OTS is a unit within the Treasury
Department, but law and custom make it practically an independent
agency.
The Federal Housing Finance Board (FHFB) regulates the savings
establishments for liquidity. It provides lines of credit from
twelve regional Federal Home Loan Banks (FHLB). Those banks and the
thrifts make up the Federal Home Loan Bank System (FHLBS). FHFB gets
its funds from the System and is independent of supervision by the
executive branch.
Thus a clear, streamlined, and powerful regulatory mechanism was put
in place. Banks and savings and loans abused the confusing overlaps
in authority and regulation among numerous government agencies. Not
one regulator possessed a full and truthful picture. Following the
reforms, it all became clearer: insurance was the FDIC's job, the
OTS provided supervision, and liquidity was monitored and imparted
by the FHLB.
Healthy thrifts were coaxed and cajoled to purchase less sturdy
ones. This weakened their balance sheets considerably and the
government reneged on its promises to allow them to amortize the
goodwill element of the purchase over 40 years. Still, there were
2,898 thrifts in 1989. Six years later, their number shrank to 1,612
and it stands now at less than 1,000. The consolidated institutions
are bigger, stronger, and better capitalized.
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