RICHARD C. ASPINWALL Chess Manhattan Bank GEORGE J. BENSTON Emory University FRANKLIN R. EDWARDS Columbia University ROBERT A. EISENBEIS University of North Carolina at Chapel Hill JOHN D. HAWKE, JR. PAUL M. HORVITZ EDWARD J. KANE RICHARD J. BERLING KENNETH & SCOTT SUPPORTERS INCLUDE MID AMERICA SARAH SCALPE FOUNDATION UNIVERSITY OF Statement of the Shadow Financial Regulatory Committee on Congressional Intercession with the December 10, 1990 Controversies in recent years concerning intercessions by individual members of Congress in the process of federal thrift supervision have raised serious questions about the propriety of such conduct. Particularly difficult is the question of when such intercession crosses the line between legitimate constituent service and impermissible attempts to affect the process of agency decisionmaking. the principal issue raised by the current "Keating Five hearings before the Senate Ethics Committee. also played an important role in the Wright proceedings before the House Ethics Committee. This is In Where It In certain situations Congress itself has provided guidance that answers this question. Congress has by statute prescribed a procedure designed to ensure due process to parties dealing with a financial regulatory agency, there is a clear implication that members of Congress should allow that process to go forward without interference. supervisory enforcement proceedings, where the governing law affords an aggrieved party an opportunity for a hearing before a disinterested trier-of-fact, subject to ultimate court review, intercession by individual members of Congress is inappropriate. Similarly, in application proceedings, - 2 where judicial review based on the agency record is also possible, ex parte intercession should be viewed as inappropriate. Where an agency is exercising rulemaking powers conferred upon It by Congress, it must follow procedures for the formulation of rules set forth in the Administrative Procedure Act. Efforts to influence the rulemaking process outside the scope of those procedures may also be viewed as inconsistent with the scheme Congress itself established. Issues arising out of the process of bank examination may be viewed as especially inappropriate for congressional intercession. If bank examiners are to do their job properly, they cannot be subject to challenge by individual members of Congress acting on behalf of the institution being examined, while the examination process is going on. The procedure affords due-process protections to the institutions involved, and the responsible committees of Congress have ample oversight jurisdiction to assess the quality of supervision after the fact. To tolerate ex parte interference in the process by members of Congress and their staffs would ultimately weaken not only the process itself, but, more importantly, public confidence in the examination and oversight process. There are, to be sure, occasions on which representations from members of Congress to the financial regulatory agencies may be perfectly appropriate. Routine "status" inquiries, when not intended to communicate a coercive intent, are certainly within the realm of acceptable conduct, as are formal comments on proposed rulemaking actions. In all such cases, however, the agencies should make such communications a matter of public record indeed, Congress itself should insist on such a procedure. Such a disclosure rule would not only inhibit improper communication, but would bolster public confidence in the integrity of the regulatory process. Benk Board's Henkel Proposed a Rule By Josco & TAMS å rest? Joves WASHINGTON - A rule prommed by Feders Home Lasa Banz Beard member Lee Henzel could have helped a tanft vILA vich Mr. Horses has had extensive bu ALS GONINE A provision of the proposal might have effectively unamunized Lincoln Savingu a Loan Association in Irvine. Call.. from My enforcement actions in a dispute wit 120 LEENCY Oever investments Localing of teas 3615. mulion. The proposal died & Le Bank Board meeting lam Thursday for face of a scand Bank Board verem said the agrory kaam dren able to idematy wny other unfts that might have benefited from the provision, but if some are found, the uzal benefit is likely to be smaller than the benefit to Although Mr. Henzet d'acua eral provisions of his prop ern at the agency in the meeting, archer the section hare belped Lincein or the drvard was raised, actoring warves, it drst surfaced when Mr. Menas read its modes in the open merung, the As reported previmmly, deed the Albania aren show that Unesia Wilde at fram 161.9 million to loans to corporeCons and partnerships in which Mr. Herba had an internal The records indicate that Lincois was by far the largest ung) source of financing for a closety baid estate development company of which Mr.. Menzel was chairman, a shareholder and ane of three arvcters. Lincom & Barent company is contraried Caries Keating, an outspoken ente of unft regwaam. Mr. Menzel & former Atlanta attorney, was topmated to the remember Bank Beard by Prendent Reagan Nov. 1. He bas put all his bunem interns that bad iPSAMLEDENS Mu unna-lactuding Uhmme with leans trem Lincoln-unis blind trust He has also said he intends to recuse him sett fram Bank Baard votes specifically volving artis be has dealt with, including Mr. Henkel was asked through an uide for comment on this story yesterday, bat dan? return telephone calls before leaving Washington yuerday aflarnom As the Bank Board grappled The current rule, which va ded the regulates through scheduled & pubic beartag •late next fo we directed |