View Header


Office of the Press Secretary

                         BACKGROUND BRIEFING

March 10, 1993

The Briefing Room

12:36 P.M. EST

SENIOR ADMINISTRATION OFFICIAL: Good afternoon, I'm unidentified one and this is unidentified two here. (Laughter.) Actually, in reverse as it turns out.

Q Could you tell --


Q On background.

SENIOR ADMINISTRATION OFFICIAL: That's right. What we've got here, obviously -- you all know -- we're talking about the credit crunch today, and we'll be happy to walk through some of the key things that are going to be handed out and distributed and give you some more background, and take questions which we're happy to respond to.

I do need to just mention that, particularly because neither my colleague nor I are confirmed at this point in time, that we really are going to have to confine our remarks to today's comments by the President and today's handout. So if you have questions on broader issues about financial institutions, policy, et cetera, et cetera, we'll have to do that another time. We'd be happy to do that after we're confirmed.

Q When will that process occur? This has been going on now for more than a month. And from what I understand, it's going to go on longer.

MS. MYERS: We're confining questions to topic at hand.

SENIOR ADMINISTRATION OFFICIAL: We'd also like to get through the fundamental walk-through to make sure that everybody has the basic background and then we'll be happy to take your questions. Let's just start through here.

The program is designed to eliminate excessive regulation and duplication, to free resources that can be put on real risks. Part of the whole concept here is that not only are we relieving some of the burden that is holding up business lending, particularly small and medium-size business lending, but also that we can better utilize those examination resources. We can focus their attention on real risks -- things that really matter -- and on things like fair lending. So there's sort of a dual approach to all of this.

The second thing is that what we're doing is not just making broad statements, but we are going to be issuing very specific, very detailed regulations. Now, they're not all out today. We have a paper that I think you all have that's a joint interagency statement of policy and in it, it notes that the specific regulations will be coming out. But this is -- it's very important to understand that this is not just making speeches and sort of taking policy positions, but very specific regulations will be following shortly.

And another important thing is that this is an ongoing effort. It's not just a one-time position, it's going to be a continuing effort and you'll see as we go through some of the materials.

If you'll turn now, please, to the thing that says "Interagency Policy Statement." What's going to happen shortly is that the President is going to introduce the overall approach and some of the things we're trying to accomplish for the business community, for jobs, and for fair lending and for our neighborhoods and rural areas. We will then be making available to the public immediately afterwards this document. And this document will be then sent out, as it notes at the very bottom of the first page, it will be sent out to all federally examined banks and thrifts and all regulatory agency offices and examiners. So this will be clearly a statement that is out there, that the banks will understand this is the policy statement and all the examiners will understand this is the policy statement.

It's very important to note that this has been done by all four regulatory agencies. One of the problems that you often hear complaints about is that you've got two different agencies coming into a bank and agency one says this is fine, agency two says it's not fine, and you end up with long delays and long complications. So we put a great deal of effort into getting all four of the agencies in agreement on this approach and, in fact, they are.

The paragraph still on the first page below the bullets mention that we are planning to get out within the next few months these detailed regulations. Some of them will be out in a matter of just two or three weeks. Others will take longer to do. But rather than wait until we've got everything all done, we're going to start getting them out constructively one at a time.

Let me go on to the next page. And I, again, will be happy to come back to some of these things.

One of the first paragraph in a policy statement needs is that it's hard to tell exactly what's caused the credit crunch. And we're not trying to make up numbers or pretend that we know things that can't be known. There are a lot of factors that might be the cause of some of the problems. And if you look at these charts you see the growth in commercial industrial loans -- this stuff here. And it's been down recently, and, similarly on the next page, small business employment has grown very, very slightly in this latest period of time, and business failures have gone up.

We're not trying to represent that that's all a result of the credit crunch in the sense of it's all a result of regulatory actions. Nobody will ever know the answer to that. It's an impossible-to-answer question. All we are saying is that we know that one of the factors that has not been constructive is some of the policies and procedures and regulatory practices, and we're going to fix them. Hopefully, the rest of the President's program will help the economy in general, and the combination of the two will be really constructive.

Q Do I understand that you don't have any way of estimating what the impact of this will be in terms of loans made, money loaned, or in any way do that?

SENIOR ADMINISTRATION OFFICIAL: That's correct. There's no fundamental way to estimate --

Q And that's because you don't really know for sure why the banks don't make loans, you're sort of guessing at that.

SENIOR ADMINISTRATION OFFICIAL: That's right. It's impossible to tell how much of the lack of loans is from the economy being poor and companies not even going in and applying for loans because their business is so slow they don't need the loans to support growth because the products aren't selling; versus those who came in and really wanted the loans and they were turned down for very good and legitimate reasons; versus those who came in and were turned down because of excessive regulation.

