I was appointed director of the Office of Thrift Supervision just a few weeks ago. Since that time, I have found myself confronted in meeting after meeting with the question: What is the future of the thrift industry? To be honest, I simply do not know yet. And I find that a number of the people I talk to do not yet know the answer either.

What I do know is that the nation's thrift industry is alive and well. The industry has recorded 20 consecutive profitable quarters, including record earnings of $3.7 billion in the first two quarters of 1996. Thrifts' equity capital of approximately 8% is comparable to banks' capital, and other key measures also reflect the strong performance.

I believe that thrifts continue to play an important role as mortgage and community lenders. It is clear, however, that competition has intensified on both the asset and liability sides of their balance sheets. Nonbank lenders and government-sponsored enterprises have moved strategically into the residential mortgage market, and thrifts have lost market share. Thrifts, like banks, also have seen their deposit base erode as the inflow of money to mutual funds has boomed in the last several years.

I also know that Congress recently acted to benefit communities by enacting legislation to enhance the thrift charter so these institutions have more flexibility to better serve their community's credit needs.

More than 90% of all thrifts have assets of under $500 million, and nearly all of these are locally owned and managed. Their solid capital position, sound management, and strong regulatory oversight should enable thrift institutions to integrate these expanded powers into safe and sound community-focused business and consumer lending

Finally, I know that change, just for the sake of change, seldom produces a beneficial outcome.

As a result of deliberations in the last Congress, momentum is building to reform the bank and thrift charters. That is an important and significant goal.

But to do that right, we must look to answer the fundamental question of what does the future hold for both thrifts and banks. Wayne Gretzky, of hockey fame, has explained that the key to his success is the ability to skate to where the puck will be. Applying that analogy, financial services institutions must be able to anticipate the future needs of their customers and have the flexibility to meet the changing demands for financial services.

As regulators, we have a responsibility to remove barriers to prudent lending. Regulations must continue to be streamlined and allow for more lending flexibility. Modernization, however, is a much broader proposition than just streamlining regulations and expanding lending authority.

So I contend that as these deliberations unfold, all of us who will be participating - Congress, the administration, regulators, the industries, analysts, and others - should focus not only on issues related to the charters of insured depository institutions, but also on the dynamics of change in the broader financial services industry.

Let's look at the facts. We already are in the midst of a tidal wave of changes in how financial services are delivered. Market forces are driving these changes, not government regulation.

Many new players have found opportunity in the financial market, and more are likely to follow, further increasing competition.

One aspect of this change is the use of technology in banking, which is fast becoming a way of life in doing business. Today, consumers enjoy access to transactional services, such as bill paying, funds transfer, and opening new accounts - from their homes. They can use electronic cash, smart cards, and electronic checks.

An institution operating under a federal thrift charter became the first Internet bank in 1995 and is growing its business. Is this enterprise the model for the future? Is there even such a thing as a model institution for the future?

The wave of change also raises crucial public policy questions. What will be the role of federally insured depository institutions in this geometrically changing and ever more competitive world of financial services? What say should the government have in determining the future financial services infrastructure, and who will be allowed to offer insured financial products? How do we ensure that all consumers will have access to financial services? What is the proper use of deposit insurance in a financial market where a technological explosion is occurring?

I strongly believe that we must take the time to weigh these questions thoughtfully if we are to enable our institutions to move to where their customers of the future will be.

By focusing on these issues as the congressional deliberations go forward, we should be able to find some answers. Once we have made realistic headway, we hopefully can make informed decisions about the financial system and the regulatory structure that will be needed to ensure safety and soundness of insured depository institutions of the future, as well as their competitiveness.

In Mr. Gretzky's world, success is getting the "hat trick," (three goals in a game by a single player). For thrifts, two of the three goals have been scored - capitalization of the thrift's insurance fund and enhanced lending powers.

The third goal, and perhaps the toughest of all, is to determine how federally insured institutions fit into the financial services that Americans will want and need in the 21st century.

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