Born in a Previous Crisis, OTS Faces Extinction
Thursday, June 18, 2009
The last time a president was remaking the financial regulatory system, Lawrence Kaplan and several other attorneys at the Federal Home Loan Bank Board were heading to the rooftop restaurant atop the Hotel Washington. It was Aug. 9, 1989.
They watched on television as President George H.W. Bush, nearby in the White House rose garden, signed into law sweeping legislation intended to rectify years of neglect and inept regulation that had contributed to the savings and loans crisis.
"It'll safeguard and stabilize America's financial system and put in place permanent reforms so these problems will never happen again," Bush said that day of the new law, which created three new federal agencies and eliminated two others.
That afternoon, when the lawyers returned to their offices on 17th Street, Kaplan said, another sign was already on the door.
"It said Federal Home Loan Bank Board when we left," Kaplan recalled. "When we came back, it said Office of Thrift Supervision."
The agency born that summer afternoon in 1989 to charter and regulate thrifts -- also known as savings and loans -- now faces extinction as the Obama administration presses Congress to roll its responsibilities into a new national banking regulatory agency.
The news came as little surprise yesterday to veteran OTS employees who have endured repeated calls over the years to dissolve the agency and to policymakers who have long set their sights on abolishing it.
"I think the time has probably come," said Ellen Seidman, a Democrat who headed the agency from 1997 to 2001. "I don't think they did such a great job over the last several years."
As word came yesterday that President Obama had put the agency on the chopping block, staffers at the Washington headquarters reacted with a measure of "gallows humor," said one long-time employee, who was not authorized to speak publicly. "These people have been through this before," the employee said. "Not only that. They've lived through the calls for the elimination of OTS" for "pretty much all 20 years of OTS's existence."
But they also realize that this time it could be for real. OTS spokesman Bill Ruberry said staffers had sought out supervisors for any details.
"Employees are obviously into what's going to happen and how it affects them and what the future might hold," he said. "It's human nature to wonder how it will all play out."
Acting OTS Director John Bowman has sent out regular e-mails to the entire staff, reminding them that any proposed changes must weather "a long, deliberative process" in Congress. Even if the OTS does fade away, it likely wouldn't happen until late this year or early next.