JIM WRIGHT, as House majority leader, intervened three times last fall with Edwin J. Gray, the chief regulator of the savings and loan industry, to seek help for fellow Texans. Now speaker of the House, Mr. Wright defends himself by observing that they were only the kind of phone calls that congressmen make constantly in behalf of constituents. Erratic regulation of the S&Ls by the Federal Home Loan Bank Board has generated charges of unfairness to which, he feels, Congress needs to respond.
Mr. Wright was wrong to tamper with the regulatory system. But the S&L regulators are notoriously vulnerable to this kind of interference, while their close relatives the bank regulators -- overseeing a similar industry, under similar pressures -- are not. Why?
One reason is obvious. The Home Loan Bank Board's budget has to go through the congressional appropriations process, and the bank regulators' budgets do not. Both systems are financed by fees paid by the respective industries, not by tax money. But Congress has chosen to treat them differently. When you hear bank regulators talking about the absolute necessity of maintaining their political independence, that's what they're talking about.
Both the banking and S&L industries run large lobbying operations. But the S&Ls have narrower and much more highly focused interests. They work in close alliance with another industry of wide political influence, the home-builders, who drum constantly on Congress to ensure a steady flow of financing to home buyers. The S&Ls' lobby has dominated the appointment of their regulators, and successfully worked for weak rules.
The result is an S&L regulatory system that is underpowered, underfinanced and overpoliticized. If Mr. Wright and Congress want to change it, this is their moment. A new chairman, M. Danny Wall, is about to take over at the Home Loan Bank Board and, in a departure from tradition, he was not nominated by the people he is to oversee.
And if there's to be change in the character of S&L regulation, the place to begin is in the bill now in House-Senate conference. As it has taken shape so far, it is dangerously inadequate. The House version contains provisions, written largely by the S&L lobby, that would make even the present regulations all but unenforceable. Mr. Wright's phone calls are only the most visible part of a far wider pattern of regulatory debasement. The S&L deposit insurance fund is on the point of collapse. Congress could rescue it. But that would take a sharp reversal in the way Congress is now moving