Now, the Chair will entertain another motion.

MR. WHITE: Lee, I don't want to

MR. GRAY: Unless you, unless you ---,

MR. WHITE: No, no, I will. I just--I wasn't sure if Lee had anything he wanted ---.

MR. HENKEL: Just, just one more comment. And I made the comment that Ed and I get along famously--we do--so just because we're up here disagreeing--I have some very pronounced views. I've been a regulator, and I feel very strongly about them and I'm going to continue to feel that way. I have an approach to regulatory authority to protect FSLIC, and that's what I'm going to do, and just because we disagree, Mr. Chairman, on the way to go about it, doesn't mean I'm any less sincere about going about it than anybody else.

MR. GRAY: No, no, there's no intent to question motivations. There may be some questions, but not intent to question motivations.

MR. HINKEL: I know that.

Mr. Gray: Okay, why don't you go ahead.

MR. WHITE: Thank you, Mr. Chairman. This is a proposal that has been put to us by the staff. It's generated extensive comment and controversy, and the public record is a sizable stack.

As you know, I've been a Bank Board Member for only five weeks, and unfortunately this has just not been enough time for me to acquaint myself fully with the full complexities of this issue, especially in light of my other obligations as a new Board Member and, consequently, I do not feel that, at this time, I can make a properly informed decision on the merits of the proposal as it stands.

You've heard in the past almost three hours the questions that I've raised. There have been some answers. There are still a lot of puzzles in my mind. I don't ask for perfection. I know we're never going to know everything, but there are still too many questions that are out there in my mind.

As a solution to my dilemma, I suggest, and I will put it in an appropriately phrased motion, that the Board extend the current rule for two-and-a-half months past December 31, 1986, that would extend it to March 15, 1987.

In the interim the public comment period should be reopened so that any new information can be provided to the Board and interested parties can comment on the evidence and arguments that have been advanced thus far.

Also, the new evidence which we heard about today that has been developed by the Board since the close of the most recent comment period--through this process can be exposed to public scrutiny. In addition

MR. WHITE: In addition, a public hearing should be held on the proposal, and I would suggest the dates of January 29 and 30, 1987 as those dates, so that oral presentations can be made before the Board. There can be give and take between Board Members and interested parties.

I believe that a public hearing is especially worthwhile for regulation that is considered to be as important and as controversial as this one.

Let me emphasize this suggestion for what I consider to be a relatively brief extension should not be interpreted as a signal as to my eventual decision on this matter. It is simply a means by which I can better inform myself so as to be able to make a better decision.

Let me emphasize that when we open the public comment period, I would welcome public comment on really a wide range of issues relevant to this rule. We've heard from Board Member Lee Henkel some proposals that involve, for example, notification; for example, gearing of the ability to take direct investment to capital requirements. I would welcome comments on the feasibility of notification as a means of dealing with the possible problems, the feasibility of the capital requirements, perhaps substituting an alternative set of capital pool requirements, perhaps tangible net worth, as an alternative measure.

I would like to hear, perhaps, comments on the suggestions that have been made in the record of raising the threshold for some well-financed institutions. I'd like to know how well it's thought the new capital requirements will serve as a measure to deal with our insurance problems.

I'd like to hear how better supervision might be put into effect

to deal with our monitoring and policing problems.

Let me emphasize that, at this point, I don't feel that I know enough to make a decision. I don't even know which direction the regulation ought to go. If one believes the California data, that we heard about earlier today, perhaps a regulation ought to go down to a 5 percent threshold and approval beyond 5 percent.

Perhaps we ought to bring the state-chartered institutions down to federal levels. Perhaps we should bring our rules into conformity with other banking agencies. At this point, I don't know.

Some of these directions are clearly in a more stringent direction, other of these suggestions are in a less stringent direction. At this point, I don't feel I know enough to be able to endorse any of them, and I believe that the best course of action then is a limited extension, open up the public comment period, have an oral hearing, expose the new data, the 37 institutions, the California institutions, if we can find out about the Texas institutions, as well, within the limits of confidentiality, of course. I believe that at the end of this process by March 15th, I will be prepared to make a definitive decision on this rule, and so I would move that the current rule be extended for two-and-a-half months to expire on March 15, 1987; that this be adopted as an interim final rule and that the existing proposal, in essence, stay on the table. I'm not quite sure exactly legally how to phrase that, and that we have a January 29 and 30 oral hearing on the wide range of issues that I've presented.

MR. GRAY: All right. We'll have comment after

second? The Chair will second the motion.

