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Financial Institution Fraud 6/22/90 [OA 8314] [3]
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Financial Institution Fraud 6/22/90 [OA 8314] [3]
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Originally Processed With FOIA(s):
FOIA Number:
S
S
FOIA
MARKER
This is not a textual record. This is used as an
administrative marker by the George Bush Presidential
Library Staff.
Record Group/Collection:
George H.W. Bush Presidential Records
Collection/Office of Origin:
Speechwriting, White House Office of
Series:
Speech File Backup Files
Subseries:
Chron File, 1989-1993
OA/ID Number:
13723
Folder ID Number:
13723-004
Folder Title:
Financial Institution Fraud 6/22/90 [OA 8314][3]
Stack:
Row:
Section:
Shelf:
Position:
G
26
20
6
4
Justice
DOJ FINANCIAL INSTITUTION FRAUD AMENDMENTS TO S.1970/INDEX
ISSUE/TITLE OF AMENDMENT (statute effected, if any)
B1
Enhancement of Ability to Order Restitution in Certain Fraud
Cases (Hughey V. United States) ;
B2
Debt Collection Provisions
B3
Wiretap Authority for Bank Fraud and Related Offenses and
Technical Amendments to Wiretap Law (18 U.S.C. 2516 (1) ) ;
B4
Cross-Designation of Government Attorneys by the Attorney
General to Assist in Prosecution of Financial Fraud Crimes;
B5
Jurisdictional Amendment for Section 2314 to Cover
Fraudulent Schemes involving Foreign as well as Interstate
Travel (18 U.S.C. 2314) ;
B6
Fraud Through Use of a Facility of Commerce (18 U.S.C.
1343) ;
B7
Richmond Amendment (Simplified Version) Re: Alienation or
Disposition of Property (18 U.S.C. 1345) ;
B8
Correction of Misplaced Phrase (18 U.S.C. 3289) ;
B9
Conforming Amendments to Substitute a Reference to the FDIC
for the now Abolished FSLIC in Two Banking Offenses (18
U.S. C. 657; 18 U.S.C. 1006).
ISSUE #B1 ENHANCEMENT OF ABILITY TO ORDER RESTITUTION IN CERTAIN
FRAUD CASES.
Section 3663 (a) of title 18, United States Code, is amended
by adding at the end the following:
"For the purposes of this section the term 'victim of such
offense' shall include any victim of an offense involving a
scheme or artifice under chapter 63 of this title (or under the
second paragraph of section 2314 of this title), or of a
conspiracy to commit such an offense, irrespective of whether the
defendant was convicted of an offense involving that victim or of
an offense involving the property of the victim for which
restitution is to be ordered."
ISSUE #B1 SECTION-BY-SECTION ANALYSIS
This would partially overcome the decision of the Supreme
Court in Hughey V. United States, (decided May 21, 1990), which
held that, for the purposes of the restitution statute,
restitution can be ordered only to those victims of an offense
for which the defendant has been convicted. Under the proposed
amendment, Hughey would be effectively overturned with respect to
prosecutions using a "scheme or artifice" provision, such as mail
fraud and bank fraud. In those cases, the court would be
empowered to order restitution to any victim of a scheme, even if
such victim was not included in a count of conviction or (as to
the same victim) even if the property for which restitution is
ordered was not the subject of a count of conviction.
ISSUE #B2 DEBT COLLECTION
ISSUE #B3 WIRETAP AUTHORITY FOR BANK FRAUD AND RELATED OFFENSES
AND TECHNICAL AMENDMENTS TO WIRETAP LAW.