Q Is it also a potential factor that a bank can do better than a bond market?

SENIOR ADMINISTRATION OFFICIAL: Well, no, I will address that, although I've broken my own rule here and I'm going to have to correct myself, because we need to get through the document before we have too many questions here.

The question was about the bond market. And I know that's one that's been written about a lot and we do need to comment on that. We do not see any credible evidence that, in fact, banks have chosen to buy bonds because of capital regulations or because of any other sort of artificial constraint like that. Deposits have been growing and loans haven't and the banks have to do something with their cash.

Now, the reason that loans aren't growing is what we were just talking about -- there are a whole plethora of reasons why they haven't been growing, one of which we believe is regulatory practices that have not been constructive. One of which is this the general state of the economy. We have seen, and the OCC has done some work on this and the Federal Reserve has done some work on this the OTS has done some work on this -- even though we have seen the holdings of treasuries by banks and thrifts grow, we have not seen evidence that they are taking improper interest rate risk by borrowing short and lending long. There's been a lot of speculation about that and we're going to be doing very intensive examination work to look into that and there's a whole program going on to really dig in to interest rate risk.

As a matter of fact what I mentioned before, one of the things we're going to try to do when we shift examination resources from unproductive paperwork to more productive real risk management, one of the places we're going to put that increased emphasis is looking more intensively at interest rate risk.

But at the moment there is no credible evidence that, in fact, banks have been borrowing very short money at three percent and putting it in long-term bonds at 6.5 percent. If that were to be done in any magnitude it would be an unsound practice and we would crack down on it. And we'll be looking for that.

But at the moment that's just a speculation, an assertion by some people. We do not have any evidence that that's the case. Nor is there any evidence whatsoever that the risk-based capital rules have, in fact, led banks to hold bonds rather than loans. Again, almost any banker you will talk with would much prefer to put on a good loan than to put on treasuries. You make more money. The statement that there's no risk in putting on treasuries is not quite correct if you take on interest rate risks. And if, in fact, you match maturities, the bank cannot make money by buying treasuries. If the bank raises funds of a given maturity and reinvests those funds in a treasury of the same maturity, thereby taking clearly no credit risk because it's a U.S. government obligation, and also no interest rate risk because of the matched maturities, that bank cannot make money.

Therefore, any intelligent banker would much prefer to put on a good loan. And that's, in fact, the orientation, and we're trying to help relieve some of the obstacles that are standing in the way of putting on those good loans.

I'm sorry, I'm going to have to go on --

Q I just wanted to clarify one point on what you said. When you talk about borrowing short and lending long, do you include the intermediate treasuries in the category of lending long in that situation?


Still on this first page here. We're emphasizing loans to small and medium-sized businesses. That's where we believe the problem has been most evident. That includes agricultural businesses, farms and other agricultural businesses in addition to straight farms. There's no bias in this program, or in this administration against large businesses or loans to large businesses, or loans to individuals or any other kind of loan. It's just that in this particular case, we felt that the principal problem was really affecting the small and medium-sized businesses. There is, of course, a lot of evidence, a great deal of job growth has come and could come from small and medium-sized businesses, although obviously for them to be successful, we also need successful large businesses and individuals who are participating in the economy.

At the bottom here, the bottom of this first page, we note that it is very important the policy is that loans to creditworthy borrowers should be made whenever possible as long as it fully consists and with safe and sound banking practices. We mean that. There's no reason for this to cause any lack of safety in the banking system whatsoever, zero. I think the President's going to comment on that, but our best estimate of the number of banks that will fail as a result of this program is zero, zero, zero. The number -- the cost to the taxpayer as a result of this program is zero.

As a matter of fact, a credible argument can actually be made in the other direction -- that by redirecting good examiner time -- and, you know, we have a lot of very capable examiners. We want to be very careful here that we don't cast aspersions on very professional examiners. We're just trying to -- it's our job as the policymakers to direct their efforts. By redirecting some of their efforts from unproductive paperwork that really does not reduce risk in any meaningful way, and having them pay attention to things that really deal with risk, in fact, we should be reducing the risk to the banking system. And that's one of the dual objectives here.

Q Why is it you have to state that? We've heard Presidents now -- the past two state that. What is the other side that lay people like myself don't see, don't know? What is the concern about -- that banks might feel that we don't know that lead you to state --

SENIOR ADMINISTRATION OFFICIAL: I'm not sure exactly what your question is, but there are a lot of people who -- any time anything is done to change a regulation that looks to them like it's loosening or -- quote -- deregulation -- will take the view, ah-ha, we're going to have another S&L debacle here. You know, it's going to cost billions of dollars to the Bank Insurance Fund and then ultimately to the taxpayer. And that's -- there's just no foundation whatsoever for that kind of a concern. It's just -- and I share --

Q But it's a legitimate question, isn't it?

