BOSTON -- The Bus administration, the banking industry, and its regulators have "failed miserably" in attempts to convince Congress of the necessity to reform banking laws, Federal Reserve Governor John P. LaWare said in a speech to the American Bankers Association convention.

Mr. LaWare proposed forming a private-sector commission to study and recommend legislative changes that would keep the industry competitive.

Such an independent effort "would result in a truly objective look at banking and might sufficiently desensitize the whole issue politically," Mr. LaWare said. "There would be a good chance for prompt, positive action in Congress."

Neutral Parties Sought

The Fed official did not suggest candidates for the commission, but he did say who should not serve: bankers, government officials, and avowed Republicans or Democrats.

That leaves borrowers and academics, Mr. LaWare said.

He spoke on Sunday to a gathering that seemed to have one big issue on its mind: The regulatory burden that has become a rallying cry for bank lobbyists of all stripes.

ABA leaders used the podium at every opportunity to exhort bankers to convince their Congress members and customers that bank regulations must be rolled back.

Grass-Roots Campaign

The ABA announced Sunday that it will launch a grass-roots campaign to case regulation when Congress goes back to work early next year.

"Let's start Congress off on the right foot," outgoing ABA president Alan Tubbs said in speech designed to rally the troops. "Let's stick together."

"If we don't do something, if we don't find a better way to communicate, if we don't find a way to change the attitudes and change the perceptions, we are really going to be in big trouble," incoming ABA president Bill Brandon added.

Ironically, the same law that gave rise to so many new regulations - the Federal Deposit Insurance Corp. Improvement Act of 1991 - also instructed the banking agencies to assess the negative affects of regulation on banks.

The study is completed, said Mr. LaWare, who chairs the joint agency group handling this regulatory burden study. Because it is not scheduled for release until mid-December, the governor would not reveal the regulators' findings.

Mr. LaWare did say banks spend at least $15 billion a year on compliance, which is 50% more than the $10.5 billion annual tab the ABA has ascribed to "regulatory burden."

While regulators at the convention sympathized with bankers, they offered little solace.

"Our hands are tied," said Mr. LaWare, explaining that the agencies are only implementing laws passed by Congress. That prompted one banker to blurt: "Why are you here, then? You don't have a positive approach to making changes."

Clearly irritated, Mr. LaWare answered: "You haven't read our testimony" decrying over-regulation.

"Action is more than testimony," the frustrated banker shot back.

Mr. LaWare, FDIC acting chairman Andrew C. "Skip" Hove, and acting Comptroller of the Currency Stephen Steinbrink admitted that sometimes they are tougher than the letter of the law in attempts to head off further congressional action.

Warning Against Complacency

Mr. Hove and Mr. Steinbrink delivered pessimistic assessments of the banking industry's performance. Mr. Steinbrink warned against allowing recent reports of record earnings to lull the industry into complacency.

"I am concerned about the source of those earnings," he said. Interest rates will not stay low forever, he said, and past-due loans remain "exceptionally high."

Mr. Hove was more direct: "It ain't over till it's over, and ladies and gentlemen, the cleanup ain't over."

Mr. LaWare also said bankers are not doing an adequate job of lending to minorities. He called a detailed Federal Reserve Bank of Boston study of mortgage lending "conclusive evidence of de facto discrimination." He urged bankers to improve the training of mortgage lenders.

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