(a) Section 2516 (1) (c) of title 18, United States Code, is
amended
(1) by inserting "section 215 (relating to bribery of bank
officials) ," before "section 224";
(2) by inserting "section 1014 (relating to false statements
to financial institutions), "before "sections 1503,"
(3) by inserting "section 1344 (relating to bank fraud) ,"
after "section 1343 (fraud by wire, radio, or television) "; and
(4) by striking out "the section in chapter 65 relating to
destruction of an energy facility,
(b) Section 2516 (1) of title 18, United States Code, is amended -
-
(1) by redesignating the first paragraph (m) which reads
"any conspiracy to commit any of the foregoing offenses.' as
paragraph (o) ;
(2) by striking out "and" at the end of paragraph (m)
(3) by striking out the period at the end of paragraph (n)
and inserting ";and"; and
(4) in paragraph (j), by striking out "any violation of
section 1679(c) (2) (relating to destruction of a natural gas
pipeline) or subsection (i) or (n) of section 1472 (relating to
aircraft privacy) of title 49, of the United States Code" and
inserting in lieu thereof "any violation of section 11 (c) (2) of
the Natural Gas Pipeline Safety Act of 1968 (relating to
destruction of a natural gas pipeline) (49 U.S.C. App.
1679a (o) (2) or sections 902 (i) or (n) of the Federal Aviation
Act of 1958 (relating to aircraft piracy) (49 U.S.C. App. 1472 (i)
or (n) ".
ISSUE #B4 CRO88-DE8IGNATION OF GOVERNMENT ATTORNEYS BY THE
ATTORNEY GENERAL TO ASSIST IN PROSECUTION OF FINANCIAL
FRAUD CRIMES
Notwithstanding any other provision of law:
(a) The Attorney General may, with the consent of the
heads of departments, designate attorneys employed by the
departments to assist the Department of Justice in the
investigation and prosecution of fraud or other criminal or
unlawful activity in or against the savings associations
industry.
(b) An attorney designated in accordance with
subsection (a) may, subject to the general supervision of the
Attorney General, conduct any kind of legal proceedings, civil or
criminal, including grand jury proceedings and proceedings before
committing magistrates, and perform any other investigative or
prosecutorial function, which United States attorneys are
authorized by law to conduct or perform, whether or not the
attorney is a resident of the district in which the proceeding is
brought
(c) The Attorney General is not required to reimburse
the departments for the services of attorneys designated in
accordance with subsection (a).
ISSUE #B4 SECTION-BY-SECTION ANALYSIS
Subsection (a):
This section is based on current 28
U.S. C. § 543, which the Department of Justice relies on for
authority to cross-designate attorneys from other federal
agencies to assist the Department. The verb "appoint" in section
543 has been replaced with "designate" to make clear that
designated attorneys will not have two government appointments,
but simply will have additional duties. The reference to
"savings associations industry" is based on FIRREA, which refers
repeatedly to "savings associations. n
Subsection (b):
This section is based on current 28
U.S.C. § 515. The section is designed to insure that the
Department of Justice can make full and appropriate use of
government attorneys with the requisite expertise.
Subsection (c) :
This section makes clear that the
Department of Justice will not have to pay the salaries of
designated attorneys.
ISSUE #B5 JURISDICTIONAL AMENDMENT FOR SECTION 314 TO COVER
FRAUDULENT SCHEMES INVOLVING FOREIGN AS WELL AS
INTERSTATE TRAVEL
The second paragraph of section 2314 of title 18, United
States Code, is amended by inserting "or foreign" after
interstate.
"
ISSUE #B5 SECTION-BY-SECTION ANALYSIS
The amendment in section 102 would plug a loophole in 18
U.S.C. 2314, which punishes schemes to defraud (including those
directed against HUD or a HUD program) involving the induced
interstate travel of a person other than the perpetrator.
The relevant portion of section 2314 (the second paragraph)
was enacted in 1956, in order to combat a then growing species of
fraud in which the interstate travel of the victim was a prime
ingredient. Congress found that: "This travel by the victim not
only serves to provide a means of carrying the money to the
criminal by the agency of the victim himself, but because the
victim is induced to travel away from home the time incident to
his travel and return may also occasion an additional delay which
can be used by the criminal to escape from the scene." (H. Rep.
