Life after FSLIC

AN ABA BANKING JOURNAL ROUNDTABLE Life after FSLIC? Banking reform will likely take a back seat to legislative damage control, according to a panel of ABA experts The more things change, the more things change. That's the best way to sum up the outlook for banking issues in Washington in 1989. A new Administration and a new Congress will be revisiting the gamut of issues Washington has been kicking around for some time. But the issues will be cast in the harsh light of a worsening crisis at the Federal Savings and Loan Insurance Corp. and increasing concerns about the federal budget deficit. ABA Banking Journal asked four of the American Bankers Association's top government relations pros to assess what bankers can expect in 1989. The panelists were: Edward L. Yingling, executive director, Government Relations Group; James D. McLaughlin, director of Agency Relations, Trust, and Securities; J. Denis O'Toole, director, Office of Federal Legislative Operations; and Henry C. Ruempler, tax counsel and head of the Office of Tax and Accounting. The session was moderated by ABA Banking Journal Editor William W. Streeter and Managing Editor Steve Cocheo. THE FSLIC MESS ABA BJ: What will the inauguration of George Bush mean to banking? Yingling: One would expect the new Administration to have the same philosophy as the Reagan administration, which has generally supported banking. It also seems likely the same people will be in charge of the regulatory agencies, at least for the first year or so. O'Toole: One radical difference is that the FSLIC pot is boiling over. It can't be hidden anymore and that will force some decisions that have been put off for the past few years. FSLIC has major implications for the federal budget and will therefore affect the budget and tax picture. That will shape banking legislation in ways we haven't seen recently. ABA BJ: Will the FSLIC crisis be addressed in the first 100 days of the new Administration, as some predict? Yingling: It will be addressed but not resolved. There's a good chance Congress will begin work on FSLIC early in 1989 but it's unlikely it will finish in the first 100 days. It takes Congress a couple of months to get organized. And such a complex issue will take several more months to study--at a minimum. If there were some crisis--such as a run--it's conceivable Congress and the Administration could move faster. O'Toole: Neither Henry Gonzalez [D-Texas], the new House Banking Committee chairman, nor Donald Riegle (D-Mich.), the new Senate Banking Committee chairman, have worked closely on many of the issues related to the FSLIC. Both committees will also have new members who will need some time to come up to speed. ABA BJ: Will the thrift issue travel alone or become the centerpiece for a broader package? Yingling: The Administration and the congressional leadership will probably try to deal with the FSLIC crisis by itself. It is a big, complex issue, and taking on other matters could easily blow the negotiating process apart. Senator Riegle has announced that FSLIC will be his top priority. And Congressman Gonzales said he will begin hearings in January on the general state of the economy. He feels that is a necessary first step to address issues that will come before the committee. But then he apparently plans to take up the FSLIC issue. ABA BJ: Does all this mean FSLIC will preempt any other banking committee legislation in 1989? O'Toole: Housing legislation, which is related to the FSLIC issue, will likely be one of the early pieces of business on the House side. That's because the 100th Congress didn't pass a new comprehensive housing bill, and the Democrats have many commitments in this area. Also, Gonzalez has a deep interest in housing. The relationship to FSLIC is that once you solve the immediate FSLIC funding problem, the question becomes: Do we need specialized housing lenders? …