Federal Deposit Insurance Corp. Chairman Ricki Helfer on Tuesday said regulators need more latitude in handling problem institutions.

"Strong banking supervision-like sound banking-involves good judgment and common sense," Ms. Helfer said at a meeting of the Women in Housing and Finance.

"Limiting the exercise of that judgment prevents the application of common sense when it is most needed."

If the "prompt corrective action" standards enacted in 1991 had been in place in 1983, Ms. Helfer said, regulators would have been forced to seize the nation's 10 largest banks. In total, 143 institutions that are open and healthy today would have been closed by the government.

"We worked our way out of the sovereign debt crisis because bank regulators had the discretion, judgment, common sense, and time to address the problems," she said. "Today, the 10 largest U.S. banks are among the best capitalized multinational banks in the world."

Ms. Helfer also used what may be her last public speech before leaving office June 1 to take a philosophical look at the role of government.

"The government can make the lives of people better than they otherwise would be, if government is effective and efficient," she said. "How the FDIC manages itself has the potential to affect every American."

During her two and a half years at the agency's helm, Ms. Helfer forced the FDIC to operate more like a private-sector business. The FDIC adopted its first strategic plan and began linking planning and budgeting.

Staffing had to be justified by work load; since late 1994 the agency has shed 36% of its employees, and its annual budget has shrunk nearly 40%, to $1.1 billion.

Ms. Helfer also made a pitch for the agency's independence.

"When bank regulators speak-particularly the FDIC as insurer-we should do so straightforwardly and without bias or political goals," Ms. Helfer said.

"When we point out a problem, we want people to believe it is a problem."

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