No. 2474, 84th Cong., 2d Sess.), reprinted at 1956 U.S. Code
Cong. & Adm. News, p. 3038 (1956). This rationale clearly
applies to schemes in which the victim is induced to travel in
foreign commerce as well as interstate commerce, yet the statute
covers only the latter. This anomaly is underscored by the fact
that the section's other paragraphs, penalizing the
transportation of various items of stolen or counterfeited
character, extend both to interstate and foreign commerce
transportation. Moreover, the failure to cover foreign commerce
in the second paragraph offense creates other anomalies in which
a fraud victim's travel, e.g., from the State of Washington to
Mexico through other States, would be covered (as "interstate"
travel), but a victim's travel from a border State such as Texas
directly into Mexico would not. See United States V. Kelly, 569
F.2d 928, 934 (5th Cir. 1978). Accordingly, the amendment adds
travel in foreign commerce to the second paragraph of 18 U.S.C.
2314.
ISSUE #B6 FRAUD THROUGH USE OF A FACILITY OF COMMERCE
(a) Section 1343 of title 18, United States Code, is
amended by --
(1) striking out "transmits or causes to be
transmitted by means of wire, radio, or television communication
in interstate or foreign commerce, any writings, signs, signals,
pictures, or sounds" and inserting in lieu thereof "uses or
causes to be used any facility of interstate or foreign
commerce; " and
(2) inserting "or attempting to do so" after "for the
purpose of executing such scheme or artifice. "
(b) The heading of section 1343 of title 18, United States
Code, is amended to read" "Fraud by use of facility of interstate
commerce. "
(c)
CLERICAL AMENDMENT. The table of sections for
chapter 63 of title 18, United States Code, is amended to by
striking out the item relating to section 1343 and inserting in
lieu thereof "1343. Fraud by use of facility of interstate
commerce. "
ISSUE #B6 SECTION-BY-SECTION ANALYSIS
Section 103 would expand jurisdiction under the current wire
fraud statute, 18 U.S.C. 1343, so that there would be federal
cognizance over fraudulent schemes in which any facility of
interstate or foreign commerce was used, not only schemes
promoted by means of wire, radio, or television communication.
The wire fraud statute was enacted in 1952 as a supplement to the
pre-existing mail fraud law, in order to deal with the rapid
growth of fraudulent schemes then being promoted through radio
and television advertising. See H. Rep. No. 2426, 82nd Cong. 2d
Sess. (1952) reprinted at 1952 U.S. Code Cong. & Adm. News, pp.
2264-5 (1952). Another statute, 18 U.S.C. 2314 (second
paragraph), punishes fraudulent schemes in which a person or
persons travel in, or are induced to travel in, interstate
commerce. A gap, however, exists among these statutes with
respect to the use of other facilities of interstate commerce.
For example, a sophisticated schemer, aware of the limitations of
federal fraud laws, could use an interstate common carrier such
as Federal Express rather than the mails to distribute fraudulent
solicitations. The federal interest in reaching such schemes is
every bit as great as when the mails or a wire facility, such as
the telephone, is used in interstate commerce, since the common
theme uniting all these situations is that prosecution by a State
or local prosecuting authority is difficult when the scheme takes
on interstate or international proportions. Many modern federal
statutes use the device of expressing the federal interest by
reference to the use of any facility of interstate or foreign
commerce. See, e.g., 18 U.S.C. 1952 (a) and 1465 (as amended by
section 7521 (c) of the Anti-Drug Abuse Act of 1988). The
proposed amendment thus represents an updating of the wire fraud
law to foreclose the use of jurisdictional loopholes by which
certain unscrupulous persons could escape federal prosecution,
including the perpetrators of frauds involving the Department of
Housing and Urban Development or an agency or program thereof.
