 45,000 real estate properties on the books of the RTC--houses, condominiums, shopping centers, office buildings and raw land--are proving hard to sell in a depressed market. The job will become even tougher for the agency as inventory increases. Many of the overdue loans will wind up in foreclosure, bringing more properties directly under the RTC control. And Seidman has estimated that additional thrift failures will add at least $100 billion more in bad assets to the RTC’s staggering burden.

The most popular legislative vision of a reorganized RTC is modeled on a private corporation, with a chief executive, a chief financial officer and an independent board.

This would replace the current RTC Oversight Board, which includes Treasury Secretary Nicholas F. Brady, Housing and Urban Development Secretary Jack Kemp, Federal Reserve Board Chairman Alan Greenspan and two members from the private sector. The Bush Administration is opposed to changing the current structure, which gives it control of policy-making powers for the RTC.

Several names have been circulating as possible candidates to run a revamped RTC.

Postmaster General Anthony M. Frank, who ran an S&L; before coming to Washington, has expressed interest in getting back into the industry. But there are mixed evaluations of his performance as an S&L; executive.

The list of possible candidates also includes Timothy Ryan Jr., head of the Office of Thrift Supervision, which regulates S&Ls.; He is praised for doing an efficient job, but Congress might balk at giving him the bigger RTC task because he is a protege of Treasury Secretary Nicholas and might be considered too close to the Administration.

John LaWare, the banking expert on the Federal Reserve Board of Governors, is well respected, but might consider it a step down to leave the prestigious Fed for the RTC job with its attendant controversy. Comptroller of the Currency Robert L. Clarke would bring a keen understanding of the intricacies of financial institutions. But he would face an uphill battle in the Senate, where many members have been hearing from angry local bankers who think of Clarke as the “regulator from hell.” Also mentioned in some circles is Gerald Greenwald, former vice chairman of Chrysler, would bring a national executive repuation to the job. But he might not be willing to work under constraints established by Congress.

“Whoever steps in will not have the same type of public understanding and sympathy” given to Seidman, Vento said.

The FDIC, meanwhile, faces problems of its own, with the bank insurance fund expected to be insolvent by the end of the fiscal year. The House and Senate banking committees have passed separate bills providing $70 billion in temporary borrowing authority for the fund, with the money to be repaid by premiums from the banking industry.

Seidman’s replacement at the FDIC will run the fund at a time of great uncertainty for the banking industry, during a depression in commercial real estate that threatens the solvency of many banks.

The White House last year picked William Taylor, the Federal Reserve Board’s director of bank regulation, as Seidman’s eventual successor at the FDIC. But the President Bush said Tuesday that he hasn’t made any final selection for the job.

The White House may now be hesitating and reviewing Taylor’s candidacy because of the scandal surrounding the Bank of Credit & Commerce International, which was a haven for spies and drug smugglers, and secretly controlled First American Bankshares Inc., a bank holding company with branches in seven states and the District of Columbia.

Taylor recently told Congress that Fed officials were deliberately misled about the illegal control of First American bank by BCCI, which was based in Luxembourg and directed by Persian Gulf investors. But members of Congress may raise questions about the Fed’s effectiveness under Taylor in enforcing the law that prohibits bank holding companies from buying other banks without specific permission.

The Agencies at a Glance Federal Deposit Insurance Corp.

The FDIC was created by Congress with the 1933 Banking Act to protect bank depositors after the severe financial crises of the early 1930s and officially opened for business Jan. 1, 1934. The agency insures deposits of up to $100,000.

The President appoints the chairman for a five-year term and the vice chairman and director for six years. The agency employs about 19,000 people, including the 5,500 employees of the Resolution Trust Corp.

There was an average of 179 bank failures a year between 1985 and 1990, compared to an average of only 11 a year between 1943 and 1985. The FDIC assumed the role of insuring savings deposits in 1989 when it took over $13 billion in assets previously under the FSLIC. The FDIC’s insurance fund, made up of assessments paid by insured banks and earnings on U.S. government securities, stood at $8.5 billion at the end of 1990. The fund backs about $2 trillion in deposits.

Resolution Trust Corp.

The agency was formed in August, 1989, to sell off assets of failed savings and loans. Resolution Trust is managed by the FDIC and is funded through the issuance of $50 billion in federally guaranteed bonds. The S&L; industry ran into trouble in the 1980s with bad loans on commercial real estate and junk bonds.

The RTC has recently come under fire by the General Accounting Office, which issued a report saying that the agency still doesn’t have a handle on all its assets, that its finances are disorganized and that it inadequately supervises its subcontractors. And a recent study by the The Times showed that, although the law creating the RTC calls for efforts to encourage participation by women and minorities in handling failed S&L; assets, few contracts were being granted to those groups.

Through June, the RTC has closed 430 S&Ls; and recovered $160 billion. It employs about 5,500 people, including 500 staff lawyers.

Handicapping the Candidates William Taylor is seen as the leading candidate to replace L. William Seidman as chairman of the Federal Deposit Insurance Corp. Meanwhile a restructuring of RTC has been proposed, which would create a strong chief executive of that agency. Here are four of the leading candidates thought to be vying for the RTC post. The FDIC Candidate William Taylor Title: Head of banking regulation, Federal Reserve Bank Age: 52 Pro: Widespread support to head FDIC Con: Could be hurt by Fed’s regulation of banks controlled by BCCI The RTC Candidates Anthony Frank Tite: Postmaster General Age: 60 Pro: Actively seeking job of running thrift cleanup Con: Both his Postal Service and S&L; performance are seen as lackluster Robert L. Clark Title: Comptroller of the Currency Age: 49 Pro: Expert in financial issues Con: Would face strong opposition in Congress John LaWare Title: Member, Federal Reserve Board of Governors Age: 63 Pro: The Fed’s banking expert Con: May not want to leave Fed during crucial period Timothy T. Ryan Jr. Title: Director, Office of Thrift Supervision Age: 46 Pro: Seen as tough, competent regulator Con: Not well known, head of much smaller agency

COLOR, (Orange County Edition) The Agencies at a Glance

COLOR, (Orange County Edition) Handicapping the Candidates