WASHINGTON - Jerry Hawke is back.

After a year of self-imposed exile, legendary banking lawyer John D. Hawke Jr. has returned to the limelight as Treasury under secretary for domestic finance - the Clinton administration's point man on issues affecting the financial services industry.

Mr. Hawke, 62, may understand banking better than anyone who has ever held his job. Since the early 1960s, he has written banking regulations, designed bank mergers, and litigated many of the industry's battles over product and geographic expansion, regularly suing regulators he felt had overreached their authority.

He's used to winning.

A man without pretense, Mr. Hawke is a straight-talking, get-it-done type. To wit: just six weeks after taking the Treasury Department job, he pulled together the administration's $12 billion plan for salvaging the Savings Association Insurance Fund. To be sure, banking regulators had crafted the key elements before he took office, but it was Mr. Hawke who ended months of negotiations and delivered the proposal on Capitol Hill July 28.

While he has made a fortune representing banks over the last 30 years, Mr. Hawke is anything but an industry shill. In fact, bankers are 0-for-3 so far under the administration's proposal to rebuild the thrift fund. In an interview, Mr. Hawke made no apologies for laying a big chunk of the rescue's cost off on banks.

"Arguments by the bankers that they shouldn't be required to participate in the SAIF fix because the failure of the thrift industry was not their fault is basically irrelevant," he said.

Mr. Hawke is also deaf to bankers' demands that others - including credit unions and government-sponsored entities like Fannie Mae - contribute to the cleanup.

"I don't think it profits any of these discussions to try to go out and throw mud at fundamentally different kinds of institutions," he said. "To talk about how to deal with recapitalization of the insurance funds ... by talking about rewriting the rules to bring in credit unions and government- sponsored enterprises just isn't realistic."

Finally, while the industry is pushing to broaden the administration's financial fix to cover issues such as melding the two industry's charters, Mr. Hawke wants to focus on the administration's three-part narrow solution. That plan would raise $6.1 billion from thrifts to capitalize the thrift fund, merge it into the bank fund, and force banks to pay 75% of the annual interest on the Financing Corp. bonds.

That said, Mr. Hawke is working on what he calls the "Phase 2" issues, such as a common charter. But when he delivers this second piece of legislation to Congress around Oct. 1, do not expect the Treasury Department to support giving banks the freedoms included in the thrift charter.

"It would be a mistake to try to turn the consideration of the Phase 2 issues into a surrogate for financial modernization," Mr. Hawke said. "More likely, it would bring everything to a screeching halt. Look where financial modernization is in the House today.

"We want to get the Phase 2 issues done as a transition to financial modernization; we don't want it to become the vehicle."

Financial modernization includes repealing the Glass-Steagall Act, the Depression-inspired law that separated commercial banking from investment banking.

But Mr. Hawke does not expect Glass-Steagall to be reversed in 1995; he doesn't think the Senate will have time to tackle the bill.

He is still hopeful that Congress can enact regulatory relief for the banking industry, but warned that President Clinton will sign the measure only if Republicans and bankers back off attempts to water down the Community Reinvestment Act.

"If they want to make a statement about gutting CRA then they'll have their statement, but I think the chances of that bill getting vetoed are extremely high," he said. "In effect what they will be doing is sacrificing meaningful regulatory burden reform on the CRA altar."

While all this sounds like bad news for bankers, Mr. Hawke is an industry ally on at least one front. He opposes the efforts of insurance agents to link regulatory relief to limits on bank powers, and he thinks the agents are doomed to failure.

"It's a tribute to their lobbyists ... but it's got to be a losing battle," Mr. Hawke said. "The number of insurance agents is diminishing steadily and the average age of insurance agents is increasing. The old independent agency system of delivering insurance products is fading away."

Mr. Hawke criticized Republican leaders in the House who are backing the insurance agents.

"There is something sort of anomalous for a pro-business, pro- competition, pro-free market Congress to ... take up the cause of financial calcification," he said.

Mr. Hawke also opposes any bill that clamps down on the Comptroller of the Currency's power to expand bank products and services. (The Comptroller's office is a bureau of the Treasury Department, and the House version of regulatory relief currently contains a provision that would handcuff the agency.)

"The Comptroller of the Currency has been the single most progressive force in the country for the modernization of banking," he said.

Though a lifelong Democrat, Mr. Hawke sounds much like his free-market predecessors from the Bush administration.

"The role of government ought to be as little as possible," he said. "The government should not interfere in the operation of financial markets in a way that creates distortions."

But then Mr. Hawke has been saying that for a very long time.

He got his start in banking law in 1962, when he joined Arnold & Porter here.

"The firm had 25 lawyers and I got assigned to handle a lawsuit against the Comptroller of the Currency," Mr. Hawke recalled. "It was my first trial. I won, and that started my banking career. From then on anything that remotely had anything to do with banking was handed to me."

And much of what he was handed involved suing the government.

Mr. Hawke took the leading bank merger case of the 1960s to the Supreme Court and established the antitrust rules that govern the industry. In the late '70s and early '80s, Mr. Hawke successfully sued the Fed and the Federal Deposit Insurance Corp., blocking the agencies from conjuring up other reasons to deny mergers.

He was also an early engineer of interstate banking, representing the Bank of New England in the first legal challenge to a regional compact. The compact, between Massachusetts and Connecticut, was upheld by the Supreme Court in 1985.

Although Mr. Hawke was the Fed's general counsel in the mid-1970s, that never stopped him from taking on the central bank. In 1986, Mr. Hawke squared off with Michael Bradfield, then the Fed's general counsel, before the Supreme Court in the Dimension "nonbank-bank" case. The 8-0 decision written by then-Chief Justice Warren Burger criticized the Fed's overregulation of nonbanks.

Mr. Hawke also influenced a generation of attorneys through a course he taught at Georgetown University from 1971 to 1988 on the federal regulation of financial institutions .

In 1987, Mr. Hawke was elected chairman of Arnold & Porter and began phasing out of his hectic litigation practice. As he got more and more involved in the operation of the 350-lawyer firm, Mr. Hawke was less and less involved in banking issues.

"I was spending very little time on the practice, which is what I really loved, and a great deal of time managing the law firm," he said. "For a couple years I felt like I was not really cut out for or interested in (the job.) So retirement was certainly a possibility."

Mr. Hawke decided to take much of last year off. He traveled in Italy, studying opera and cooking. He spent the summer of 1994 fishing on Martha's Vineyard. But he decided he wasn't ready to retire.

So he jumped at the Treasury Department job when he got a call last fall from Frank Newman - the former Bank of America executive who was then under secretary. The department's deputy secretary, Roger Altman, was resigning, and Mr. Newman was moving up, leaving the under secretary's position open.

Mr. Hawke and Mr. Newman met in the late 1980s when First Interstate made a hostile takeover bid for Bank of America and Mr. Hawke served as an outside counselor to the San Francisco bank.

Sworn in June 14, Mr. Hawke is working 12-hour days for $123,100 a year - a fraction of what chairmen of major law firms make.

"This was the perfect job at the perfect time," he said. "I really could not imagine a better place for me to be in terms of my interests, my background, or my ability to make a contribution."

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