Regulators: Fix Fund Before Combining Banking Agencies

Congress should not consolidate the federal banking and thrift agencies until it has a clearer picture of what the financial services industry will look like, top regulators told the House Banking Committee on Tuesday.

"We should evaluate the benefits and costs of major changes in our regulatory structure only after congressional deliberations on reform of the laws governing the banking and thrift industries," said Ricki Helfer, chairman of the Federal Deposit Insurance Corp.

House Banking Committee Chairman Jim Leach, R-Iowa, who called the hearing, said he is considering bringing a bill to the floor this year to merge the Office of Thrift Supervision and the Office of the Comptroller of the Currency into a new Federal Banking Agency.

But regulators urged Rep. Leach to hold off. Treasury Under Secretary John D. Hawke Jr. said Congress should first rescue the ailing Savings Association Insurance Fund. Legislation pending before Congress would capitalize the thrift fund, merge it with the Bank Insurance Fund, and require thrifts to switch to bank charters.

Only after the funds have been merged should the Office of Thrift Supervision be eliminated, Mr. Hawke argued. He recommended that during the phaseout of the thrift charter, the functions of the Office of the Comptroller of the Currency and the OTS should be combined. At the end of that period, "OTS' separate existence would cease," Mr. Hawke said.

The government would either help OTS employees find work in the public or private sector, or reassign them to one of the three remaining banking agencies, Mr. Hawke said.

However, Jonathan L. Fiechter, acting director of the Office of Thrift Supervision, was wary of Treasury's plan. "Any proposal that does not provide minimal job protection for OTS employees will hurt morale," Mr. Fiechter said in brief interview.

Although consolidation may not occur immediately, the agencies are trying to coordinate supervisory policies. Comptroller of the Currency Eugene A. Ludwig testified that the agencies have been working together to improve uniformity in areas such as capital adequacy and record keeping.

The Clinton administration thrust regulatory consolidation into the spotlight in 1994 when it proposed merging the four bank and thrift agencies into a single, super regulator. The Federal Reserve Board, which didn't want to lose its supervisory authority, helped derail that effort.

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