The second part of the amendment, adding coverage of the use
of an interstate facility in an attempt to execute the fraudulent
scheme, would conform 18 U.S.C. 1343 to its companion statute,
the mail fraud law, 18 U.S.C. 1341, which already contains such
provision.
ISSUE #B7 RICHMOND AMENDMENT (SIMPLIFIED VERSION)
RE: ALIENATION OR DISPOSITION OF PROPERTY
The first sentence of section 1345 of title 18, United
States Code, is amended to read as follows:
"Whenever it shall appear that any person is engaged or is
about to engage in any act which constitutes or will constitute a
violation of this chapter, or of section 371 (insofar as such
violation involves a conspiracy to defraud the United States or
any agency thereof), or 1001 of this title, or is engaged or
intends to engage in any alienation or disposition of any
property, the Attorney General may initiate a civil proceeding in
a district court of the United States to enjoin such violation or
such alienation or disposition of property or equivalent assets. "
for
steagrage
ISSUE B8 CORRECTION OF MISPLACED PHRASE IN 18 U.S.C. 3289.
Section 3289 of title 18, United States Code, is amended by
striking out "or, in the event of an appeal, within sixty days of
the date the dismissal of the indictment or information becomes
final, " and inserting that same stricken language after "within
six months of the expiration of the statute of limitations, ".
D.
ISSUE #B9 CONFORMING AMENDMENTS TO SUBSTITUTE A REFERENCE TO THE
FDIC FOR THE NOW ABOLISHED FSLIC IN TWO BANKING
OFFENSES.
Sections 657 and 1006 of title 18, United States Code, are
each amended by striking out "the Federal Savings and Loan
Insurance Corporation" and inserting in lieu thereof "the Federal
Deposit Insurance Corporation."
DRAFT -- HILDEBRAND -- 6/20/90
Remarks by Secretary Brady
S&L Initiative -- Justice Department
June 22, 1990
I am pleased to join the President and the Attorney General
this morning [as we announce] [to discuss] the Bush
Administration's initiative to intensify the fight against
financial institution fraud.
In the ten months since the FIRREA legislation was passed by
the Congress, those of us tasked with cleaning up the mess have
been guided by three principles:
First, we will make sure that the millions of men and
women who put their life savings in savings and loan
institutions are protected to the full extent of their
federal deposit insurance.
Second, we will do all within our power to do the job
at the least cost to the taxpayer.
Third, we will aggressively pursue and prosecute the
crooks and fraudulent operators who helped create the
S&L problem.
The United States Government made a promise to millions of
Americans. We promised to protect their savings deposited in a
federally-insured savings and loan. Now we are making good on
that promise. The problem is huge, and the resolution of it will
1
DRAFT -- HILDEBRAND -- 6/20/90
neither be quick, nor easy, nor cheap. But we will see that it
is done -- and done well. To accomplish that goal, we need the
continued assistance and commitment of the U.S. Attorneys.
Making good on our commitment to safeguard the savings of
millions of Americans is only part of the cleanup. The American
people need to know that the crooks and wheeler-dealers who
created this mess, through blatant mismanagement and outright
fraud, are going to be hunted down, prosecuted, and sent to jail
for their betrayal of trust.
Trust and confidence are an integral part of our financial
system. It is up to the regulators, federal law enforcement
officials, and the U.S. Attorneys to work as a team in this
commitment to clean up the fraud and restore the confidence of
the American people -- both current and future depositors -- in
thrift institutions.
The Resolution Trust Corporation (RTC) has established an
Office of Investigations in Washington and has teams of
investigators throughtout the country. The RTC's investigations
staff numbers
and will reach 300 by year end. These
investigators will help to identify negligent and reckless
mismanagement, fraud and criminal conduct that contributed to
failed thrifts. These investigators will assist the FBI and the
2
DRAFT -- HILDEBRAND -- 6/20/90
U.S. Attorneys in criminal prosecutions.
