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Orleans, Louisiana $
October 23, 1985 *

NOV 0 0 1985

I am pleased and honored for this opportunity to have a short talk
with you today.

Though I have been in this business for only about 48

hours, I feel comfortable with old friends like Don Ogilvie, with whom I
worked in the Ford Administration and any number of practitioners of the
art who have held my note at one time or another.

As a former regional

Federal Reserve Board member, I see many old friends from Grand Rapids,

Also, Jim Simmons, my former chairman, and C. C. Hope, my new

old friend, are here, and my mentor and Board Member, Irv Sprague.
However, since I have had a relatively short time to become familiar
in depth with the FDIC, I hope you will not expect any major statement
of policy from me at this early date.

Instead, I would like to give you

some first impressions for your reaction.
These will be in three areas which I hope will be of interest to
those in the world of finance:

(1) the FDIC operations; (2) key issues

for the banking system and the FDIC; and (3) the FDIC relationship to
the banking industry.
Remember, these are first impressions and somewhere in the last 40
years I have learned that I may not always be right the first time.
FDIC Operations
It is my firm conviction that my predecessor Bill Isaac and his deputy
Meg Egginton, the Management Group, and others have done an outstanding job
in very troubled times.

I believe the industry has been fortunate to have an

insurer/regulator of this caliber during these difficult times.





applaud their performance and the thousands of other dedicated employees.
I will try to live up to Bill Isaac’s level of competence, but what I
lack in experience I will attempt to compensate with humility.
A fine job done is not to say that there are not operational problems
to be solved and opportunities for improvement to be grasped.

There are

delays that need to be eliminated and uniformity that needs to be enhanced.
There may be opportunities to use private sector help to improve performances
in auditing, disposition of assets and computer operations.
We will, I am sure, welcome all suggestions you may have.
Key Issues for the Financial System


It is near Halloween and the financial system does not have to
spend a lot of time seeking out ghosts and hobgoblins, these are easily
discernible to all.
The problems to the U.S. system and the world financial structure
are real.

Because the FDIC is the insurer of the U.S. system, these

problems are an obvious concern.

The five most troublesome problems in

my view (but in no particular order) are:
(1) international debt
(2) agricultural loans
(3) the status of the thrift system
(A) energy credit
(5) an emerging real estate problem.
The FDIC has a duty to be a participant in suggesting action to
meet these and other interrelated problem areas.

We shall try to be a

constructive voice, and one particularly close to the banking industry
in the effort to assure a sound financial system.

- 3 -

On a less global basis, the FDIC must seek ways to assure that its
own operation is soundly based and operates fairly among all its constituents.
This means that the perceived difference between the treatment of
depositors of large and small banks when a bank fails must be addressed.
This perception becomes more important, and less acceptable, as the
industry moves toward regional and interstate banking.
It also means the effort to achieve better market discipline through
some form of increased capital, risk-based premiums, or risk-based
capital requirements should be finalized with agreement among the regulators
and the banks.
The coordination of the various banking regulators, whether under
the Bush report suggestions, or some alternative, would be of meaningful
help to U.S. banks.

Uncertainty in these areas does not help the system.

There are other substantive areas which the FDIC has currently
under study from mergers to brokered deposits.

There will be no shortage

of position papers or proposals on which you will be asked to comment.
The FDIC and the Banking Industry
It impresses me that of the many governmental agencies that have a
safety and soundness responsibility with respect to the banking system,
the insurer should be the most likely representative of the industry
The Treasury, and thus the Comptroller, must look first to its
primary duty as the fiscal officer of the U.S.

Those obligations may at

times require a different view than that of any one industry.


- A -

Federal Reserved primary concern is U.S. and world monetary policy, and
this great responsibility may require positions that are different from
those held by financial institutions.
Don’t get me wrong.

These institutions have a vital interest in

the health of the banking system, but they have a few other "little
matters" to keep in mind and the responsibility to do so.
The FDIC’s primary concern, as insurer and regulator, is the health
of the banking industry, and its operation in a sound manner.

We should

surely be your strong voice in governmental affairs on most issues, and
most surely you will need one.
The recent tax proposals affecting the treatment of reserves seems
to me to be a good example of a place for the FDIC to stand with the
industry for the good of the system.
Well, that is the way it looks to me on first impression.


experience with unhappy constituents or regulatees will make a change —
I hope not.
Finally, permit me to congratulate you, as bankers, on the way you
have weathered some difficult times, including deplorable national
economic policies, and exogenous events of unprecedented magnitude. In
fact, you have more than survived, by and large, you have prospered.


is a tribute to your talents and also to the ability of a free and
competitive system to work wonders under the most difficult circumstances.
Let us all protect it.
It has been enjoyable to be with you.
invite me back.
Thank you.


I hope you’ll see fit to