SENIOR ADMINISTRATION OFFICIAL: It's a legitimate question, and that's why I'm trying to respond to it. But there is no foundation for it.

Q For the past several years, we have heard first President Bush and now President Clinton say loans to creditworthy borrowers should be made. Sound banks should make sound loans. That seems to be obvious. Why does that have to be stated?

SENIOR ADMINISTRATION OFFICIAL: Well, you know, I guess it doesn't have to be stated. And if all we were here today and all the President was going to do today was just state that again, we would not be doing it. The point of all this is that we are going to have a very specific set of regulations that reinforce that and that explain to banks exactly what we mean when we said creditworthy loans and what we don't mean. There's a very critical difference there between just saying it in very broad terms and issuing very specific regulations that deal with some of the issues. And as we get on here I think you'll see some of the examples.

I'm on page two now. Equal credit opportunity in CRA is going to get continued attention. That doesn't happen to be the focus of today's new set of regulations, but we want to keep in mind at all times that we're not losing sight of that.

If you go down to item number one in the second paragraph there, it says "encouraging use of judgment and borrower's reputation." There's been a lot of talk about what are called character loans. We need to be very careful about that because that can be abused. And lending purely on someone's character can just turn into a way for a bank to imprudently lend to friends or to people they don't really have any financial information on. What we're really trying to say here is that the experience and the underlying reputation of an individual borrower is a perfectly legitimate part of the overall credit assessment. I mean, that borrower still has to have decent financial statements, et cetera, but if you have a borrower who had proven that he or she has led a business through difficult times in the past, that's an important factor and it ought to be taken into consideration. And it's perfectly legitimate in part of the overall risk management process that banks are supposed to undertake.

Q Going back to one, just the paragraph before that, to assure that these loans are made to small and medium-size businesses, there will be a ceiling. The bankers would probably like to know what is the ceiling?

SENIOR ADMINISTRATION OFFICIAL: That's going to be coming out in the detailed regulations and the four agencies will be agreeing on that. That's one of the many, many details that have yet to be worked out and that's why it's going to take a series of weeks before these regulations come out.

Q Why do you have this announcement without the details. It seems like often this is the case, we don't really have the guts of something to look at, yet there's a big pronouncement and a big ceremony.

SENIOR ADMINISTRATION OFFICIAL: Well, we're sort of at an intermediary point here. That's a fair question -- why didn't we wait until we had all the regulations. I think there are a couple of reasons for that. First is we believe we have enough meat here so that it will be meaningful to the banking community. And I assume a number of you or your colleagues will be checking with people in the banking community afterwards to see what they think. But it is our belief that there is enough in this six-page document that will be considered to be meaningful to a lot of the banking community in terms of their approach to their lending activities.

We could have waited; but if we waited, it would mean we would be losing valuable time. And, as you know, the administration is very concerned about making sure that this economy really keeps going on its recovery and that it does produce jobs.

Q You're looking for a phsychological effect today.

SENIOR ADMINISTRATION OFFICIAL: It is a psychological effect, and the psychological effect is important. But in addition to that, there are a number of specifics here that are going to be very meaningful to the bankers.

Let me give you an example that's right at the bottom of page two -- excuse me, please -- the bottom of page two. This is a fairly arcane thing, but actually one of the most important parts of the total package from a perspective of real, live loan officers. And what's going on here is that when the examiners go through a loan portfolio, they have a category that's called "doubtful." And doubtful -- it depends on the individual bank and the geographic area, et cetera, et cetera. But often, you find in banks that there is a 40 percent to 50 percent ultimate loss factor on loans that are classified as doubtful.

Then there's another category called "substandard." And, again, the range varies, but you might find 15 percent to 20 percent ultimate loss factor in the substandard loans.

Then there's this category called "other assets especially mentioned," which was really intended as a very early warning system. And the ultimate loss factors there -- again, it varies from the bank, but it wouldn't be surprising to find it in the two percent to four percent range. Clearly, far, far lower risk than the classified loan. As a matter of fact, technically, these are not called classified loans; only the doubtful and substandard are called classified.

What has happened in many cases, just over a period of time, is that many of the examinations and, therefore, the banks themselves have come to lump these altogether in making comparisons to capital in assessing the overall risk. And you don't have to be a mathematical genius to figure that if you take something that has only a very small percentage risk in it and add it in with something that's got a higher percentage risk, you've lost meaning. It's no longer is a -- the total number is not a meaningful number to measure against the capital of an institution.

