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This matter is important as a matter of principle. It is important to credibility as supervisors of institutions in this district.
Limitations on Direct Investment by Insured Institutions
AGENCY: Federal Home Loan Bank Board
SUMMARY: The Federal Home Loan Bank Board ("Board"), as the operat- ing head of the Federal Savings and Loan Insurance Corporation ("FSLIC" or "Corporation"), is proposing to amend its regulations concerning the operations of institutions the accounts of which are insured by the FSLIC ("insured institutions") to limit the aggregate of insured institution investment in real estate, service corpora- tions, and equity securities (collectively "direct investments"). The Board also proposes to impose qualitative and quantitative re- strictions on investment by insured institutions in most equity secu- rities. The proposed regulations are intended to allow insured insti- tutions the flexibility to exercise their investment powers, as provided by applicable federal or state law, while preventing unsafe and unsound practices that otherwise would expose the institutions and the Insurance Fund to an unacceptable level of risk.
DATE: Comments must be received by [the 60th day following publication of this notice in the Federal Register].
ADDRESS: Send comments to Director, Information Services Section, Office of the Secretariat, Federal Home Loan Bank Board, 1700 G Street, N.W., Washington, D.C. 20552. Comments will be available for inspection at this address.
FOR FURTHER INFORMATION, PLEASE CONTACT: Steven A. Rosenberg, Attorney, Office of General Counsel, (202) 377-7054.
SUPPLEMENTARY INFORMATION: During the past few years, changes in federal and state legislation have provided new investment powers to thrift institutions whose accounts are insured by the FSLIC. Included among these new investment powers is the authority to invest in equity securities, e.g., corporate stock, and in real estate for the purpose of development and other purposes. See e.q. the savings and loan laws of Texas, California, and Florida. The Board believes that prudent exercise of these new direct investment powers may allow thrift institutions to reduce their exposure to certain forms of fi- nancial risk, e.g., the interest-rate risk associated with asset/lia- bility maturity mismatch, Nonetheless, as discussed below, the Board is concerned that unfettered exercise of these non-traditional investment powers is likely to expose insured institutions and the Corporation to a degree of risk inconsistent with the federal pr
Of 29 lawsuits involving Lincoln Savings and Loan Association, 16 have settled and 13 are still pending. See attached Exhibit "A" of pending litigation and Exhibit "B" of cases settled in 1985.
Of the two complaints involving American Continental Corporation, one was settled on October 30, 1985 (Continental Ranch - Cardi Construction). The other, a personal injury claim involving injuries sustained by a cable television installer, is set for trial March 24, 1986. Plaintiff's counsel has agreed in writing to dismiss ACC.
There were 22 non-soils litigation cases in 1985, of which 10 have been settled. See attached Exhibit "C."
Expansive Soils Problems:
There are 22 soils litigation cases currently pending and 4 threatened soils litigation cases. 18 cases have been settled in 1985. See attached Exhibit "D" prepared by Jeff Cooper.
1. To remain current on legislative and regulatory developments and to assure protection of our specific interests in these areas, significant contacts have been continued within the following:
House Banking Committee Senate Banking Committee
National Association of State Savings & Loan Supervisors National Council of Savings Institutions
1. Committee on Government Relations
Committee on Legislative and Regulatory Affairs
U.S. League of Savings Institutions
Elected to the Board of Directors of the National Council of Savings Institutions
Elected to the Board of Directors of the National Association of State Savings and Loan Supervisors
Became active in (1) American Bankers Association; (2) the National Association of Thrift Holding Companies; (3) the Arizona League of Savings Institutions; and (4) The American Bar Association's Committee on Financial Institutions Lobbying efforts have created relationships with, and endorsements by, the National Council of State Legislators and the National Conference of Governors.
Activity Relating. Specifically to the Federal Home Loan Bank Board's Direct Investment Regulation includes:
Working with Congressman Annunzio's staff resulting in the introduction by Congressman Annunzio of H. Con. Res. 34 January 21, 1985 (the anti-direct investment regulation resolution)
Active lobbying of state savings and loan leagues and commissioners opposed to the direct investment regulation. (See Exhibit "E")
Working with Congressman Pashayan in soliciting co-sponsors for H. Con. Res. 34 resulting in obtaining a majority of Congress and a majority of the House Banking Committee as co-sponsors (See Exhibit "F")
Coordination of lobbying efforts with the National Association of State Savings and Loan Supervisors, National Council of Savings Institutions, National Counsel of State Legislators, National Conference of Governors, Ray Gustini, Esq., William R. White, Esq., Jay Smith, and former Congressmen Jerry Patterson, Ludd Ashley, Dave Evans, and Kent Hance.
Coordination with Paul, Weiss and Congressman Pashayan of Congressional letter to the Federal Home Loan Bank Board contesting the legality of the direct investment regulation. Letter cosigned by Ben Erdreich (D-Ala.), Charles Pashayan, Jr. (R-Calif.), Thomas Kindness (R-Ohio), Rod Chandler (R-Wash.), Eldon Rudd (R-Ariz.), Charles Stenholm (D-Tex.), Tom Luken (D-Ohio), Parren Mitchell (D-Md.), Dennis Eckart (D-Ohio), and John McCain (R-Ariz.) See Exhibit "G".
Preparation for hearings of the House Committee on Government Operation's Subcommittee on Commerce, Consumer and Monetary Affairs (Barnard)
Arranging for invitations to Alan Greenspan, George Benston and Charles Keating to testify before the subcommittee.
11) Preparation of testimony
111) Preparation of questions for subcommittee members for Chairman Gray and other witnesses
ix) Preparation of questions for Congressman Pashayan
Preparation for hearings of the House Banking Committee (St. Germain) regarding deposit insurance reform:
arranged for George Benston to be invited as a witness 11) worked with Benston in preparing his testimoney
regarding his study of savings and loan failures and his conclusion that direct investments do not cause failures.
Arranging for invitation to Alan Greenspan from the National Association of State Savings and Loan Supervisors to speak at the National Association's Governmental Affairs Convention in Washington, D.C.
Drafting and distributing the National Associaton of State Savings and Loan Supervisors' letter to all Congressmen and all House Banking Committee staff members requesting their attendance at the Greenspan presentation.
Lobbying Congressman Dingell's staff regarding hearings of the House Energy and Commerce Oversight and Investigation Subcommittee's regarding the Beverly Hills Savings and Loan failure.
Coordinating KEKST & Co.'s activities including George Benston's op-ed piece for The Wallstreet Journal and the National Council's "award winning" advertisements opposing re-regulation.
Specific meetings for CHK and lobbying including: (1) house banking committee members and staff; (2) senate banking committee members and staff; (3) Senators Thurman, Mattingly, Cranston, Glenn, Armstrong, Laxalt, Recht, D'Amato, Deconcini, Dole, Garn, Hawkins, Proxmire and Wilson; (4) Congressmen Barnard, Pashayan, McCain, Kolbe, Dingell, Hubbard, Luken, Annunzio, Archer, Badham, Bartlett, Brooks, Bustamante, Coelho, DeLay, Dornan, Downey, Dreier, Eckart, Faunt roy, Gephardt, Gradison, Hall, Kindness, Kramer, Lehman, Lowery, Manton, McCollum, Neal, Oakar, Pepper, Roukema, Rudd, Shumway, Stump, Udall, Waxman, Wirth, Wright, Wyden and
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