Thrift regulators and institutions have made over 17,000
criminal referrals in the last three years. Over the same
period, OTS and its predecessors required 664 institutions to
enter into binding agreements terminating unsafe and unsound
practices; removed over 150 senior officers and directors from
thrifts and forbade them ever again to be employed by an insured
thrift institution; and issued 111 cease and desist orders, to
stop unsafe and unsound practices and to require restitution. In
addition, there are over 1,000 civil law suits seeking to recover
billions of dollars from the former directors, officers and
professionals -- including accountants and lawyers.
[Number] of criminal referrals by OTS to date have already
resulted in prosecutions and convictions.
Woody Lemons, the former Chairman and CEO, Vernon Savings
and Loan, in Texas, was caught. He will serve 30 years for bank
fraud and bribery.
(Additional examples of long prison terms)
3
DRAFT -- HILDEBRAND -- 6/20/90
The enactment of the FIRREA legislation was the beginning- --
not the end -- of the solution. Today's announcement of
additional steps to fight financial institution fraud is one more
-- not the final -- step in the Administration's efforts to
ensure that the federal government's resources are targeted at
the root of the problem.
This is not a small enforcement effort. We are stacking the
deck against the crooks and the thieves.
The
Treasury
Department, the Office of Thrift Supervision, the Comptroller of
the Currency, and the Internal Revenue Service, are committed to
working with you, our U.S. Attorneys; the Justice Department; and
other financial regulators to see that these high-flyers, who
gambled with -- and lost -- depositors' money that didn't belong
to them, are made to pay. And whenever possible, I mean,
literally, pay.
Our mission is to see that the S&L crooks are not allowed to
sail away in their yachts, as some have suggested. To those who
have cheated the American people through criminal acts, we make a
pledge. Our goal for you -- the crooks, the cheats and the
chislers -- is a long stay, not in a plush resort, but behind
bars.
4
See Highlights
C : alan
THE WHITE HOUSE
Office of the Press Secretary
For Immediate Release
August 9, 1989
FACT SHEET
Key Provisions of the Financial Institutions
Reform, Recovery and Enforcement Act of 1989
STRONG THRIFT CAPITAL REQUIREMENTS
The bill was designed to require thrifts to meet generally
the same capital and accounting standards as national banks.
In addition to new, tougher minimum capital requirements for
thrifts, the bill provides other new standards which reflect
national bank capital provisions.
O
The bill also creates a tangible capital requirement of at
least three percent of assets. This will prevent the
current situation in which institutions with an enormous
negative tangible net worth are able to comply with minimum
capital rules and continue active expansion. All
"supervisory goodwill* must be phased out by January 1,
1995.
O
Investments in thrift subsidiaries engaging in
nontraditional activities must be deducted from capital.
This will prevent the risk of sudden failure of insured
institutions as a result of losses in subsidiary businesses.
Growth by undercapitalized firms will be strictly limited or
prohibited.
Brokered deposits will not be permitted for undercapitalized
thrifts.
2
ESTABLISHMENT OF NEW DEPOSIT INSURANCE FUND
Deposit insurance for thrifts will be provided by a new
insurance fund, called the Savings Association Insurance
Fund (SAIF) SAIF will replace the current Federal Savings
and Loan Insurance Corporation. The SAIF fund will be
directed and administered by the Federal Deposit Insurance
Corporation, although it will be separately maintained from
the existing bank insurance fund.
SAIF will continue to receive assessments paid by its
members after 1991, and should it become necessary, Treasury
payments to maintain the Fund's net worth at specified
levels.
RESOLUTION TRUST CORPORATION (RTC) AND RTC OVERSIGHT BOARD
The RTC will be established to merge or liquidate all
existing failed thrifts, as well as any thrifts that fail
prior to August, 1992.
