The events of the past year have had profound effects, not all of them good, on the Federal Deposit Insurance Corp.

A year ago the FDIC was riding high, even as it struggled to cope with record numbers of problem banks, failures, and losses.

Many observers argued, incorrectly it turns out, that the FDIC was badly insolvent and would need a massive infusion of taxpayer funds. But scarcely anyone questioned the FDIC's pivotal role in the system of financial regulation.

Indeed, thanks to significant grants of authority under the 1989 and 1991 banking laws, the FDIC had come to be regarded by many as the most powerful of the federal banking agencies.

The FDIC was headed by Bill Taylor, a career bank regulator highly respected in all quarters. The other two full-time board members of the agency, "Skip" Hove and C.C. Hope, brought a special perspective based on their long and distinguished careers in the banking industry.

Untimely Deaths

Sadly, Bill Taylor died, and then C.C. Hope. Their deaths were wrenching experiences for their families and many friends. No one could have guessed just how seriously the FDIC would be affected.

A change of guard at the White House has left the FDIC without a permanent head for more than a year, and for much of that time a majority of the board has been composed of ex officio members who report to the Treasury.

I can't think of anyone I'd rather see as acting chairman of the FDIC than "Skip" Hove, but there are limits to what any acting chairman can do. The other two members of the board have demanding, full-time jobs running the Comptroller's office and the Office of Thrift Supervision, agencies whose perspectives and responsibilities are sometimes very different from the FDIC's.

The plain truth is the FDIC is suffering greatly from the failure to resolve the question of its leadership. This failure couldn't have come at a worse time for the agency and its staff.

A new administration has come to town with lots of energy and ideas for reform. The FDIC can't be a full partner in the deliberations concerning financial reform without a chairman blessed by the new President.

The chairman of the Senate Banking Committee must have sent a chill down the FDIC's spine recently when he was quoted as saying that the lack of a permanent head at the FDIC would make it easier for Congress to deal with the question of consolidation of the banking agencies.

To make matters worse in terms of staff morale, the FDIC is facing significant reductions in force due to the substantial decline in bank failures.

And the FDIC board recently voted to curtail the ability of the agency's staff to conduct examinations at national banks and S&Ls, an authority the FDIC fought hard for more than a decade to obtain.

I believe our regulatory system needs a strong, independent FDIC serving in the role of a watchdog.

The agency's regulatory activities could well be streamlined, and it should coordinate its supervisory activities with the primary regulators to the maximum extent possible. But to denude the deposit insurer or, worse yet, to consolidate it into a regulatory agency is to risk an S&L-type fiasco.

An important contributing factor to the magnitude of the S&L crisis that was the deposit insurer, the former Federal Savings and Loan Insurance Corp., was not in an independent position from which it could blow the whistle on egregious mistakes by the regulatory agency.

Other people have different views on these issues, to be sure. But the issues deserve a vigorous and open debate, as the stakes for the banking system and potentially the taxpayers could be very high.

The debate will be lopsided, at best, if the FDIC is not represented very soon by an able and respected chairman appointed by Bill Clinton.

Mr. Isaac, a former chairman of the Federal Deposit Insurance Corp., is managing director and chief executive of the Secura Group, a financial services consulting firm based in Washington.

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