|Worst Is Over' for Banking, LaWare Says

WASHINGTON - Federal Reserve Governor John P. LaWare said Wednesday that the "worst is over" for banks and thrifts, and the economy is slowly emerging from recession.

"The banking system, after running a high fever, is about to be up and around again," he said in an address to the U.S. League of Savings Institutions convention.

|Genuine But Slow Recovery'

"I see ahead a much brighter future for those who have survived this wrenching shakeout."

Mr. LaWare said the economy is in the "early stages of a genuine but slow recovery" as anticipated by the Fed.

His remarks were more positive than those Monday by Fed Chairman Alan Greenspan, who said the recovery was fighting "50-mile-an-hour headwinds."

Should Spread the Risk

Mr. LaWare said banks and thrifts should do well in the recovery because their reserves are adequate, operating costs reduced, capital levels raised, interest-rate margins improved.

He LaWare warned that it would be "foolhardly" for thrifts to rely solely on fixed-rate mortgage lending because of low interest rates. He said thrifts should spread the risk by offering consumer products, and lend to customers they know best.

"Don't be siren-songed into corporate lending and real estate development unless you are absolutely sure you have the talent and experience to manage those very different businesses effectively," he said.

He urged thrifts to "beg, borrow, steal, or buy" the best talent to manage interest rate risk.

Kemp's Prescription

After Mr. LaWare's speech, Housing and Urban Development Secretary Jack Kemp urged Congress to fuel the economy by repealing the capital gains tax and lowering taxes on savings and capital formation.

He said lower interest rates are not the answer. "People will perceive we are trying to inflate our way into economic growth."

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