THE FEDERAL Home Loan Bank Board has finally taken the first step toward keeping federally insured savings and loan associations from granting cut-rate loans to their officers, directors and majority stockholders. It's about time. If the board had done this in 1978, when it should have, it would not now appear to be being pushed into it.
Congress barred commercial banks from making these loans late in 1978 after the Bert Lance affair made clear some of the potential abuses. That should have been a signal to all banking institutiions that public patience was wearing thin with practices that gives insiders lower interest rates than are available to others. But it seems to have taken the publicity about the discount loan offered to Mayor and Mrs. Marion Barry to stimulate the Home Loan Bank Board into action.
If the proposed rule had been in effect when the Barrys bought their house, they and the savings and loan industry would have been saved much embarrassment. The cut-rate mortgage -- at 8.75 percent interest instead of the 12 percent then available to the general public -- was offered because Mrs. Barry was a director of the S & L. After the terms of the loan became public, and amid a wave of criticism, the Barrys agreed to pay the going rate of interest.
The proposed rule would bar S & Ls from giving special rates to anyone in a position to influence the organizations' policies. It would also require S & Ls to disclose any preferential treatment given to anyone other than their non-policy-making employees. The board and the industry justify special rates for lower-ranking personnel on the ground that they are and employee benefit the S & Ls need to attract good workers.
The public disclosure part of the rule is just as vital as the ban on sweetheart, insider transactions. Without it, the temptation would always exist to offer preferential treatment to powerful citizens or to officers of other banking institutions on a reciprocal basis. While the public may have been willing to tolerate a system that offered special treatment to favored persons when interest rates were low and discounts therefore smaller, the mood today dictates that not even bankers should get a special break soley because of who they are and what they do.