Daniel F. Evans Jr. recently resigned as chairman of the Federal Housing Finance Board, an agency created after the thrift crisis to oversee the Federal Home Loan Bank System.
Mr. Evans' board members served on a part-time basis. After January, the law requires it to become a full-time board.
A lot of people don't think there's a need for a board, since each of the banks has its own board of directors, composed primarily of stockholders. Mr. Evans, in an interview just before he departed, said he thinks the board should remain part time.
The Indiana lawyer is a friend Dan Quayle, the former vice president.
Q.: I heard that you made some headway selling your concept of a part-time board to Congress and the administration?
EVANS: I'm unaware of any progress in that regard, to tell you the truth. I've heard reasonably credible rumors, but not from anyone whose got a vote on the Hill - if such a thing can be reasonably credible - that there is some recognition that the part-time board has achieved its goals, successfully managing the safety and soundness side [of the bank system]. So what is the argument for a board that has less managerial authority to become full time?
So the short answer to your question is that I've heard credible rumors.
Q.: What's the upside of a part-time board?
EVANS: The upside is that you are much more plugged into the reality of the way our country does business. I literally spent my time at home with real business people, with real commercial transactions, who were affected by their government in direct ways every day. Therefore I had to do things efficiently, but at the least cost.
There's a big difference between the government employee and the private citizen involvement, because the private citizen will be goal oriented and the governmental employee will be process oriented. Why? The governmental employee is punished for taking risks that aren't successful. So how does he do his job? He does it in a riskless way. And riskless way means that he has to eschew innovation.
And I do think that's what the Founding Fathers had in mind when Ben Franklin said people should live under the laws they pass. Read that, regulators should live under the regulations they pass.
Q.: You've said there may be a problem when the board becomes full time on Jan. 1.
EVANS: There's a very real possibility that there won't be a quorum. If there is not a quorum. then new policy cannot be made. And anybody who is left behind is left implementing existing policy, so the job becomes ministerial.
Q.: Won't the administration have replaced you by then?
EVANS: I'm not in touch with the White House and don't know of a timetable. But having been through two or three transitions myself, time is short. You would have to nominate someone almost immediately.
Q.: Assuming no quorum, what business remains unfinished?
EVANS: We have funds management [issues]. The larger members and the bank presidents have asked us to review the funds management policy and the investment authority of the banks.
Q.: Could you elaborate?
EVANS: We expect the presidents of the banks to propose in December or January that the board review the system's funds management policy, which more accurately is the "permitted investments of district banks."
That's controversial. We [already] liberalized it slightly by permitting the banks to invest a certain percentage of their capital in mortgage-backed securities. Some people want that number increased significantly.
Q.: But since they won't have a quorum, there won't be a vote, right?
EVANS: If they don't have a quorum, they can't change the policy. So it will stay by default where it is, which isn't bad.
Q.: What else is coming up?
EVANS: Well, when we get the Housing and Community Development Act studies from the rest of the agencies that are working on them with HUD, it is likely that the board will re-address the issue of retained earnings and the capital structure of the banks. That requires a quorum of the board.
That's pretty important, the retained earnings issue. That has come up in the HCDA studies [showing] that some of the individual district banks have lower retained earnings than others, and the board needs to address that issue. The bank has very high capital. But it's the nature of the capital. They have stated capital and they may have retained earnings, which is a much smaller number.
Retained earnings are available to cushion losses. Stated capital really isn't available as easily as the retained earnings.
Lastly, I don't know how we're going to approve dividends without a quorum.