S&Ls, Builders Say 'Loans to One Borrower' Rule Too Harsh

A provision in last year's bailout law requires thrifts to follow the standards set for national banks on the matter. As a result, S&Ls can lend to one borrower no more than 15% of capital, the bank industry standard, or $500,000 - whichever is greater. The $500,000 exception was added beca...

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Bibliographic Details
Published inThe American banker
Main Author ROBERT M. GARSSON and AMY SUZANNE KING
Format Newspaper Article
LanguageEnglish
Published New York, N.Y SourceMedia 26.02.1990
Subjects
Bailouts
Comptrollers
Loans
National banks
Transition rules
WASHINGTON
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Summary:A provision in last year's bailout law requires thrifts to follow the standards set for national banks on the matter. As a result, S&Ls can lend to one borrower no more than 15% of capital, the bank industry standard, or $500,000 - whichever is greater. The $500,000 exception was added because many thrifts have little or no capital. Regulators appear unmoved. The Office of Thrift Supervision says the bailout law made no provision for a transition rule and it is bound to enforce national bank standards. The Office of the Comptroller of the Currency, which sets standards for national banks, says it too lacks authority to permit a transition rule. Seidman Backs Builders David J. Sullivan Jr., chairman of the National Council of Savings Institutions, testified that such periods of transition are not without precedent. The president and chief executive officer of Mechanics and Farmers Savings Savings Bank, Bridgeport, Conn., said that in several other areas of the bailout legislation - in particular, minimum capital standards - Congress provided for a reasonable transition period to avoid the disruption of a savings institution's business.
ISSN:0002-7561
1945-578X