Academic journal article ABA Banking Journal

The President and the Thrifts

Academic journal article ABA Banking Journal

The President and the Thrifts

Article excerpt

The President and the thrifts

It was dramatic. The President stood at the lectern. Arrayed behind him in front of a dark blue backdrop in the White House press conference room were all the top federal financial officials: Treasury Secretary Brady, Fed Chairman Greenspan, FDIC Chairman Seidman, Comptroller Clarke, Bank Board Chairman Wall, Budget Director Darman.

As everyone by now knows, on Feb. 6 President Bush unveiled his administration's plan to rescue the Federal Savings & Loan Insurance Corp. (see summary).

Two things made watching this drama unfold particularly noteworthy. One was that president don't often speak about depository institutions--certainly not at length.

How things got to this point is hard to conceive. The problem has been recognized for years. In fact the first printmedia reference to the phrase "thrift crisis" we found was in 1981.

The second point of note during the President's press conference was that many of the steps in his plan were the same as those proposed in a report issued last September by ABA's FSLIC Oversight Committee. The committee's efforts, which began in 1987, clearly paid off in a plan that was acceptable to banks--at least as initially proposed. Random reactions. The roundtable discussion with five community bankers in this issue(p.37)took place well before President Bush announced his plan. But we got back in touch with three of the five shortly after the plan was announced. Judging from their comments, the first reaction of every banker in the country must have been to reach for a calculator to figure the cost of the proposed increase in FDIC premiums.

Michael (Mick) Guttau estimated it will cost him $5,300 the first year and $9,700 the second year if the proposed premium increase goes through. Guttau, chairman and president of Treynor (Ia.) State Bank, figured the two-year total represents about an 80% increase. He agreed with the need to strengthen the FDIC fund, but felt the proposed increase is too much, too soon. …

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