Date: 1981-10-27
Speaker: ST GERMAIN (democrat)
Chamber: H

Mr. Chairman. your Banking. Finance. and Urban Affairs Committee by voice vote on October 5 recommended that the House adopt H.R. 4603. as amended. responding to the request of the independent regulators and insurers of our financial institutions. After a thorough consideration of the regulators request the committee concluded that simple prudence demands that we provide our regulators with maximum flexibility in the administration of existing deposit insurance funds to minimize impact on these funds and at the same time provide maximum assistance based upon the circumstances involved in each case to those institutions. primarily thrift institutions. experiencing declinIng net worth problems during this period of extreme financial stress. largely due to persistent doubledigit inflation. H.R. 4603. as amended by the committee. provides for increased flexibility in the administration of existing deposit insurance funds. for the provision of transitional assistance to thrift institutions during this period of financial stress. and for broadened merger possibilities designed to minimize the cost impact on the Individual Insurance funds while at the same time assisting the maximum number of Institutions. These changes affect the Federal Deposit Insurance Corporation. the Federal Home Loan Bank Board and Its Federal Savings and Loan Insurance Corporation. and the National Credit Union Administration and its National Credit Union Share Insurance Fund. In order to respond to those who mistakenly charge that the committee leadership has rushed the bill through both subcommittee and full committee. a somewhat detailed. history of the events leading up to the committees favorable action by voice vote on October 6 will be of Interest to the House. Well over 1 year ago the committee leadership began meeting with regulators. Individually and collectively. as it became Increasingly apparent that thrift Institutions with their lowyield portfolios and sustained high borrowing costs were experiencing rapidly declining net worth problems and that simple prudence dictated that a workable contingency plan be adopted should the economic situation hold constant or even worsen. as has been the case. The regulators at the request of the committee leadership were encouraged to prepare concensus draft legislation which was done. This draft legislation was discussed by Members and staff thoroughly at numerous meetings beginning last spring. The legislation before you today. H.R. 4603. remains essentially the bill which was drafted by the regulators. During this period. numerous meetings were held as well with representatives of the administration. primarily Department of Treasury officials and the Economic Council. To assist my colleagues in attempting to understand the administrations position on the provisions of H.R. 4603 which has. and continues to cause confusion. I want to place In the RECORD thei exchange of correspondence which took place with the Department of Treasury. several committee releases furnished to each committee member as well as correspondence with Housing Subcommittee Chairman GONZALEZ which took place after Assistant Secretary Mehles appearance before the committee during our monetary policy hearings on July 23. As stated previously. formal hearings began on the draft regulators bill on July 14 In connection with the committees semiannual monetary policy hearings held pursuant to the lull Employment and Balanced Growth Act of 1978. Those hearings were opened with the following remarks by the Chair in part as follows: For most of 1980. and for all of 1981. Interest rates have been at Intolerably high doubledigit levels. As a result. mutual savings bsnks and savings and loan associations. and some banks and credit unions. are suffering serious reductions In their ability to extend needed credit to Important sectors of our Nations economy. Their financial soundness may also be falling into jeopardy. It is this aspect of the conduct of monetary policy that will be explored In todays hearing. the iirst of several by the House Committee on Banking. Finance and Urban Affairs in its semidannual monetary policy hearings held pursuant to the Full Employment and Balanced Growth Act of Almost every day now I see press reports on the plight of the thrift induistry. Rumors and conflicting statements abound. and In some Instances. aggravate public concern and confusion. This spring. this committee stood ready to act quickly In a full bipartisan manner to consider solutions to the thrift industry problem. At that time. this committee was asked. In the most urgent terms. by the Federal Reserve. Federal Deposit Insurance Corporation. Federal Home Loan Bank Board. and the National Credit Union Administration. to consider statutory changes to broaden their merger and acquisition authorities. and to expand the resources of the Federal deposit Insurance funds. Mr. Stanton and I met on several occasions with the regulators Individually. the Chairman of the Federal Reserve. and Informally with newly appointed administration officials. beginning with Secretary Regan. and with our counterparts In the Senate. concerning draft legislation. CoMM~irfEE ON BANKING.