What happens when an agency takes requests for regulatory relief seriously?
In June, the Office of Thrift Supervision proposed a wagon-load of rules changes meant to cut through red tape and reduce the regulatory burden on savings institutions it oversees.
The OTS gave the industry until mid-August to respond to its proposals, which are part of a larger effort to revise 70% of the agency's regulations. It may have expected praise, but the agency got 23 letters, most of them critical.
Several thrifts were miffed about an OTS plan to cut its 306-word conflict of interest rule to 54 words. The proposal states that thrift officials or fiduciaries "may not advance (their) personal interests, or those of others, at the expense of (their) institution."
Four words, "or those of others," should go, thrift executives told OTS.
Robert Duncan, chairman of Magnolia Federal Bank, Hattiesburg, Miss., termed the phrase "an invitation to litigation if it is not further explained."
Robert Davis, director of government relations for America's Community Bankers, said the phrase "would certainly precipitate needless and costly litigation."
Also criticized was an OTS proposal to rewrite and substantially simplify the rule that bans thrift officials from pursuing lucrative business opportunities that might more properly be pursued by their institutions.
The Washington Savings League said this provision is so broad that thrift holding companies wouldn't know what they are allowed to do. "There is no better way for the OTS to express its policy views ... than by explicit regulation," wrote M. Scott Gaspard, the state trade group's president.
Thrifts' competitors also got in their licks, questioning the wisdom of an OTS proposal to give thrift servicing corporations more latitude, in many cases averting the need for agency approval to offer a new product or service.
Mortgage Insurance Companies of America said it thought the OTS was being too lenient.
"We urge great caution before approving any requests for entry by thrift affiliates into any aspect of the mortgage insurance business," the company advised.
The American Bankers Association said it welcomed regulatory relief but thought the OTS had gone too far. Thrifts should not get OTS approval to offer services such as credit analyses and real estate appraisals to the general public, the ABA said.
"Such a restructuring goes beyond any effort to streamline and clarify the service corporation regulation," wrote John Rasmus, the ABA's senior federal administrative counsel. The "ABA believes that the OTS should not make substantive changes to its regulations in the context of the regulatory burden process when not clearly authorized by statute."
