Still scarred by the 1980s thrift crisis, Scott M. Albinson vows that the industry will not tank on his watch.
As a managing director at the Office of Thrift Supervision, Mr. Albinson is the agency's top cop, with final say on which companies get a charter.
Now 39, he began his regulatory career in 1986 as the thrift industry was collapsing. He examined CenTrust Bank of Miami, Horizon Financial of Southampton, Pa., and Hill Financial Savings and Loan of Red Hill, Pa.-all of which failed.
"I learned a variety of lessons that I keep with me all the time," Mr. Albinson said in an interview. "As a regulator, I saw many institutions move into new markets, new activities, and they were thoroughly unprepared to deal with the risks that were presented to them.
"Without sound management, no institution can survive," he said.
Today he sees some scary parallels to the 1980s, even though the industry is better capitalized, more profitable, and less vulnerable to interest rate risk, which punished thrifts in the 1980s.
Newcomers are lining up in droves for charters, commercial lending is becoming more important, and competitive pressures are increasingly pushing thrifts into risky activities such as subprime and high-loan-to-value lending, he said.
The result is an agency moving at a glacial pace, a trait that has left some thrift lawyers irritated and impatient.
"They believe there is an issue under every stone," said one thrift lawyer who refused to be named. "Everyone's afraid of being criticized, because you don't want it to blow up on your watch and have everybody say, 'Where were the regulators?'"
The thrift charter is enjoying a renaissance, because it is the only vehicle that permits commercial, insurance, and securities firms to enter the banking business. This has caught the attention of lawmakers, who are considering either eliminating the unitary thrift charter or barring commercial firms from owning them.
Scrambling to get charters before Congress acts, more than 75 nonbank companies have submitted applications to the OTS since 1997. Twenty-one have been approved, an average of about one every six weeks.
The pace has picked up, however. In the past month the OTS granted charters to Grange Mutual Casualty Co., Loews Corp., Farm Bureau Bancorp., and American General Corp. The string of approvals fueled speculation that more would follow.
"It's all systems go," said Matthew Lee, executive director of Inner City Press/Community on the Move, and a frequent critic of awards of thrift charters to companies that do not prove they will comply with the Community Reinvestment Act.
Mr. Albinson said reality lies somewhere between the two perceptions of the agency's speed. "You're likely to see a more steady trickle, not like a heavy volume or anything," he said.
The agency still must settle supervisory issues such as how to ensure that an insurance company's customers know the difference between bank and nonbank financial products, he said. One solution is to send in examiners incognito to buy products from insurers, to check that consumer protections are being met, he said.
"We've resolved many of these issues, not all of them," Mr. Albinson said. "You're never really done, because the market evolves, and each one of these applications has a little bit different twist than the last one."
To avoid the mistakes of the 1980s, the OTS is scrutinizing companies that want to own thrifts, Mr. Albinson said.
"The agency chartered some unscrupulous characters that it probably shouldn't have back then, in order to bring fresh capital into the system," Mr. Albinson said. "We're certainly doing our homework as to who we're allowing in the door."
Mr. Albinson said his next challenge is updating how thrifts and holding companies are examined, especially given the rapid-fire changes in the marketplace.
"We're seeing a movement to alternative delivery systems, whether it is the Internet, or it happens at the kitchen table, or at a local insurance agent's office," he said.
One priority is to improve measurement of risk incurred by thrift holding companies, Mr. Albinson said. Examination guidelines are being updated, and reporting requirements may become more detailed.
Risk-based capital rules also may have to be revised, because they do not take into account many activities that are recorded off an institution's balance sheet, such as mortgage securitizations.
Mr. Albinson is also negotiating with the National Association of Insurance Commissioners to share financial information. An agreement will probably be completed this summer.
Mr. Albinson, who stands 6 feet, 6 inches tall, attended Eastern College in St. David's, Pa., on a basketball scholarship, but decided not to pursue a professional career. At the school, he met his future wife, the daughter of the school's athletic director. The couple have four children, ages 4 to 11, whom Mr. Albinson coaches in basketball, soccer, and baseball.
He was promoted to his current position in December, from special assistant to the agency's deputy director, Richard M. Riccobono.
OTS Director Ellen S. Seidman said, "Scott clearly has the knowledge, experience, and compatibility we were seeking. He is a natural for this very important job."