The Federal Home Loan Bank Board proposed yesterday prohibiting savings and loan associations from granting mortgage loans to their officers, directors and majority stockholders at rates more favorable than those offered to the general public.
The action is designed to avoid any appearance of conflict of interest that could affect S&Ls' safety and soundness. It follows revelations last month that Mayor Marion Barry received a mortgage loan from a Washington S&L at 8.75 percent, or 3.25 percentage points below the market rate, because his wife Effi is a member of the S&L's board of directors.
The Barrys would have saved $242 a month in loan payments at that rate. After word of the loan leaked out, the mayor agreed to pay the going rate of 12 percent.
The bank board's proposal is also intended to bring thrift insitutions into line with commercial banks, which were prohibited from making insider loans two years ago when Congress passed bank reform legislation. The previous year Bert Lance resigned as director of the Office of Management and Buget in the wake of allegations involving preferential loans to him, his family and business associates.
The proposed regulation also will set a maximum preferential interest rate allowance S&L employes. The bank board didn't outlaw these loans because it recognized they are sometimes part of employe benefits. Also, the regulation won't forbid preferential loans to nonaffilated persons, such as good customers, provided these loans are publicly disclosed.
Meanwhile, the U.S. League of Savings Associations announced yesterday that the the S&L industry just had its worst quarter in a decade. Savings withdrawals exceeded new deposits by $890 million in December. With interest accredited, the quarter's net gain was $1.1 billion, the lowest total since a $610 million outflow in the fourth quarter of 1969.
The league said the 1979 fourth-quarter figures were only half as large as those for the fourth quarter of 1974, during the midst of a very severe housing slump. Economists have forecast that the slump would be milder during the 1980 recession.
The league's executive vice president, William B. O'Connell, commented yesterday, "Poor savings flows and substantial shifts of deposits to higher-interest accounts mean mortgage money will remain hard to get in the first half of 1983. Mortgage rates will stay high, too."
The league estimated that the percentage of low-interest-paying passbook accounts fell from 32 percent of total savings in the fourth quarter of 1978 to just 25 percent of savings in the same period last year. High-interest-bearing money market certificates now account for 27 percent of total savings, while jumbo certificates account for 6 percent.