The hearing will come to order.
Today's hearing will focus on the condition of the banking and savings and loan industry. We will also look at the condition of the deposit insurance funds.
The banking and thrift industries are doing remarkably well. Both industries are making record profits. I believe, however, it is the responsibility of this Subconunittee to review the condition of the industry on a regular basis -- so that we can act before a crisis, not after it.
My chief concern is that while the banking system and the economy are doing very well -- some will loosen credit standards too much. Very simply, easy money will hurt the economy in the long run. It will also hurt well-run banks -- which is usually the majority -- that have stayed out of trouble.
I am already seeing too many advertisements for 125% home equity loans -- which I think is reckless. The FDIC Chairman will note in his testimony that such loans have increased almost 250% in the last four years, and that such loans originated in 1995 have a high default rate.
I have read about the sending of unsolicited loan checks to consumers, which I think is also very reckless. We don't know the degree to which mainstream lenders are doing this, but if they are, it should be of concern to the regulators.
Credit card lending should also be of some concern. The banking industry has over 200 billion in credit card loans, but they have nearly 1.5 trillion in possible credit card commitments. The charge-offs of credit card loans is at an all time high.
Our easy bankruptcy laws are not helping the situation, and the National Commission on Bankruptcy that released its report yesterday isn't helping -- because they have come out with even weaker proposals. This is something I plan for the Subcommittee to review in the future.
Finally, on the savings and loan side, the industry is doing well. But, the number of new applications is rising dramatically. In all 32 new S&Ls may be chartered this year.
This would be double the number that have been approved in recent years. I am
concerned about the intentions of those getting into the thrift industry now. It is clearly
something we have to keep a watch for.
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