Senate Banking Committee Chairman Donald W. Riegle Jr. said he is planning an election-eve hearing to investigate what he and other Democrats anticipate will be a wave of bank failures after Election Day.
The announcement prompted an angry response from Sen. Jake Garn, R-Utah, the committee's ranking minority member.
Accusing Sen. Riegle, a Michigan Democrat, of purely political motivation, Sen. Garn said the hearing was called on such short notice that he won't be able to attend. In fact, he said, he hasn't even formally been advised of the hearing but learned of it from news reports.
Sen. Riegle's initiative -- alongside related accusations Monday by House Banking Committee Chairman Henry B. Gonzalez, D-Tex., that the administration has not been forthcoming about industry problems -- has Republicans crying foul.
Sen. Garn said he knows of no compelling reason for holding a hearing during the congressional recess. It was not possible to get comment Monday from the banking panel's Democratic staff.
Some Democrats, including Sen. Riegle, have suggested that bank regulators are delaying the closings of a number of banks until after the election to avoid the appearance of an industry in deep trouble.
What they call the "December surprise" would amount to regulators' closing institutions that should have been shut earlier, these Democrats allege.
Law's Effect Cited
However, many observers, including Sen. Garn, have said the only reason to expect a wave a bank failures is because new requirements for prompt corrective action take effect Dec. 19.
Regulators will be required to begin closing institutions once their capital ratios fall below 2%. Until now, the government has generally not moved against institutions until they become insolvent.
"The point of it is, Congress passed the law," said Sen. Garn. "Congress put in the Dec. 19 date. To say it's surprise is ridiculous."
Andrew C. Hove Jr., acting chairman of the Federal Deposit Insurance Corp., also said the 2% rule "should come as no surprise." "We've not held off closing any institution," he told the American Bankers Association convention in Boston.
Sen. Garn, whose term expires in January and who is not running for reelection this fall, said Democrats have increasingly used the banking panel to bash the Bush administration. "I get more and more tired of it," the senior Republican said at the ABA convention.
In Washington, Rep. Gonzalez charged that a looming $72 billion bailout of the banking industry is being "swept under the rug" because of election-year politics.
"It is in the regulators' and the administration's best interest to play down the looming bank problem," the powerful Democrat said in a prepared statement. "Some in the banking industry and their bought-and-paid-for consultants have yet another motive -- to keep troubled institutions alive and make a buck."
Rep. Gonzalez said he derived the $72 billion figure from Office of Management and Budget data on the cost of bailing out failed banks for fiscal years 1992 through 1995.