Is Jim Leach losing it?
The House Banking Committee chairman took on the thrift industry, the banking regulators, even the members of his own committee last week. As one aide put it Friday, Rep. Leach practices "a different kind of leadership."
In a speech Tuesday to America's Community Bankers, the Iowa Republican said he didn't think legislation bailing out the Savings Association Insurance Fund would pass this year. What's worse, Rep. Leach dismissed as "competitive disadvantage" the thrifts' fundamental belief: Paying 23 basis points more than banks for deposit insurance will destroy the industry.
When he finished, 200 thrift executives sat on their hands; Rep. Leach's remarks had dashed their hopes of a legislative fix, and had made them wonder if an ally had been lost.
During the Q&A, it got ugly. A questioner clearly angered Rep. Leach, who shouted: "If you don't like the news, I can't help it."
Hello. These are the same people who agreed to pony up $6 billion to capitalize the thrift fund.
But if the rescue legislation is going nowhere, these thrift executives vowed to start moving deposits out of the fund "big time," as Great Western's Jim Montgomery put it.
The prospect of billions being sucked from the thrift fund prompted Rep. Leach on Thursday to propose "five options" for the weak thrift fund. Of the five alternatives, Rep. Leach said he wants a quick fix to address the most pressing problem: default on Financing Corp. bonds.
Currently, a big chunk of the deposits in the thrift fund is owned by banks and premiums paid on these so-called Oakar and Sasser deposits may not be used to pay off Fico. Rep. Leach wants to permit revenue from these deposits to be used toward the $780 million due every year on Fico bonds.
While that may sound like a simple solution, no one - from thrift leaders to Treasury officials to Banking Committee members - has backed it.
In fact, members don't even want to come to the hearing because no House votes are scheduled Tuesday until 5 p.m., and a number of lawmakers will be back in their districts for presidential primaries on Tuesday.
Even Senate Banking Committee Chairman Alfonse M. D'Amato, who has kept a low profile on this issue, said through a spokesman Friday that he still backs a sweeping solution.
"Chairman D'Amato believes the comprehensive BIF/SAIF bill ... is the best and most effective solution," the spokesman said. "The chairman is committed to its enactment."
In a preview of the hearing, regulators met with Rep. Leach for 90 minutes Thursday. A red-in-the-face Rep. Leach listened to agency heads explain why a comprehensive solution is still the best bet.
The agencies are worried the thrift fund might collapse if its members shift funds to affiliates insured by the Bank Insurance Fund or charter their own banks.
If enough money moves, Rep. Leach's quick fix could become the long-term solution. Thrifts would be out from under their fund's higher costs and Fico would be paid off by the banks that own thrift deposits.
Maybe there's a method to Jim Leach's madness.