Panel Rejects Clarke Nomination
Ryan Emerges as Possible Successor
WASHINGTON -- In a stunning defeat for President Bush, the Senate Banking Committee voted 12 to 9 Wednesday to kill Robert L. Clarke's nomination for a second term as the top regulator of national banks.
The vote, made along party lines, effectively ends Mr. Clarke's controversial six-year reign as comptroller of the currency, during which he was alternately criticized for being too soft and too hard on banks.
His crackdown on real estate lending in late 1989 angered many bankers, and politicians charged it was an overzealous tactic that helped spur a credit crunch. In the end, the crackdown and his agency's handling of some large failures doomed his renomination.
Political observers said Mr. Clarke has two options: Step down or continue to serve until a successor is confirmed, which could take many months. Mr. Clarke declined to comment.
Will Agencies Merge?
The vote prompted speculation that the President might now turn to T. Timothy Ryan, the nation's chief thrift regulator. The administration previously proposed merging Mr. Ryan's Office of Thrift Supervision with the Comptroller's office. The rejection of Mr. Clarke might now fuel that plan.
"I think that opens the very great possibility that Mr. Ryan will get the job, and they'll combine" the agencies, said L. William Seidman, the former chairman of the Federal Deposit Insurance Corp.
Mr. Ryan declined to comment.
Treasury Secretary Nicholas Brady rebuked the banking panel for its "shameful work" and said the vote represented "crass politics and partisanship at its worst."
He added: "It makes no sense to take this action when credit availability is lacking, the economic recovery is sluggish, and the American people ask for leadership."
Mr. Clarke's defeat - the first for a presidential nominee this year - demonstrated how partisan banking issues have become. Intense lobbying by the President and Mr. Brady failed to win over a single Democrat.
The result provides further evidence that the administration will be hard pressed to move comprehensive banking legislation between now and the 1992 presidential election.
Some observers wondered how field examiners would react. The examiners were told recently to ease up on banks trying to make new real estate loans during a recession. But the vote may have the opposite effect, according to Paul M. Homan, who was Mr. Clarke's senior adviser before becoming president of Tampa-based First Florida Banks in August.
"I've been an examiner long enough to know . . . they are going to read this as Congress hoisting Bob up as being too lax on the industry," he said.
Senate Banking Committee Chairman Donald W. Riegle, D-Mich., said he had no immediate plans to call for the Comptroller to step down. "That's a matter he and the administration have to consider."
Close associates said Wednesday that they doubted Mr. Clarke would resign.
"I think there is no chance that tomorrow he storms out of there," said Dana Cook, formerly Mr. Clarke's special adviser at the agency and now an independent consultant in Houston. "Bob's got enough honor that he will serve until someone else is nominated."
Vote Was Delayed for Months
The vote, taken after two hours of acrimonious debate, ended 10 months of uncertainty over Mr. Clarke's fate.
He has served without Senate approval since his five-year term expired last December.
Even before the President renominated him in January, the Senate Banking Committee began investigating Mr. Clarke's handling of a wave of bank failures that occurred on his watch, including the collapse of the Bank of New England.
Committee Republicans on Wednesday criticized the long, drawn-out probe, saying Sen. Riegle was conducting a personal vendetta against Mr. Clarke.
"The chairman was conducting a murder trial without a body," said Sen. Pete Domenici, R-N.M.
But Sen. Riegle defended the investigation. Under Mr. Clarke's tenure, "National banks have failed in numbers not seen since the Great Depression," he said shortly before the vote.
"His policies are the biggest cause of the impending bankruptcy of the Bank Insurance Fund, which is creating an urgent need for $70 billion in recapitalization."
Several Democrats said they regretted voting against Mr. Clarke but felt they had no choice.
Sen. Christopher Dodd, D.-Conn., said he held national bank examiners responsible for dismal credit conditions in New England. "We're suffering miserably because of it," he said.
"Occasionally you have to send a message, and unfortunately, Bob Clarke has to be the messenger."
Mr. Clarke's supporters claim an injustice was done.
"The IBAA regrets the vote; justice was not done," said Kenneth Guenther, executive vice president of the Independent Bankers Association of America. "Finding someone as open to all segments of the industry and as fair-minded as Bob Clarke is going to be very difficult."
PHOTO : Robert L. Clarke Controversial comptroller