Danger Is Seen In Tough Rules on Thrift Conversion
WASHINGTON - Robert E. Litan, the Brookings Institution's expert on banking, said Tuesday that the government should relax rules barring savings and loans from converting to banks.
Mr. Litan, a senior fellow at the Washington think tank, said the move is necessary to avoid another bailout of a deposit insurance fund. S&Ls continue to pose a "substantial risk" to taxpayers because they have about $900 billion in fixed-rate mortgages on their books. A big spike in interest rates would sink hundreds more S&Ls, he warned.
"The earthquake could happen again," said Mr. Litan, who spoke at a press conference sponsored by a new political policy magazine, Domestic Affairs. Mr. Litan wrote an article for the magazine titled "The End of the Savings and Loan Industry."
Mr. Litan said the government should make S&Ls more attractive to investors by taking steps such as relaxing deposit-insurance …