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ABA STATEMENT ON TREASURY DEPARTMENT'S BLUEPRINT FOR REGULATORY REFORM

by Edward L. Yingling, ABA president and CEO

            "The Treasury Department has put forward some very significant proposals for reorganization of the financial regulatory structure.  We are ready to participate in this valuable discussion now and into the next Administration.  This review needs to be conducted carefully, thoughtfully, and thoroughly, with the goal always being how to facilitate the ability of financial services firms to serve their customers.  As we do so, we must be careful not to let rearranging regulatory boxes substitute for real improvements. 

"We must recognize and build upon the strengths of the current system and add to those strengths.  We are disappointed that in several important respects the proposed blueprint comes up short.  In particular, dismantling the thrift charter and crippling state banking charters will weaken banking in America.   

            "The thrift charter is a strong point in our financial system, converting savings into new home opportunities.  As long as homeownership remains a high priority—and ABA believes that it must be—we need an industry focused on and dedicated to promoting and financing homeownership.  That is why we firmly oppose the recommendation to do away with the thrift charter, which makes housing finance a first responsibility.  The Office of Thrift Supervision administers the thrift charter and ensures that there is always a talented and experienced regulatory staff in place to keep savings associations prudently on their tasks.  We are no more ready to abandon the thrift charter than we are to abandon the American family dream of living in a house that you own.  Especially today, as more people are looking for traditional mortgages—the bread and butter of the thrift industry—we must not deemphasize homeownership.

            "For nearly 150 years, our dual banking system of state and national banking charter options has been a source of innovation and vitality that has served banking customers well.  Checking accounts, interest on checking, home equity loans and other important customer services originated with state-chartered banks.  Almost 70% of banks today hold state charters, all of which are jeopardized by the provisions of the Blueprint, particularly by the long-term plan.

            "Because of the benefits to customers that we have witnessed from having viable federal and state banking charters, we congratulate the Treasury on its unequivocal support for an optional federal insurance charter.  ABA has long called for a national insurance system to join with state-chartered companies to increase resources available for better and broader insurance against the risks that Americans face as part of everyday life.

            "Other elements of the Treasury proposal make good sense and deserve support.  Uniform and universal mortgage standards—effectively enforced—are needed for all firms.  Better information must attend any regular access to borrowing from the Federal Reserve.  And seconding the efforts of SEC Chairman Cox to build up the Commission's role as a prudential supervisor is welcome.  We applaud these recommendations.

            "Given the current uncertainties in the market, it is important that this review not draw attention away from addressing the immediate problems.  Those in particular are the problems associated with mortgage originations by inadequately supervised brokers, the nature of information needed by the Federal Reserve in connection with expanded access to its funding facilities, and strengthening coordinated efforts to encourage economic growth.  The Treasury's short-term proposals look to these issues, and working on these immediate problems should demand our first priority before we get drawn off into more theoretical discussions.

            "This is tough work, with many hard questions to be asked and answered.  We have to get the details right, subjecting all ideas to hard-nosed scrutiny and careful weighing of pros and cons.  We welcome the discussion and are ready and willing to participate in the search for reduced regulatory burden and a better regulatory system for financial institutions and especially for our customers."

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                The American Bankers Association, on behalf of the more than two million men and women who work in the nation's banks, brings together all categories of banking institutions to best represent the interests of this rapidly changing industry.  Its membership-which includes community, regional and money center banks and holding companies, as well as savings associations, trust companies and savings banks-makes ABA the largest banking trade association in the country.