For the first time since its creation in 1989, the Office of Thrift Supervision's budget is in balance and its staffers' jobs are secure.

By cutting expenses and employees, the thrift agency blazed a trail for the banking agencies to follow. This role is a new one for the office, the underdog among the four agencies.

"We're not poor little OTS," said Cora P. Beebe, the agency's executive director of administration. "We're an agency that's been under very difficult circumstances and is moving forward."

The regulatory agencies bulked up to handle the 1980s thrift crisis and then the banking disaster of the early 1990s. But 1992 ushered in the first of four consecutive years of record industry profits, leaving the crews at the banking agencies with not enough to do. Industry consolidation also has pushed the number of banks below 9,950, leaving the agencies with fewer wards.

These developments have not hit the Federal Reserve Board and its 12 reserve banks - where staffing actually increased 7.3% to 27,263 in 1995 - but the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency have been scurrying to cut costs and people.

The FDIC and Resolution Trust Corp. peaked in 1992 with a combined staff of 23,500. Today, the RTC is out of business, and the FDIC employs 10,376. But the agency's target staff is 6,800, so another 3,500-plus people must go.

The FDIC staff is bracing for more cutbacks in 1997.

"There is the prospect of a fairly significant reduction in force," said FDIC spokesman Robert M. Garsson.

At the Comptroller's Office, staffing peaked at 3,929 in 1994 and now stands at 3,500. A hiring freeze, attrition, and early retirement programs have helped trim the staff.

"We expect that number to keep going down because of bank consolidation," said agency spokesman Dean Debuck.

The Office of Thrift Supervision has been where these agencies are going.

When it was created to take the place of the Federal Home Loan Bank Board in 1989, the agency had more than 3,400 employees. Today, it has 1,411.

More than 50% of the departures were resignations. Many of those were coaxed out the door via incentive programs. About 25% retired and another 10% got jobs at other federal agencies. The agency also fired 91 employees - the only financial regulator to use widespread layoffs.

Ms. Beebe said the OTS was able to do this without devastating morale because it had good reasons for eliminating positions. For example, she said payroll jobs were eliminated because there were fewer people to pay.

"Also be direct and up-front with employees, and go the extra mile to do what ever you can to help your employees find a job," she advised.

"It is remarkable how high the morale has been, we're not seeing an unusual amount of absenteeism ... grievances or other employee problems on the job."

Ms. Beebe said she phoned all over town looking for jobs for the displaced employees, and the agency helped employees search for jobs by setting up a job placement center and hiring a consultant.

The staff cuts were inevitable. From 1989 through 1995, hundreds of thrifts failed or were acquired. Thrift assets under OTS oversight plunged 30% to $7.72 billion.

The agency's budget had to shrink to reflect the smaller workload. Revenues equal expenses for the first time in the 1996 budget, which totals $145.3 million.

Rather than shaving total numbers, Ms. Beebe said the toughest task the agency faced was cutting people from the right jobs.

"It's not the overall numbers, but having the right skills and talents in the right geographical locations," Ms. Beebe said.

According to union leaders, the agency's employees accepted the need for cuts, but objected to their implementation.

"There has been downsizing at this location and we didn't feel it was fair and equitable," said Pat Goings, president of the Washington office's local.

Specifically, "the agency saved a lot of higher-level employees on the backs of the lower-level employees," she said. "The mood here is that people have lost faith and trust, and most people would like to get out because we don't know our future."

Ms. Beebe agreed that these employees were hit the hardest because "there was almost no attrition in the lower grades and that is where a disproportionate amount of the workload had eroded."

Now that the agency has shown other regulators how it's done, it may have to pull off a repeat performance.

Many thrifts are talking about eliminating deposits to avoid paying the higher premiums charged by the Savings Association Insurance Fund. That could lead to new problems at the office.

"We can't read what's going to happen a year from now but at the present time, we don't anticipate any," Ms. Beebe said.

Scott D. Smith of Medill News Service contributed to this story.

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