Statement of Administration Policy: H.R. 27 - Federal Savings and Loan Insurance Corporation Recapitalization Act of 1987

(Conference)
(St Germain (D) RI)

The administration urges the immediate enactment of a bill to recapitalize FSLIC with funds from the private capital markets at $15 billion over five years. The administration's full self-help plan would: (1) result in a responsible level of funding that will allow FSLIC to protect depositors; and (2) avoid the risk of a budget-busting bailout of FSLIC. Insufficient funding dramatically increases the risk of being forced to use taxpayers' funds — as was the case with the State insurance funds in Ohio and Maryland — to bail out both owners of insolvent savings and loans and depositors.

The administration opposes the numerous objectionable, restrictive, and extraneous provisions added to both the House and Senate versions of H.R. 27 and urges their deletion. If the bill were presented to the President (1) without the necessary resources for FSLIC, or (2) with the highly objectionable provisions outlined below, the President's senior advisers would recommend the bill's disapproval.

The administration strongly opposes, and will seek to eliminate provisions that would:

• Deny to consumers the competitive benefits of new entrants into the regulated and supervised banking system (the so-called non-bank bank loophole, title I H.R. 27 as passed by the Senate);
• Restrict or create disincentives to purchasers of ailing savings and loans that would help offset FSLIC's financial problems (title I of H.R. 27 as passed by the Senate);
• Prohibit banking institutions from offering new products and services to consumers and businesses (title II of H.R. 27 as passed by the Senate);
• Exempt the Federal financial regulatory agencies from Presidential apportionment authority; and
• Impose rigid statutory limitations on the ability of the regulators to supervise troubled thrift institutions.

The administration supports all efforts to eliminate these highly objectionable provisions.

The administration recognizes the appropriateness of regulatory forbearance for well-managed institutions in regionally-depressed areas, provided that the institutions have reasonably good prospects for recovery. This can be accomplished most effectively through regulations issued by the Federal Home Loan Bank Board.