Banking Law

Yesterday's American Banker had a front-page story (paid subscription required) that discussed how some large federal savings banks were flipping from an OTS to an OCC charter. Apparently, the uncertainty of what effect the proposed financial reform legislation, including proposals to abolish the OTS, might have on federal thrifts is causing some publicly-traded thrifts to end the uncertainty by simply switching charters.

While the story featured $60 billion Hudson City Savings Bank jumpting to the OCC, the OTS denied that any pressure was being put on its assessment base by such a large defection or by any other potential defection, for that matter.

"The OTS budget is cyclical. In some years, the agency runs a surplus; in other years, there is a deficit," OTS spokesman William Ruberry said in a statement, without providing specific numbers. "Over time, there is a balance."

Ruberry also dismissed suggestions that the potential for a regulatory overhaul is hurting the agency. "Naysayers have been predicting the demise of the OTS for 20 years and, despite those predictions, the OTS continues to fulfill its mission," he said.

Mr. Ruberry then screamed that alien sucker fish were nibbling his giblets and encased himself in a thermal snuggy to await the arrival of Lord Zardoz of the planet Ishtar, who is apparently leading an inter-galactic revival of the federal thrift charter. The rest of us believe that the OTS' budget is currently "cyclical" in the same manner that your washer runs through the spin cycle right before it stops. The "balance over time" concept is problematic for an agency whose time is just about up.

As for the fact that predictions have been made in the past that the OTS is a dead man walking and that such predictions haven't panned out thus far, I can only say that the only such prediction that has to be correct is the very last one made. We'll be certain to archive this article and resurrect it next year to see how cocky everyone is feeling then

That said, I have to agree with the closing comments of attorney Kip Weissman, who said "he's skeptical that a number of thrifts will follow Hudson City's lead. He thinks many are waiting to see what happens with regulatory overhaul legislation."

"There clearly is a large group of institutions that are actually thinking about it and are on hold pending the clarification of the legislation," he said. "That could change in six weeks when things become more clear, but now there are still a lot of issues with what your charter will look like."

I agree that if you're a federal thrift you'd be foolish not to be seriously exploring a charter change. I also agree that until we see what the final legislation that passes both houses looks like in this regard, cautious federal thrifts will be holding their water.