1 A top bank official says the Federal Home Loan Bank Board's dual role as regulator of the savings industry and promoter of home ownership has contributed to the wave of S&L failures.
2 L. William Seidman, chairman of the Federal Deposit Insurance Corp., which insures deposits in commercial banks, said Wednesday the insurance fund for S&Ls should be independent of the bank board.
3 The primary goal of the Federal Savings and Loan Insurance Corp., which insures deposits up to $100,000, is the safety and soundness of savings institutions, he said.
4 However, the FSLIC's parent, the Federal Home Loan Bank Board, is also charged with creating, or chartering, S&Ls to provide a steady flow of mortgage money to home buyers.
5 'There's a basic conflict between those two roles and I think it's very important that they be separated so that the insurer .
6 can protect his insurance fund and not allow institutions that operate in an unsafe and unsound manner to have insurance,' Seidman told reporters at a luncheon to release a 408-page FDIC report, 'Deposit Insurance for the Nineties: Meeting the Challenge.'
7 He recommended a regulatory structure for S&Ls similar to the system for banks.
8 The Office of the Comptroller of the Currency, an arm of the Treasury Department, charters national banks, while the FDIC insures their deposits.
9 The U.S. League of Savings Institutions, the industry's largest trade group, has not taken a position on separating the FSLIC from the bank board, but its chairman, B.R.
10 Beeksma, said recently the question should be considered.
11 The bank board's performance as a chartering agency may be suffering because it is consumed with the problems of the FSLIC, he said.
12 The FDIC, which prepared the report for Congress, also recommended placing S&L examiners under the FSLIC.
13 Currently, the examiners work for the regional Federal Home Loan Banks, which lend money to S&Ls, are owned by the industry and are controlled by boards composed of S&L executives.
14 The current system can have the effect of allowing S&Ls with representatives on the regional bank boards to regulate their competitors, Seidman said.
15 The FDIC made no recommendation on how money should be raised to pay for the S&L crisis, but said it was clear that the federal government, rather than the S&L industry or banks, will have to pay most of the $60 billion to $115 billion needed to restore S&Ls to health.
16 But, it said, 'concerns about the federal budget deficit could be mitigated by an off-budget financing arrangement' in which the Treasury pays the interest on borrowing to finance the industry's rescue.
17 The Treasury Department is preparing a recommendation for President-elect Bush and the new Congress.
18 Meanwhile, the FDIC rejected proposals to curtail or eliminate federal deposit insurance, arguing that would increase the danger of bank runs.
19 Some scholars say reducing or doing away with the insurance would force depositors to pay more attention to how well their institutions are run.
20 The American Bankers Association said in a statement Wednesday that the current practice of protecting even depositors with funds in excess of the $100,000 insurance limit 'has become a license for abuse by some financial managers.'
21 But, Seidman said, 'In today's complex world, we think the depositor, both sophisticated and unsophisticated, would have great difficulty in knowing the condition of their banks on a day-to-day basis.
22 We as bank regulators with thousands of supervisors have difficulty in keeping control of banks in terms of their exact financial condition.'

" There ' s a basic conflict between those two roles and I think it ' s very important that they be separated so that the insurer .
insurer
So that the insurer will do what?