Let's have a little comment. I understand fully that a new Board Member, particularly an academic-

(Laughter.)

MR. WHITE:

Ed, I will teach you about heteroskidasticity before

my term of office is over.

MR. GRAY: I can certainly understand that time has been short and that you would want more time to do this, to take a look at this, including the public hearing that you're talking about.

I have very reluctantly seconded the motion, not because I have any doubt that you want to get at the issues here and learn them very well, but because I am concerned about sending a bad signal to the Congress that the Board does not have that resolve, that I mentioned earlier, to deal with this issue in even a mild way, which is not as strong, as I say, and I would hope, speaking for myself, that anything we do with respect to dealing with direct investments be stronger than we currently have in this current regulation, as we move down the track, particularly in light of what the banking agencies have proposed, themselves.

I don't know particularly what form that might take at this time, of course, but I'm trying to say that your points are very well taken in that you do need more time.

I would say, however, and I will repeat what I said earlier: If this Board cannot send that signal to Congress, that it does, in fact, intend to deal with this issue with resolve, then I will urge the Congress to put in statute, particularly with the recapitalization legislation, the means by which we can deal with this issue as heads of this insurance carrier.

So, though as I say, my decision to support this is very reluctant. I believe you can understand that, too, and also can understand that I have lived with this problem for a long time, now---.

MR. QUILLIAN: May I ask for clarification of one aspect of Board Member White's motion for the benefit of the Board voting on the motion. It was our understanding from the conversations just prior to the Board meeting that it was contemplated that there would be a meeting of the Board no later than the end of February to act on the basis of whatever the outcome of the hearing was.

It seems to me it may well be undesirable to specify a precise date, but I was wondering whether Mr. White might want to include in his motion the further element of a Board meeting by the end of February to act upon the rulemaking.

MR. WHITE: Since I automatically assume that the Board and its staff would need a reasonable amount of time subsequent to a meeting to get it all down right and make sure it gets to the Federal Register right, I mean, just as we are meeting two weeks prior to the expiration date, and I know the holidays are there, but I assume we're doing it also because it gives the staff adequate time.

I had certainly assumed that that would be the case and I would certainly be aiming for a meeting at the end of February that would take the definitive decision on this rule.

MR. BLACK: Did your motion include a comment date? An end on the comment date?

Mr. WHITE: All right. All right. What I would like to have ---I had suggested hearings on January 29 and January 30, and I would extend the public comment period to one week past those hearings. So I guess that makes it February 6. If that's the Friday, that's the one I want, so as to

allow people to react to what they've heard in the oral arguments and provide us with written comments subsequently. February 6th being the end of the public comment period.

MR. GRAY: All right. So the motion has been made. Is that duly taken into account of?

MR. QUILLIAN: Yes, sir; as you know, we had prepared the documentation for today's meeting on the basis that the Board might take up and approve the recommendations of the staff and we have prepared a document on that basis. The staff will need to prepare a document for submission to the Federal Register. It seems to me that that could be approved in form by notational voting to incorporate whatever the Board decides on the basis of Professor White's motion or otherwise. That is, that you could vote on the motion and we will prepare the memorialization of that vote and that could be approved on notational voting.

MR. HENKEL: Mr. Chairman, a comment and I'll be brief because it's been long. I oppose the motion. It's time to move on and get a regulation out there, for a period of time of some sort, that the industry can rely on. We're just delaying further and having more uncertainty, and I think we need a measure of predictability so that managers can run their institutions with some idea of what the regulatory consequences would be so they can concentrate on the bottom line.

I made a proposal. It has what I think is innovative, giving the examination force the ability to focus on those problem institutions where, I think, most of our problems are. I'd be perfectly willing, if that rule needs modification later, to change parts of it. I'm not fixed on any part of it, but I think we ought to get on with the job. I was ready to move on, and I proposed one year. I'd even go longer than that. I think it's time to move, and I will vote no on the motion.

MR. GRAY: So, all right. Well, it's been moved and seconded. I seconded the motion.

MR. HENKEL: I don't disagree with the public hearing, Mr.

Chairman, but

MR. GRAY: All right. With respect to that, we had a proposal on the table and there would have been certainty had that two-year extension been adopted, which it was not. That certainly provided certainty and particularly on the basis of almost two years of experience and particularly in light of the comments that have come in to us from interested parties, particularly insured institutions.

Again, it is very important because we have a recapitalization bill that --- we have not voted yet --- we have a recapitalization bill that will be before the Congress. There may be several, but there certainly is one that the Treasury and the Bank Board have already proposed to the