Mr. Ryan, who has resigned as director of the Office of Thrift Supervision, used a speech to the Savings and Community Bankers Association on Monday as a farewell address. An edited version appears below.

Regulators face the challenge of maintaining a continuing safe, sound, and profitable thrift industry as demand for credit for housing of all types increases, and as the landscape for financial institutions continues to change.

What have we learned in the thrift cleanup that will guide OTS and the industry, and what does it tell us about the future? Let me share with you some of the most important lessons we have learned.

Lesson No. 1: Sometimes government actions have unintended consequences.

Consolidation in the banking and thrift industries has had a salutary effect, strengthening the surviving institutions and improving their competitiveness.

On the other hand, however, credit availability has diminished in key lending areas, and that has had an adverse impact on the economy.

Let me give you a few other examples of congressional or executive branch actions that have had unintended consequences.

* In the thrift-bailout law, Congress appropriately barred future investments in junk bonds and certain real estate ventures.

But Congress also forced divestiture of the bonds by a fixed date, and required harsh and rapid capital deductions. Both actions led to forced sales that artificially depressed markets and unnecessarily reduced capital and lending capacity.

Only recently has Congress given the OTS authority to stretch out the divestiture of investments in real estate development and freeze capital at existing levels.

* Congress appropriately conducted extensive hearings on abuses in the thrift industry.

But at the same time, Congress placed in the public spotlight dedicated career government employees who were used to working behind the scenes.

This created a climate of fear, and fear produced overly restrictive supervision, which negatively impacted credit availability and restricted policy options.

* The OTS, together with the Justice Department, the RTC and the Federal Deposit Insurance Corp., properly brought legal actions against those who abused the system. But we failed to emphasize that our enforcement actions were limited to wrongdoers and were based on traditional standards.

As a result, honest directors and officers developed unwarranted fears of lawsuits, and went out of their way to limit certain types of lending, not as a rational business decision, but out of fear for personal exposure.

I see this misunderstanding as a significant issue for the government and one that we have tried to address for more than six months.

Unfortunately, this issue was ducked because of its controversial nature and the political implications. Now, however, I believe it is appropriate to describe what we expect of directors and officers.

If they will meet their traditional responsibilities, including the exercise of loyalty and care, then we will not take action against them. You can expect to see guidelines for directors and officers in the next week.

Lesson No. 2: The financial sector is becoming increasingly homogenized.

Today, the barriers that once separated banks and thrifts from other providers of financial services are disappearing. You are facing strong new competition from the nonregulated sector of the economy:

* GE Capital moves from financial wholesaler to retailer.

* Your customers put their savings in mutual funds.

* Government-sponsored enterprises play an increasing role in securitization.

* Every other commercial on TV is for a GM, GE, GTE, or AT&T credit card.

This is a special challenge for highly regulated, federally insured institutions. You are competing against lightly regulated entities that can operate at a lower cost because they do not have to buy federal deposit insurance, nor meet our regulatory and capital requirements, nor pay assessments.

How can thrifts survive and prosper in this environment? The answer.

Lesson No. 3: Keep it simple.

This is a niche business - consumer banking with a housing emphasis. Stick to what you do best. The whole world knows the consequences of the industry's experiment in high-risk investments.

Lesson No. 4: Thrifts must participate in their communities.

You cannot have a business plan that ignores your community and its needs for affordable housing. With most of the thrift cleanup behind us and a stable, profitable industry before us, it is time for savings institutions to place renewed emphasis on financing affordable housing.

Many thrifts are already full partners in this effort. Nationwide since 1990, savings institutions provided more than $2.4 billion in funds for affordable housing and community development through the Federal Home Loan Bank System's Community Investment and Affordable Housing Programs.

But there is even more that the industry can do. You must find the best way to be a better partner. The industry has to find sound ways to increase its presence in communities where financial services are needed.

This is what is required. You must earn your franchise every day as the housing lender for the entire community. Your marketing plan must begin with a commitment that you care about housing in your community, and you are in business to promote home ownership.

Lesson No. 5: Government can do more with less.

Many people have the perception that government is a collection of bloated bureaucracies. That perception is unwarranted . . . at least in our case.

Since I came to OTS in April 1990, we have cut our expenses by 25% and our staff by 30%. We did this by increasing the efficiency of those who remained. We call this "right-sizing."

In our case, right-sizing means: reducing the size of the staff and its cost, while increasing supervision of the industry, increasing enforcement activities, and increasing risk analysis.

Supervisory assessments are now lower than comparable national banks. Yet the number of examiners per institution is higher than ever.

As we reduced our costs and our staff, we became not only more efficient, we also became more effective. Ironically, at a time when people question the ability of governmental most, we have the best example of its effectiveness.

The cleanup of the thrift industry and its restoration to profitability and stability prove government can work.

But now we must stop fighting the last war. The most difficult thing is to accept the reality of the changes in the industry and to rationalize the regulatory process.

Our nation's banks and thrifts need only one regulator, one insurer, and one central bank.

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