UPDATE 1-Regulator says US thrifts face "tremendous" pressure
(Adds Reich quotes, information on OTS responsibilities)
SAN FRANCISCO, Nov 10 (Reuters) - The U.S. thrift industry is "under tremendous pressure" and is handicapped by charters forcing them to concentrate on a single lending sector such as home mortgages, the director of the Office of Thrift Supervision said on Monday.
"The circumstances today lead to the obvious conclusion that thrifts are handicapped by the nature of their charters," OTS Director John Reich told the American Bankers Association conference.
The OTS, a unit within the U.S. Treasury Department, regulates about 800 thrifts that are largely focused on mortgage lending. Two of the largest institutions regulated by the agency -- IndyMac Bank in California and Washington Mutual -- have failed since July. IndyMac is now operated by the Federal Deposit Insurance Corp (FDIC) and WaMu was acquired by JPMorgan Chase & Co (JPM.N) for $1.9 billion.
Reich said the federal government has recently pumped billions of dollars into the U.S. economy with "relatively little success" in boosting public confidence.
Banking regulators, meanwhile, have been struggling to keep ahead of the credit crisis that has created liquidity or solvency problems at many U.S. financial institutions. The various federal agencies that regulate banks are holding weekly conference calls about specific institutions and the threats facing them, Reich said.
So far this year, 19 U.S. banks have failed, compared to three in 2007.
"Banking regulators in the U.S. are pretty much playing defensive trying to find merger partners for weaker institutions," Reich said.
Fair value accounting also hurts financial institutions, he said. The approach, also known as mark-to-market accounting, requires assets such as mortgage-backed securities to be valued at market prices. It has been blamed for billions in writedowns by some U.S. banks.
"When there are no markets for securities, it makes absolutely no sense to see institutions have to write the securities down to an unreasonable level reflecting a period of time when markets have seized," Reich said.
Looking to the regulatory reform push that is gaining momentum, Reich said he hoped the United States does not move to a single banking regulator.
Treasury Secretary Henry Paulson recommended earlier this year combining the OTS and the Office of the Comptroller of the Currency. The FDIC and Federal Reserve also regulate banks.
"I'm resistant personally to a one-size-fits-all federal regulator. I hope that is not where we wind up," Reich said.
Instead, Reich advocated a two-tiered system of banking regulation. One regulator would supervise the largest, most systemically important banks, while another regulator would oversee community banks.
Reich also told the bankers group he would leave the OTS "sooner rather than later" but has not set a date for his resignation. The pace of departures from top positions at government agencies is expected to accelerate as the administration of President George W. Bush prepares to hand over to that of President-elect Barack Obama in January. (Reporting by Karey Wutkowski, Editing by Chizu Nomiyama)
