President Reagan has promised the Senate Banking Committee he won`t skirt the committee`s confirmation role by making a controversial appointment to the Federal Home Loan Bank Board during Congress` Labor Day recess.
However, that commitment hasn`t quelled opposition to the man believed to be favored for the post, George J. Benston, a free market-oriented professor of accounting, economics and finance at the University of Rochester in New York.
Benston`s strong support of deregulation of the financial services industry has riled several members of the Senate committee. It also has prompted a strong campaign against him by the Chicago-based U.S. League of Savings Institutions. Benston reportedly also is opposed by Edwin J. Gray, Federal Home Loan Bank Board chairman, although a spokesman for Gray declined to comment.
On the other hand, Benston`s possible nomination to succeed Mary Grigsby as the Democratic appointee to the three-member Home Loan Bank Board is being pushed by certain forces within the savings and loan industry. Notably, Benston has the backing of officials of S&Ls in the Sun Belt who favor expanded investment powers for S&Ls beyond their traditional role as home mortgage lenders.
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The National Council of Savings Institutions, a Washington-based lobbying group representing principally large thrifts, supports Benston`s appointment. The National Council is a growing voice of S&L executives opposed to the positions of the U.S. League.
Beryl Sprinkel, chairman of the President`s Council of Economic Advisers, reportedly also is backing Benston. However, a spokeswoman for Sprinkel said he would not comment on a pending appointment. Last month, economist Alan Greenspan voiced his support of Benston in a letter to Sen. Jake Garn (R., Utah), chairman of the Senate committee.
In July, 1984, Reagan riled Democrats on the committee by naming Martha Seger to the Federal Reserve Board during a congressional recess. That so-called recess appointment permitted Seger to
serve until the end of Congress` 1985 session without Senate confirmation. However, the Senate confirmed the appointment in June, 1985.
Grigsby, whose term expired June 30, has said she plans to leave office after the Home Loan Bank Board`s meeting Friday. Donald Hovde, the other Republican member (Gray is a Republican), plans to leave by the end of the month. His term expired June 30, 1985. The board needs at least two members to take any action requiring a vote.
The White House is considering nominating Atlanta attorney Lee H. Henkel Jr., a former chief counsel to the Internal Revenue Service, to fill Hovde`s seat. Henkel is also facing opposition from S&L traditionalists.
William O`Connell, president of the U.S. League, said Benston ”just wanders into a lot of areas we find difficult to understand. . . . His writings and philosophical approach trouble us. We would hope the White House decides to send another name up.”
In a letter to the White House in June, O`Connell said Benston`s nomination would prove ”quite controversial” and ”potentially
embarrassing” to the administration.
Among the issues being pressed by the league against Benston are remarks he made to the Senate committee in 1984 advocating the abolition of the Home Loan Bank Board. Benston said the league is quoting his views out of context. ”O`Connell is under the impression that I am in favor of destroying S&Ls as an industry and merging them with commercial banks,” said Benston, who said he was aware that the FBI was conducting a routine background check on him in anticipation of the appointment.
”The industry is not going to be destroyed and is not going to be merged. It may be that O`Connell`s concern is that, being an academic and not somebody who`s looking for a post in an S&L or an association, I might be independent.”
Benston`s research findings have concluded that direct equity investments by thrifts have not contributed to the financial problems of the industry. The U.S. League supports the position of the Home Loan Bank Board that direct investments be limited to no more than 10 percent of an S&L`s portfolio.
”Direct investment powers are useful and profitable for many associations to be able to succeed and continue their mission of providing alternatives to savers and support for the housing stock,” Benston said. Many of the Sun Belt S&Ls favoring Benston`s appointment strongly oppose the 10 percent direct investment limit.
On another issue, Kenneth McLean, Democratic staff director of the Senate committee, said Benston ”had his head in the sand” regarding the alleged practice of redlining by lending institutions, whereby certain areas within a lender`s market are systematically denied mortgage loans. Benston`s research has found no evidence of the practice and concludes that government-imposed credit allocation is counterproductive.
Henkel`s possible nomination as a Republican member of the Home Loan Bank Board, succeeding Hovde, is less controversial. Henkel said he hasn`t heard from the White House and is keeping a low profile.
”I don`t plan to say anything publicly about Henkel,” O`Connell said.
”He has not been so wide-ranging in various comments.”
Henkel said he knows ”I am one of the ones seriously under consideration.” He said he gained considerable experience at the IRS drafting and implementing rules and regulations.
”I`ve been through the mill of trying to put out sensitive regulations and deal with the public on them,” he said. ”But I`m not an (S&L) insider. I don`t know Mr. Gray. I don`t know Mr. Benston. I don`t know any of them. The only people I`ve met are the loan officers where I`m trying to borrow and scrape money.”
One of the places Henkel has borrowed money is the Lincoln Savings and Loan Association of Los Angeles, one of the chief opponents of the direct investment regulations formulated under bank board chief Gray. Benston, too, has been linked with Lincoln through an analysis of direct investing he conducted. The work was funded by Lincoln.
McLean said Sen. William Proxmire (D. Wis.) is concerned that the appointment of Benston and Henkel might provide undue influence to Charles Keating Jr., chairman of the company that owns Lincoln and a longtime activist in Republican politics. Keating could not be reached for comment.
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