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Mr. James d. Gropia
tie. Prosideat

aad doooral Counsel
Liasola Sariage
2735 Last Cuolbook loud
Poorais, Arisoai 99016
Duur via:

Laclosed plous. fiad o copy of v rocvat letter to the
Honorable tavia Gray, chains of the Federal Hon. Lona deak
Boord. I dopo 16 is of satorust to you.

fais lottor vaprussos osc. upala coavsetion tout tae
Board's proposed rui. sa the uru of FSLIC-losur.o
state-ebartered suviags and loua ussociations ability to
wake direct savestacats is vasouad sad vaviso.

If you dare lay conscats or questions on this matter,
oluase do act Besitate to contact no.
Wita dest regards, I rasia


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TO: John
PROM: Gwendolyn
DATE: 3 March 1987

RE: S&L visitors this afternoon

This afternoon at 3:00 you will be visiting with Norm Miller, William Hina, Ployd Sedlmayer, David Dinnerline, and Donald Lewis who are the Arizona delegation of the U.S. League of Savings Institutions. They will want to discuss two issues specifically, and possibly a few others in general, all of which have to do with Thursday's markup of a Senate banking bill.

First, the issue of the FSLIC recapitalization plan will arise. The League supports the recapitalization of the fund to the tune of $5 billion, which should last about two years. The Treasury wants far more maybe as much as $13-15 billion. Senator Proxmire is likely to offer a compromise of $7.5 billion which would last two and a half years and would have to be reauthorized again at the end of that period. It is also possible that Senator Gramm offer an amendment for a higher figure.

The reason that Senator Proxmire (and Congressman Wright) support the lower figures is that they fear FLSIC will start closing S&Ls that might be savable if they have too much money. I suspect, although no one has said this to me, that the likelihood of having to readdress the issue in such a short period of time is appealing to Senator Proxmire also because it will afford him another vehicle for other banking legislation in the same way that the urgent need for a FSLIC recap is giving him the opportunity to close the nonbank bank loophole and address other issues.

Finally, my reading of these numbers is that the industry will supply the vast majority, if not all, of the funds that are required so that no federal outlays will be made. I am not one hundred percent sure of this, however.

The second issue is the "forebearance" issue which may or may not have to do with Thursday markup. There are two parts of this issue. Pist, under current accounting procedures the PHLBB appraises the value of real estate held by thrifts at market value. If you are a thrift in Texas, however, and real estate prices have fallen and you're beginning to run into trouble, the last thing you want the FHLBB to do is take the depressed current real estate values instead of their value at the time you acquired them or their possibly higher future value. This


procedure, I am told, is more rigorous than their usual accounting procedures, and is causing a great deal of pain, especially in depressed areas of the Southwest. The industry would like to see this rule eased.

Second, S&LS would like to use a Financial Accounting Standard Board rule (FASB 15 FASB is pronounced "FASBY") that allows them to take bad loans, readjust interest rates and reamortize them over a long period of time without touching the principal of the loan. The industry would like to be able to use this rule.

The FHLBB announced last Thursday that it would take care of these two issues via regulation, but this may have been done to relieve some of the pressure to accomplish them through legislation attached to the banking bill. At any rate, the SELS have Congressmen Wright and Bartlett on their side, and may also find that Senators Gramm and Armstrong will carry their water.

The other issues they will bring up is the rest of the banking bill such as the closing of the nonbank bank and nonthrift thrift loopholes, which Senator Proxmire will try. He seems to have forced grandfather existing institutions operating under this loophole as of Thursday, the day of markup. The date he preferred is 1983. For the rest, I have heard that he will attempt various other provisions, such as delayed funds availability (checkhold) legislation, allowing regulators to help sick banks and thrifts. I don't know how successful he will be.




PAT APRIL 20, 1989

from July 1983 until January 4, 1987 I was employed as a legislative assistant for Congressman John McCain. Financial Institutions were among the lóives to which I was assigned.

· In Juno of 1984, Congressman McCain directed me to review an activity than on-going at the Federal Home Loan Bank Board (PHL8B). it is my sin recollection that ho gavo no this direction aftor his help was requested by individual savings and loans in the state of Arizona as voll as the Arizona Savings & Loan Association which was the trade association for all sils in the state. My contact person was oithor Gordon Murphy or Norman Miller (Gordon Murphy later went on to work ter the Arizona Bankers Associacion and was replaced by Nozman Millor if he had not done so already).

On June 24, 1984, I drafted a lottor for the Congressman's signature to thon Chairman of the PHLBB, Ed Groy. The lattor questioned whether his proposed regulation to lia:t Sels direct invustaonts vas really an appropriate remedy for an ailing industry which had gotten in that shape largely through being tied down with infloxible assots.

On August 8, 1984, I drafted u follow-up lottor on the proposed direct investmont regulation for the Congressman's signature. Enclosed in the lottor vas a copy of an 1982 study by tho PHLBB's staft which suggested that liberalization of investment povers had proven successful in Texas. The letter also expresied the congrusman's laterst in soolag any ovidence the Board night bar to contradict this study. In addition, the lottor requested that a full widontiary housing on the regulation be held by the Board.

On January 4, 1985, I drafted • lottor to thon Chaimaa Grey sting sa extonsion of the comment period on the direct yuoat regulation. This lottor vas enclosed la loter

to mito Houso Chiot of staff JL Bakar and true srotary Don Roagan asking for thols assistance in

comment period on the direct investiment regain on. There lettors

vera duted January 30, 1985. On July 21, 1906, I driftad lottor for the Congressman's signature to thon Chairman Grey. The lottor exprussed concern over the Board's activities in the direction of restricting the povers of stato-chartered Sile, includlag the direct Investment

SPECIAL COUNSEL regulation. This was a new trend for the FHLB8 as, in my experience, they had limited themselves previous to this time to the regulation of federally chartered sels. The lottor also cequestod the Board hold an ovidenciary hearing on these activities. It is my cocollection that the ancir. Arizona delegation joined Congressman McCain on this loctor

it is my further recollection that some, 18 not all, of cho delegation joined the Congressman on the previous lottori. Additionally, I worked in close collaboration with Senator Donnis Deconcini's ottico on the direct investmont regulation issue and an quito sur, that he sont separat. lottors of a similar naturi 18 ho did not join ours (or ve his, I am not sure which lotterhead was used).

to the best of my knowledge, those ar. the only activities undertakon by Congressman John McCain's office during this period regarding the S&L Industry.

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