Wilson Urges Easing of Bank Regulations to Boost Business

Gov. Pete Wilson, criticizing what he termed overreaction to the savings-and-loan crisis, suggested Thursday that federal banking regulations be loosened to generate more loans for business.

Wilson made his remarks during a question-and-answer session with reporters that followed a speech to 200 Orange County business and government leaders focusing on his call for cutbacks in welfare spending.

In response to questions about federal economic policies, Wilson said:

“I think that we’ve got banking regulation to the point where we aren’t letting people do business. . . . You don’t react to what was a scandal by creating a crippling disability on the ability of competent lenders and borrowers to do business. When someone who has a long credit history is not permitted to borrow, then I think we’re making a serious mistake.”

Wilson’s comments to reporters mirrored sentiments of development industry leaders here, many of whom are key Republican Party contributors.

“I feel that Pete Wilson is on board and recognizes the problem and will speak to the Bush Administration,” said Christine M. Diemer, executive director of the Orange County chapter of the Building Industry Assn.

Diemer, who attended Wilson’s speech at the Irvine Marriott, said that the governor’s support is crucial because she and others believe the regulatory changes could be accomplished within the executive branch, without involving Congress.

Diemer, a former director of the California Department of Housing, said that federal Treasury Secretary Nicholas F. Brady is helping to organize a meeting with regulators next week to discuss possible adjustments that would allow banks and S&Ls; more lending flexibility.

The governor’s suggestion to ease regulation was disparaged as “absolutely irresponsible” by a former top government regulator contacted later by The Times.

Dan Brumbaugh, deputy chief economist of the Federal Home Loan Bank Board from 1983 to 1986, said that “the last thing” California needs is more lending of the type that led to the state’s glut of commercial office space.