Thrift Leaders Plan for Clinton
As leaders of what remains of the nation’s savings and loan associations meet here this week, they are assessing a host of issues that confront their industry--the economy, regulation, community reinvestment, affordable housing and others.
Clearly the main concern on the minds of the delegates of the Savings & Community Bankers of America is what the Clinton Administration will do to get the economy--particularly the housing industry--back in gear.
The SCBA, formed in a merger of the surviving thrifts and community bankers this year, expects Clinton to take strong policy stands, clues of which may be revealed today by his housing adviser, Columbia University professor Marc Weiss.
The 3,000 delegates expected to attend the four-day gathering are also expected to call for an easing of “regulatory strangling.” SCBA President Paul Schosberg said regulatory over-reaction to the thrift mess has caused credit to dry up.
“Clearly there was an abuse of deregulation in the 1980s, but the pendulum has swung back to the other extreme,” Schosberg said. “We need to reconcile the need for safety and soundness with the need to promote a stable and affordable flow of credit throughout the economy so that people and businesses and communities can grow.”
The thrift group is also expected to press Clinton for quick approval of $43 billion that the Office of Thrift Supervision says it needs to continue cleaning up the S&L; mess.
Vincent Siciliano, president of International Savings Bank of San Diego, said another industry concern is possible stricter enforcement of the Community Reinvestment Act under Clinton. CRA requires banks and thrifts to reinvest money in their communities in the form of affordable housing loans and charitable contributions.
Campbell Chaney, an analyst with Sutro & Co. in San Francisco, said tougher enforcement of the act could hurt the industry’s bottom line.
The association makes a persuasive case that the industry is on its most sound footing in years. Part of that is because so many problem institutions have been “resolved”--seized or forcibly merged with other institutions. The 4,584 savings institutions that existed in 1980 have been pared down to about 2,000, said SCBA spokeswoman Joan Pinkerton.
Tangible capital among the survivors was up to 5.78% of total assets as of June, compared to 1.67% of assets at the end of 1988. Earnings for the first half of 1992 were $2.9 billion, a marked improvement from losses totaling $13.4 billion for all of 1988.
Bert Ely, an Alexandria, Va.-based S&L; consultant, said much of the credit for the improvement goes to the 1989 federal bill that imposed tough capital standards and empowered regulators to take more active roles in resolving troubled thrifts, which is expected to cost taxpayers $200 billion.
Ely points out that the industry has also benefited from a “little bit of luck”: a propitious drop in interest rates that has enabled some thrifts to “work off their problems.” Lower rates have also lightened the cost of the cleanup for the government, he said.
The industry’s problems are not over, said William C. Ferguson, a thrift consultant whose Ferguson & Co. has offices in Irving, Tex., and Washington. About 25 thrifts are still capital-deficient and as many as 100 to 150 could fail or be merged in the next two to three years, depending “on the California economy as well as the health of commercial banks.”
Schosberg said some big S&L; timber could fall after a Dec. 19 “drop-dead date,” when federal law mandates the resolution of capitally weak thrifts--those with capital that is less than 2% of total assets.
The SCBA was formed with the merger on June 1 of this year of the U.S. League of Savings Institutions and the National Council of Community Bankers. It represents 2,000 thrifts and 6,000 community banks.