The RTC Oversight Board will establish general policies for
the RTC and oversee its activities. Members of the
Oversight Board will be the Secretary of the Treasury
(Chairman), the Chairman of the Federal Reserve Board, the
Secretary of Housing and Urban Development and two public
members appointed by the President.
The Federal Deposit Insurance Corporation (FDIC) will be the
exclusive manager of the RTC, handling day-to-day
operations.
FINANCING FOR CLOSING AND RESOLUTION OF FAILED THRIFTS
The bill will establish the Resolution Funding Corporation
(REFCORP) to fund the case resolutions undertaken by the
RTC. Refcorp will be headed by a three member Directorate,
and it will be authorized to issue up to a $30 billion
principal amount of long-term bonds to pay the costs of
closing down or otherwise resolving insolvent thrifts.
For current cases, the bill provides $20 billion to pay for
resolution activities in FY 1989, including $18.8 billion
from Treasury funds, and $1.2 billion from Federal Home Loan
Banks.
The bill provides $32 billion in public and private funds to
resolve thrifts that fail from 1992-1999, and to capitalize
the new SAIF.
3
The bill provides all necessary funds for FSLIC cases
resolved before January 1, 1989.
REGULATORY RESTRUCTURING
The FDIC will be given independent enforcement authority to
take action against violations of safety and soundness
requirements by any insured thrift. This will enable the
FDIC to act to protect the insurance fund against risks
allowed by chartering or supervisory agencies.
Under the legislation, the Federal Home Loan Bank Board will
be abolished. Its former activities will be divided into
several functions.
The primary function of examining and supervising both
federally and state-chartered thrifts and their holding
companies will be performed by a new agency, the Office of
Thrift Supervision (OTS). The OTS will be an office of
the
Department of the Treasury. As an office of the Treasury
Department, the interests of taxpayers and the general
public can be more fully protected.
The Federal Savings & Loan Insurance Corporation will be
replaced by SAIF, which will be administered by the FDIC.
The Federal Housing Finance Board will supervise the credit
activities of the 12 regional Federal Home Loan Banks.
The Federal Home Loan Mortgage Corporation (Freddie Mac)
will become an independent government-sponsored enterprise.
RESTRICTIONS ON THRIFT POWERS
The FDIC will have authority to prohibit or limit activities
of state-chartered thrifts that it determines involve
unacceptable risk levels.
Investments in junk bonds, either directly or through a
subsidiary, will be prohibited, but may be placed in a
separately capitalized affiliate where insured deposits will
not be at risk.
Equity investments (such as direct real estate investments)
will be prohibited within federally-insured thrifts.
Loans to one borrower will be generally limited to the
amount allowed for national banks.
4
QUALIFIED THRIFT LENDER (QTL) TEST
Thrifts must maintain 70 percent of their assets in housing-
related loans and other qualified assets.
Thrifts that fail the QTL test must convert to a bank
charter or be subject to certain restrictions.
HOUSING
Federal Home Loan Banks will be required to contribute at
least $100 million a year by 1995 to subsidize interest
rates on advances to member institutions that make loans for
low and moderate income housing.
The RTC must provide a three-month "first look" period to
qualified buyers of single family homes held by the RTC, and
similar opportunities for qualified buyers of eligible
multi-family housing extending up to 135 days.
ENFORCEMENT
Maximum sentences for najor financial institution crimes,
such as bribery and fraud, are increased to 20 years in
prison. The maximum criminal fine for these violations is
increased to $1 million.
The basis for civil penalties imposed by the regulators is
expanded, and current generally low penalties are increased
to a maximum penalty of $1 million per day.
The Department of Justice will be authorized to receive
substantial new appropriations to enable it to more than
double investigators and prosecutors of financial fraud
cases.
STUDIES
The Treasury, in consultation with the depository
institutions regulators and others, will conduct major
studies on the federal deposit insurance system as well as a
study on the risk exposure to the federal government of
government-sponsored enterprises.
