Bank Regulators to Hold Hearings on Credit Crunch : Lending: The meetings come amid a heated presidential campaign. Many debate whether a crunch even exists.

The nation’s top financial regulators will hold an extraordinary series of meetings nationwide to allow bankers and borrowers to air grievances about alleged regulatory abuses that may be contributing to a credit crunch.

Treasury Secretary Nicholas F. Brady ordered the meetings--starting later this month in about a dozen cities, including Los Angeles--to explore allegations that federal bank examiners have abused their power in enforcing lending standards on banks and thrifts.

The sessions come in the midst of a heated presidential campaign and as the Bush Administration has expressed renewed concern about difficulties that real estate and small business interests say they are having getting loans.

“We continue to hear from bankers and borrowers that the examiners are inhibiting the extension of credit,” Brady said in a memo to regulators about the meetings.

The Commerce Department has scheduled its own credit crunch summit session in Washington for next Monday, with bankers and top Administration officials, industry sources said.

“There are persistent complaints about credit issues in the real estate area,” Deputy Treasury Secretary John Robson said Tuesday. “We can’t make banks make loans, but what we can do is address the regulatory part of the overall lending environment.”

The existence of a credit crunch has been debated for some time. Some borrowers and banks complain that strict regulatory guidelines have made loans hard to get; but regulators and other banks say loan demand is weak and credit-worthy borrowers few.

For more than a year, the Treasury has encouraged banks to make more loans and exhorted financial regulators to be more understanding and sympathetic when reviewing the records of lending institutions. Treasury officials have attended gripe sessions with legislators and local business executives. And lenders were previously invited to complain to regulatory headquarters in Washington through a special appeals process, bypassing the field examiners. But talk of a credit crunch persists, as lending activity remains comparatively sluggish despite extraordinarily low interest rates.

Brady’s newest directive goes a major step further, bringing a public arena of confrontation to the normally private federal examination and regulation process. He wants borrowers as well as bankers to come to public sessions and provide specific complaints of mistakes and abuses by the government’s staff of regulators.

“I am requesting that you arrange to meet with institutions and borrowers in a variety of locations across the country, with the idea of hearing specific allegations of misapplication of examination guidelines,” Brady said in a memo to Timothy Ryan, director of the Office of Thrift Supervision, and Stephen Steinbrink, acting comptroller of the currency. “To the extent that specific allegations are verified, I would expect that you and your staff would take prompt and appropriate action.”

The Treasury wants the public sessions to focus on three major topics: the restructuring of mortgages in commercial real estate, which has suffered a tremendous slump because of overbuilding in the 1980s; the development and financing of single-family homes and apartments, and the availability of loans to small businesses.

Brady told Ryan and Steinbrink, whose agencies are part of the Treasury Department but normally operate with a high degree of independence, to report to him directly after the meetings “so that Treasury staff and your agency personnel can immediately begin to assess problems raised and address solutions.”

This puts Ryan and Steinbrink in the unusual position of holding public meetings to invite complaints and accusations against the people who work for them overseeing the financial stability of savings and loan associations and banks.

Robson said bankers as well as regulators share the blame if there is a scarcity of credit. “We don’t think the business of banking is to take deposits and stick them in Treasury bills, and sit there not making loans,” he said.