Magazine article American Banker

Thrifts Should Focus on Residential Mortgages

Magazine article American Banker

Thrifts Should Focus on Residential Mortgages

Article excerpt

The following excerpts are from testimony on deregulation and housing given in May by Anthony M. Frank, chairman of First Nationwide Savings in San Francisco, before the House Committee on Banking, and Urban Affairs.

I not only favor housing as the main business of the thrift industry; I would go so far as to mandate -- by regulation, if you will -- the stringent requirement of 60% in residential mortgage oans as a condition to receive three benefits:

* Status as a thrift institution.

* Supervision by the Federal Home Loans Bank Board. Insurance of accounts by the Federal Savings and Loan Insurance Corp.

I especially urge the somewhat draconian proposal that FSLIC insurance be available only to thrifts that qualify under a 60% standard. Why should the tacit credit of the United States be used for profit-making ventures without any public purpose? In some states, I am told, state-chartered associations can thrive without making a single residential mortgage.

It is to be expected, and understandable, that with 100% of the liability side set free from regulation, a firm earmarking 60% of assets for housing would necessarily have to be prudently balanced with the remaining 40%. I see no great danger in permitting more freedom with the 40% categories, but only if the freeedon is earned.

For example, an institution that proposed to its regulator that it wishes to invest 10% of its assets in, say, real estate equities, would have to earn that privilege by starting at a lower percentage and demonstrate competence. Regulators would have to make judgments, but that's what good regulators can and should do.

Such a 60-40 program would enable associations to pay market rates on savings accounts, yet would assure the housing community that the bulk of net new funds would go into housing. …

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