To the Editor:
Government officials' continuing appeals for the banking industry to be made responsible for problems now facing thrifts and the Savings Association Insurance Fund call for response. The most recent appeal was made by John D. Hawke Jr., Treasury under secretary for domestic finance, in your March 14 issue ("Banks Shouldn't Hold Thrift-Fund Fix Hostage," page 4).
Mr. Hawke is a forceful advocate for bank involvement. His views deserve serious attention because of the force of his intellectual commitment to this matter, the stature and good will he has from years of successful financial legal practice, and because of his current position in government.
But the arguments that he and others make in this matter are, nevertheless, misplaced.
The argument is that the thrifts that survived the crisis of a few years ago did not cause it; those that failed did.
It is also being argued that the taxpayers did not cause the problem. It seems there is no one left to blame, so blame is "irrelevant."
But the squeeze needs to be put on someone, and it is being put on the banks - because, as Willie Sutton said when asked why he robbed banks, "that's where the money is."
The problem with this line of reasoning is that, i n reality, thrifts both past and present were part of the problem - as were the taxpayers, indirectly, through their elected government officials.
It was the government and its long-standing and well-intentioned but fundamentally flawed favoritism toward the thrifts and policies toward homeownership that caused the problem. The only reason the government is not being asked to pay up is that it no longer has a willingness to pay, because of the federal deficit.
The government policies at fault are those that fostered and supported the savings and loan industry as a set of special institutions for the sole purpose of financing the American dream of homeownership.
The policy - which used tax subsidies, special regulations, and regulatory forbearance - was highly successful, with America becoming the best-housed nation in the world.
But as worthy as this dream may have been, it was financed by continually accommodating the needs and inconsistencies of the savings and loans, in vain effort to sustain their flawed charter, which called for them to fund long-term mortgages from short-term deposits.
If we were really honest about how we got to this situation, the government would be asked to pay. That may not be feasible, but at least it would be honest. It would also be an appropriate course of action for the government to take in a free and just society.
Anthony T. Cluff
Executive director,
Bankers Roundtable
Washington
