Gov. Wilson Urges Easing of Federal Banking Rules : Loans: In address to Orange County leaders, he says current regulations ‘aren’t letting people do business.’

Gov. Pete Wilson, criticizing what he termed overreaction to the savings and loan crisis, said Thursday that federal banking regulations should 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.

In his prepared remarks, the governor restated his call for cutbacks in welfare spending to avert what he described as more dire economic choices.

Asked afterward whether he believes that President Bush is doing enough to help pull California out of the recession, the Republican Wilson at first said that the President’s problems are similar to his: Each is faced with a legislative branch controlled by adversarial Democrats.

Pressed whether he sides with criticisms of the President’s economic policy voiced by other Republicans--including U.S. Housing Secretary Jack Kemp--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.

But the governor’s call for an easing of regulation was disparaged as “absolutely irresponsible” by a former top government regulator.

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

At a time when still-ailing banks and S&Ls; are under what he termed “stress” to make more risky loans, Brumbaugh said vigilant regulation remains imperative.

Although Wilson did not specify any particular banking institution, his comments disparaging over-regulation came on the same day that authorities indicted fallen S&L; executive Charles H. Keating Jr. on new charges of bank fraud, racketeering and conspiracy.