Federal Budget Deficits, Nonbank Banks, Rapid Growth Discussed by US League
McCue, Lisa J., American Banker
WASHINGTON -- About 3,000 thrift executives washed into and out of town recently on a wave of enthusiasm for reducing the federal budget deficit.
They pledged at the annual meeting of the U.S League of Savings Institutions to do everything in their power to get Congress and the administration to take definite steps to reduce government debt. They said it was their No. 1 priority for the year.
Yet, it was an unusually broad position for an industry group that usually sets more narrow targets like increased real estate powers. And it seemed to detract attention, or at least conversation, from more thrift-specific issues, such as the industry's capital level.
Which forces a number of questions. Among them:
Does this attention to deficits signal a resigned attitude that nothing short of lower interest rates can save the industry?
And: Are there no other issues -- such as the continuation of a net worth certificate program, or the strength of their deposit insurance fund -- that might mean more to thrifts in 1985?
Thrift managers questioned at the meeting maintained that their interest in the deficit is no more acute than that of any other business.
When pressured, some acknowledged what they alone may think is a secret: that the savings industry can't withstand another period like the hard times that hit in 1980.
"No, we cannot afford to have a recurrence of the 1980 to 1983 period -- it sapped our strength," conceded Edmond M. Shanahan, president of Bell Federal Savings & Loan Association in Chicago.
"But Congress will not allow it to recur," he said, echoing what appeared to be a prevalent attitude among those attending the meeting. Many thrift managers seem to think the industry will be protected, even if indirectly, because of their role in housing finance. That may be correct, but thrifts also may find things have gotten a little tougher for them on the legislative battlefield. Relying on Congress?
Congress is less enamored with the industry than it has been in the past.
A House Banking Committee staffer recently noted that in the past, when Congress considered thrifts only in terms of the National Housing Act, thrifts had a favored position. They were equated with the American dream of owning a home.
But in their struggle to survive, as they try to obtain new powers as weapons in the fight, Congress sees thrifts in a cooler light, more like commercial banks. Thrift lobbyists will have to deal with that new environment when they promote thrift interests on Capitol Hill.
Despite the U.S. League's very public outcry against the deficit, there will be a number of legislative and regulatory issues in 1985 that hit at the guts of the business.
For instance, there was little talk at the league's annual meeting about a need to renew a net worth assistance plan scheduled to expire in 1985. Yet the trade group's staff has been laying the groundwork for a renewal campaign for months, a campaign it privately calls its No. 1 priority.
"The legacy of low-yielding assets in the thrift industry is immense," a highplaced staffer explained recently.
"If rates turn around, it could be very ominous with regional rate wars [among institutions competing for deposits]," he said, adding that he thinks it is imperative to convince Congress not to abandon the program.
The most recent information available from the Federal Home Loan Bank Board, which administers the program Congress authorized in 1982, shows that 62 assistance agreements were signed in 1983 equaling $52.4 million. And during the first half of this year, 38 agreements equaling about $22 million were issued.
The Net Worth Certificate Program was created to help well-managed depository institutions through a bad time. And it is generally agreed that the financial condition of many thrifts is still too tenous to let the program expire without serious consequences for the industry. …