The savings and loan industry is preparing to seek congressional action to challenge the changes in interest rate made by a federal panel charged with implementing new banking legislation, an industry spokesman said today.
Edwin Brooks, president of the U.S. League of Savings Associations, told the annual meeting here of the Virginia Savings and Loan League that the controversial May 28 decision by the Depository Institutions Deregulation Committee appears to contradict congressional intent in passing omnibus banking reform legislation earlier this year.
At issue is a decision by the panel, headed by Federal Reserve Board Chairman Paul Volcker, which established a complex system for setting rates on certain money market certificates. The system would be based on Treasury bill rates.
The committee also removed what the savings and loan industry says is a vital quarter-point differential on the savings certificate when the Treasury bill rate falls below 7 1/4 percent, a so-called bonus that the S&Ls say has been used to give them an advantage in attracting mortgage money.
"I don't think the DIDC is on our side," Brooks noted, saying the decision could ultimately result in maintaining higher interest rates. "I don't think that Congress will say this was their intent."
Although Brooks, a Richmond S&L executive, told the league that "things are looking a little better for the industry," he said that earlier this year, when interest rates approached 20 percent, the nation was "sitting on a ticking time bomb" that threatened to pull "the whole country down the drain."
But Brooks also said after his speech that he did not think interest rates would fall below 11 1/2 percent this year. He told Virginia S&L officials that they were still in the middle of a war to secure dollars for home financing.
After a special meeting later this month of the U.S. League's 500-member executive committee, Brooks said, League officials expect to go to Congress to ask for a new evaluation of the DIDC moves.The League has already asked a federal court to issue a temporary restraining order blocking implementation of the rate setting system.
"Congress had ordered an orderly removal of rate control over a six-year period," Brooks said. "I don't think anybody anticipated this action."
There has been no action by this committee to affect the viability of thrift institutions and the housing industry."
Brooks said that no one on the special panel, with the exception of Jay Janis, chairman of the Federal Home Loan Bank Board, had been expressing the concerns of the troubled S&L industry. The committee also includes Treasury Secretary William Miller and other representatives of financial regulatory agencies.