OTS Chief Sees Danger In Going with One Charter

BOSTON - institutions and hamper efforts to win new powers for banks, the thrift industry's top regulator said Monday. But Jonathan Fiechter, acting director of the Office of Thrift Supervision, said he has no objection to abolishing his agency - so long as its duties, and some staff members, are absorbed by one of the bank regulators. "The idea that, in our large and diverse economy, one federal charter should fit all does not strike me as valid," Mr. Fiechter told the annual convention of the trade group America's Community Bankers. "So long as institutions can freely convert to take advantage of whatever form of charter best fits their business strategy, why limit their business options?" he added. The House Banking Committee has approved legislation that would eliminate the federal thrift charter by 1998. And some financial experts, among them Federal Reserve Board Chairman Alan Greenspan, have argued that the thrift charter's focus on mortgage lending is obsolete, even dangerous. Mr. Fiechter disagreed. "The (thrift) industry is profitable and growing stronger every quarter," he said. "Facts do not support the suggestion that mortgage lending specialists are inherently unprofitable and present undue risk to the federal deposit insurance funds." The savings and loans that failed in the 1980s, he said, were those that got into riskier businesses than mortgage lending. And among small thrifts today, an OTS staff study revealed, the most profitable institutions are those with higher-than-average mortgage holdings. Forcing those thrifts to diversify their lending to meet the standards of the commercial bank charter could be disastrous, Mr. Fiechter said. "Boy, would that be crazy - for thrifts to try to take commercial lending business away from commercial banks that have done it for decades," he told reporters after his speech. Also, Mr. Fiechter said, forcing thrifts to give up insurance and affiliation powers unique to their charter would fly in the face of the banking industry's efforts - so far thwarted in Congress by intense lobbying from insurance agents - to expand into the insurance and securities businesses. "In many ways, some features of the thrift charter may provide the flexibility that many analysts believe the commercial banks need to remain competitive," he said. After his speech, Mr. Fiechter added, "The insurance agents would get a victory if we stripped (insurance) from the institutions that now have the authority to offer that. They're not going to come back in two years and say, 'Having stripped it from thrifts, we now believe that banks should have it."' Instead of doing away with the thrift charter, Mr. Fiechter proposed doing away with the barriers that discourage charter flipping - the deposit insurance premium disparity and the bad debt tax penalty faced by thrifts converting to bank charters - and letting the market decide if the thrift charter is truly obsolete. "The $64,000 question becomes what will happen to the thrift industry," he said. "Will half the industry convert to banks? Will very few? I don't know the answer." Eliminating the thrift charter has been a top priority of the American Bankers Association and the Independent Bankers Association of America.