See Highlights
THE WHITE HOUSE
OFFICE OF THE PRESS SECRETARY
FOR IMMEDIATE RELEASE
February 6, 1989
FACT SHEET
THE PRESIDENT'S REFORM PLAN
FOR THE SAVINGS AND LOAN INDUSTRY
President Bush announced that he will send Congress a major
reform and financing initiative to resolve the nation's savings
and loan industry problems. The President emphasized that all
insured savings and loan and bank deposits are and will continue
to be backed by the full faith and credit of the federal
government.
The President's proposal has the support of all the federal
agencies that regulate financial institutions: the Federal
Reserve Board, the Comptroller of the Currency, the Federal Home
Loan Bank Board and the Federal Deposit Insurance Corporation.
The President's proposal contains these elements:
The plan will fundamentally restructure the way the savings
and loan industry is regulated and insured to prevent such a
situation from ever reoccurring.
It will improve supervisory controls so that regulators will
be able to prevent future abuses.
It will increase the financial integrity of the federal
deposit insurance funds for the future.
It will enhance enforcement and increase penalties aimed at
fraud against financial institutions.
It will create and fund a new corporation to pay the cost of
closing all insolvent savings and loan institutions. I have
rejected any new fee on deposits as part of this program.
It will begin placing these institutions under the control
of the federal government in an orderly manner.
Structural Reform
The Federal Savings and Loan Insurance Corporation (FSLIC)
will be separated from the Federal Home Loan Bank Board and
attached administratively to the Federal Deposit Insurance
Corporation (FDIC). This will create one strong independent
insurer with an overriding mission of providing insurance to
protect depositors and maintaining the security of the deposit
insurance fund. The considerable expertise of the two
corporations will be available to deal with financial insurance
and regulatory issues. However, while a single agency will be
created, separate insurance funds will be maintained for
commercial banks and fo S&Ls. The separate insurance funds
will
not be commingled, and premiums from each industry will be used
only for its own insurance fund.
The current Federal Home Loan Bank Board (FHLBB) will be
renamed the Federal Home Loan Bank System (FHLBS). Its current
board will be replaced by a single chairman. The Chairman of the
FHLBS will be subject to the general oversight of the Secretary
of the Treasury in the same manner as the Comptroller of the
Currency, who regulates national banks. The system of 12 Federal
Home Loan Banks will be maintained to support housing finance.
However, supervisory responsibilities will be strengthened,
current pay standards for supervisory personnel of the FHLBB will
not be altered.
By separating the insurer from the chartering agency, more
serious disciplinary standards are likely to be maintained in the
future. In addition, by subjecting the actions of the FHLBS to
oversight by the Treasury department, the interests of the
taxpayers can be more fully and consistently protected. This
Treasury oversight has existed for national banks since the
Administration of President Abraham Lincoln. These steps will
create a system of checks and balances for savings and loans that
more closely parallels that for commercial banks.
Improved Supervisory Controls
The President's plan will increase safety and soundness
standards for savings and loan institutions. In effect, these
institutions will be brought up to commercial bank standards over
a two-year period.
All S&Ls will be required to meet the capital requirements
applicable to FDIC-insured banks by June 1, 1991. That is, their
capital must be increased to approximately six percent of assets,
almost double the current capital requirement. Risk-based
capital standards would be utilized. The increase of private
capital will stand ahead of the government's guarantee of
deposits, giving taxpayers an enhanced level of protection.
The FDIC will be given enhanced authority to set insurance
standards for all S&Ls, both federal and state-chartered. It
will be able to restrict risky activities that have been
authorized by some states in the past. In addition, the FDIC
would be authorized to take appropriate measures on an expedited
basis when unsound practices are found.
Financial Integrity
The President's plan will require increased insurance
premiums to put federal deposit insurance on a sound financial
basis for the future, funded by the industry.
It will recapitalize the deposit insurance fund for S&Ls,
with S&L premium income of a billion dollars a year beginning in