Ryan: Fixed-Rate Loans Leave Thrifts Vulnerable

He's Applauded for Urging Agencies to Merge

WASHINGTON -- Thrift regulator T. Timothy Ryan Jr. said Monday that the industry is holding too many fixed-rate mortgages, leaving it exposed to huge losses if rates suddenly reverse their downward trend.

"We are not interested in having history repeat itself," the director of the Office of Thrift Supervision told executives at the U.S. League of Savings Institutions' 99th annual convention. He was referring to the early 1980s, when a sudden runup in rates drowned savings and loans in red ink.

Mr. Ryan also strongly endorsed a merger of his agency with the Office of the Comptroller of the Currency in order to reduce costs. The suggestion, part of the Treasury Department's plan to reform the banking industry, drew applause.

Fostering Prudence

Mr. Ryan said the OTS is not trying to discourage thrifts from making fixed-rate loans, which have become popular in recent months as rates have hit 14-year lows. He was, he said, encouraging them to be prudent. He suggested that they sell some loans into the secondary market to reduce their exposure.

(How one thrift is managing its fixed-rate mortgage portfolio; see page 12.)

"We are looking very closely at what [savings and loans] are doing and how are they responding to this situation," he said.

Mr. Ryan gave his strongest public endorsement to date of a merger of regulatory agencies. "We must all face reality," he said. "If we are going to have a cost-effective regulatory system, then this is the best option and the best hope for minimizing your assessments."

Mr. Ryan said banks and thrifts would be assessed separately to cover costs of the merged agency, which would be under the aegis of the Treasury Department. But back-office costs would be shared, he said, and duplication eliminated.

Meanwhile, Mr. Ryan plans to cut OTS staff 11% by 1992 and reduce its operating budget 20% from the 1990 level. He also intends to increase the level of supervision.

Before Mr. Ryan's speech, Donald Shackelford, chairman of the league and chairman and chief executive of State Savings Bank of Columbus, Ohio, encouraged thrift executives to speak to their representatives while in Washington.

"If you stay out of things in Washington, people perceive you are dead, and we don't want to be presumed dead," he said. "We can't just talk to ourselves anymore."

PHOTO : T. Timothy Ryan Jr. Speaks to U.S. League

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