GAO Says Bush Trying to Ease Bank Oversight : Finance: The testimony by Charles Bowsher sparks partisan fireworks at a Senate hearing.

The head of the General Accounting Office on Tuesday accused the Bush Administration of trying to weaken federal regulation of troubled banks, touching off a bitter round of partisan name-calling at the Senate Banking Committee.

Comptroller General Charles A. Bowsher, speaking in unusually blunt terms, told the committee that he was “dumbfounded” to read about an attack on regulation by Assistant Treasury Secretary John Robson.

Bowsher, whose agency is the investigative arm of Congress, said he fears that the Administration may be trying to “water down” enforcement of a 1991 law requiring early intervention by regulators when banks get into financial difficulties.

Sen. Pete V. Domenici (R-N.M.), arriving after Bowsher had given his initial testimony, in turn launched a sweeping verbal attack on the GAO. He called the 5,000-member agency a “leech” performing endless audits of other government agencies. He said the impartiality of GAO reports is often doubtful and accused it of lobbying for legislation.

The committee chairman, Sen. Donald W. Riegle Jr. (D-Mich.), sprang to the defense of the GAO, accusing Domenici and the Administration of “attempting to create a climate of intimidation.”

“They are trying to get you to lay off, to not be tough, to not call things as you see them,” Riegle told Bowsher. “You do your job; you blow the whistle; you blow it loud and long.”

Bowsher said after the hearing that “I don’t feel intimidated, but I was disappointed not to get support from both sides of the (political) aisle.”

Bowsher told the committee that financially troubled banks hold $611 billion in assets, up from $408 billion a year ago, and warned that the ability of the Federal Deposit Insurance Corp. to handle future failures without a taxpayer bailout is subject to the uncertainties of future “economic and market conditions.” The fund “has significant exposure to additional losses from troubled banks over the next several years,” according to the GAO.

Bowsher said the GAO gave an endorsement to the accuracy of the FDIC financial statement, the agency that protects bank deposits up to $100,000.

The FDIC can borrow up to $30 billion from the FDIC treasury to handle bank failures, but the regulatory agency says it can repay all borrowings with premiums collected from the nation’s banks.

Tuesday’s hearing demonstrated that the GAO’s work in the politically sensitive areas of bank and thrift regulation will draw increasing scrutiny in this election year. Democrats will look for ammunition to attack the Administration. Republicans will search for a partisan tilt in the GAO’s reports.

The Bush Administration argues strongly that the major financial crises for the banking and thrift industries are over. Robson said Monday that the banks will make more loans to help economic growth if they are not hampered by overly zealous federal regulators.

But Bowsher told the committee that he considers those remarks as “kind of a code word for saying, ‘Let’s water down the regulations.’. . . That really worries me a lot.”

The GAO and the Administration disagree strongly about the proposed regulation calling for federal examiners to review the current value of real estate in a strict fashion that could force banks to take major losses for depressed real estate.

Instead, the Administration wants the regulators to consider such factors as the history of the borrower, the economic atmosphere and the long-term prospects for the real estate properties.

For the GAO, such an approach would “take the reality out of accounting,” Donald Chapin, assistant comptroller general, told the committee.

Bowsher also accused the Administration and congressional Republicans of trying to repeal a provision in the law requiring outside accounting firms to issue special reports on the effectiveness of bank management controls.

The Treasury fired back at the GAO after Bowsher’s testimony. His comments about the Treasury trying to weaken enforcement of the law are “nonsense,” said Treasury spokeswoman Anne Kelly Williams.

“No one has suggested watering down the safety and soundness provisions of (the law,)” she said. “What Mr. Robson said yesterday was that Treasury has opposed and will continue to oppose excessive regulation.”