The Federal Home Loan Bank Board soon will propose legislation for a sweeping deregulation of the savings and loan industry to allow more flexible lending practices, FHLBB Chairman Richard T. Pratt said yesterday.
Changes in the kinds of loans S&Ls could make would continue a process of gradual deregulation of the industry and would further blur the lines between banks and S&Ls, FHLBB and congressional experts said.
S&Ls now must have a certain percentage of their loans in home mortgages and generally are prohibited from making more-profitable short-term commercial loans.
Last year Congress agreed to gradually lift the statutory ceilings on the amount of interest S&Ls can pay depositers, but left intact some major restrictions on what kinds of loans they can make. Last year's law did allow them to start making short-term consumer loans, such as those for buying cars or for making home improvements.
Pratt made his comments to the President's Commission on Housing, which was created on June 17. He gave no details of the legislation to be proposed, but the Hili and FHLBB experts said the main restriction left on S&L lending is the prohibition on commercial loans and the home-loan percentage requirement.
A spokesman for the House Banking Committee said no census exists among panel members on lifting these restrictions. Some concern has been expressed in the past that S&Ls would cut back on mortgage lending if all limits were taken off, the committee staffer said, although S&Ls argue that their expertise is in mortgage loans and that commercial loans are needed simply as a cushion against erratic interest rates.
In a related development, the FHLBB announced that it had approved a regulation that would give a boost to thrifts by allowing the 12 Federal Home Loan Banks to pay interest on demand-deposit accounts held at the banks by member thrift institutions.