On March 3, the Office of Thrift Supervision will hold a CEO Outreach Meeting in Pittsburgh so that OTS officials can share muffins with local thrift execs. In other words, it’s business as usual at the OTS.
That despite the fact that the OTS should be shut down. In truth, the entire banking regulatory regime is terribly flawed and I would argue that President Obama’s failure to clean up this mess is far worse than the administration’s inability to formally contain “to big to fail.”
Obama first proposed shuttering the OTS last June, and yet still no progress has been made. The regulatory reform bill that would kill the OTS remains stalled in the Senate over its proposal to create a Consumer Financial Protection Agency.
The trouble is the overall regulatory system is already troubled without OTS — what with the Federal Reserve, Treasury Department, Office of the Comptroller of the Currency, National Credit Union Administration, Federal Deposit Insurance Corp., Securities and Exchange Commission, and the Commodity Futures Trading Commission fighting for regulatory street cred. But at the least the US taxpayer should save the $250 million we spend on the OTS. Someone stick a fork into it — and quick.
I would say that fewer than 20% of the banks out there are under a Mutual charter. Maybe less than 15%. I will try to find out if I can find a true number from some source or the other. Remember, a lot of them changed charters back in the 80s and early 90s when using the term “S&L” was met with about as much ire as cursing in church. Some though, just took “Savings & Loan” out of their name and made no change to charter, ownership structure or operations at all. So there are still many around, they are just a little incognito.
As I alluded to, I would think it would be wiser to co-regulate them with Credit Unions than commercial banks if efficiency is the goal. This would take some doing as Mutual S&L’s consider themselves Banks in the truest sense of the word and as such there is tension between them and their CU counter parts. But such was the case some years back when there was the same feeling by Commercial banks against their S&L counterparts, much of that being long forgotten at this point in the game. Still, I think the transition that direction would be smoother and avoid the pitfalls of getting rid of the Mutual charter altogether. Just don’t allow new Mutual’s to be formed, not that there has been much of that type of activity in years anyway.
I think from a safety and soundness standpoint, what the reg’s are trying to do is get rid of the unstated approval for Mutuals to carry lower capital levels and lower net incomes as they are quasi-nont for profit membership owned organizations. Sort of like a country club, and more akin to credit unions. I think they worry about the impact of catastrophic loan problems in a geographic area killing Mutual whose lower capital levels and lower profitability can sustain. But again, I contend that most of these have proven that they have avoided specualtion anyway, WaMu notwithstanding.
And as you mention, calling the OTS by another name and keeping the same staff, same operations, same expense load really solves nothing and I can think of more than one way that it can get worse.
Tim