Magazine article American Banker

Thrifts Challenging Plan to Kill Them Off

Magazine article American Banker

Thrifts Challenging Plan to Kill Them Off

Article excerpt

Should the savings and loan industry continue to exist? Does it serve a useful function? Can it ever recover from the cataclysm of the 1980s?

The answer to all three questions is no, according to a report issued recently by the National Commission on Financial Institutions Reform, Recovery, and Enforcement.

The report, released after nearly two years of work, says one sure way to prevent another S&L disaster would be to simply do away with the industry.

It recommends forcing all thrifts to convert to commercial bank charters and suggests that all federally insured institutions come under federal rules that would supersede any state regulations. The Federal Deposit Insurance Corp. would be the sole agency charged with chartering, insuring, and regulating insured institutions.

This isn't the first time the destruction of the thrift industry has been proposed. Many have said that the secondary market and mortgage banking render savings and loans useless. The S&L disaster of the 1980s is frequently held up as proof that the industry is corrupt and hollow.

Vital Contribution

But defenders of the industry say killing S&L's is not the answer. They argue that community-based mortgage lending still provides services and loan products that no one else will. As such, the thrift industry still has a vital role to play in the country's housing finance system.

"Having a group of financial institutions interested in serving the residential real estate markets is in the national interest," said John F. …

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