And in particular, a lot of small and medium-size business loans do fall into this OAEM category. They're not imprudent. It might be absolutely, perfectly reasonable business judgment for a bank to make a loan that has a two or three percent loss probability in it. There's nothing wrong with that. The name of banking is not to make zero-risk loans -- we wouldn't have anything going on -- but to make properly managed risk loans. But if they get thrown in the total basket of bad, if you will, with a capital B, all of a sudden the environment for the bankers to take any risk, a risk they would ordinarily take in making a prudent business loan becomes very punitive. And that has caused a lot of banks to back off and say I'm just not going to take this risk. It's too much.

Q Are you saying that examiners are incorrectly classifying OAEM loans?

SENIOR ADMINISTRATION OFFICIAL: No. The question was are they incorrectly classifying them. No. The loans, it's not so much that they're incorrectly classifying, it's that once classified -- and classified is actually a technical term -- once categorized -- you're using it in a broader sense. I understand.

Q Are you saying are you saying that bank examiners are incorrectly requiring banks to set aside reserve of capital --

SENIOR ADMINISTRATION OFFICIAL: It's not even that. It's just that once having determined that a loan is an OAEM loan, it should have some reserving against it. It should have, as a matter of fact, probably two to four percent reserved for it. And we're not changing that in the slightest.

The problem is what do you do with that figure when you have it afterwards. If you take that total amount of OAEM loans and add them to the doubtful and substandard , and then go in and take that as a percentage of capital, all of a sudden the implication of that ratio is that there is very substantial risk in everything in the numerator of that fraction, and that's not correct. There is only very modest risk in a portion of that numerator. It gives a misleading representation of the risk to -- the danger to capital of that institution.

If you weighted it -- if you took three percent of the OAEMs plus 20 percent of the substandards and 50 percent of the doubtfuls, you'd have a more meaningful number at least. And in some cases that's done. But when they're just simply add it in without any weightings, it is a misrepresentation of the risk of the danger to the capital of the institution. By doing that, it makes the bankers very risk adverse.

Q Are you saying that the examiners are currently doing it wrong according to existing rules, or that the rules are written wrong and they need to be changed?

SENIOR ADMINISTRATION OFFICIAL: Do you want to take that one?

SENIOR ADMINISTRATION OFFICIAL: No, I don't think it's a question of the examiners doing it wrong. I think it's a question of ambiguity in the current set of rules that allow for examiners a broader range of decision-making than we think is appropriate to really address the risk here.

SENIOR ADMINISTRATION OFFICIAL: We're going to have to go on here or we're not going to finish up in time for the President.

Q Just one quick question. We've seen a number of initiatives unveiled to break the credit crunch in the past year. How is this different from, say, what Mr. Bush unveiled last July?

SENIOR ADMINISTRATION OFFICIAL: To the best of our knowledge, there have not a series of specific regulations that have gone out in hard terms that have addressed any of these issues that have gone out to the banks and the examiners. This is a new program.

Let me go on here, please, to page three. There's a number of issues here related to real estate, and that's not only because real estate loans themselves are important and real estate's a big portion of the economy, but also because very often real estate is taken as collateral in a small or medium-size business loan. For example, you have a company that's manufacturing widgets. And they go in for a business loan and they show their financial statements and their cash flow projections to the banker, and the banker says, well, that's nice, I want to make this loan; but in addition I would like to take -- as extra safety, I'd like to take your plant, your building in which you manufacture your widgets as extra collateral. A similar thing might happen with a farm.

So, very often, that's an integral part of a small or medium-sized business loan or an agricultural loan. And what we're essentially saying here -- I won't get hung up on the details -- what we're essentially saying here is that, even though the law specifies a number of requirements about appraisals -- and, of course, we're going to comply with the law in every way -- there are a number of judgments of regulatory policies that go further, that go beyond the law that talk about when an appraisal is needed, under what circumstances it's needed. Sometimes they're very costly, and that's a real problem, particularly for the small business loans, because a certified real estate appraisal, even for a small building, may costs thousands of dollars. And by the time you go through that, not only is it a delay factor, but as a percentage of a small loan, it becomes absolutely prohibitive.

Just think about it for a moment. If somebody wants a $30,000 loan and it costs $5,000 to do a real estate appraisal, it's already become economically impractical. And we're trying to deal with that in a constructive fashion.

Page four, we deal with another arcane thing here in the second paragraph that the bankers know well. It's called insubstance foreclosure, and essentially it is a very technical rule that under certain circumstances requires the banks to treat a piece of property that's underlying -- its collateral for a loan -- as if it has been foreclosed on, when, in fact, it hasn't been foreclosed on. It sounds a little strange, but it's been overdone. There may be some circumstances in which it makes sense, but others in which it doesn't make sense.

The liquidation value issue has been one that's been debated a lot. Clearly, if a piece of real estate property -- say, again, it's the small business loan I was mentioning before -- if the value of the building in which the widgets are being made happens to decline, but the business is doing fine -- its cash flow is fine, it's selling widgets like crazy and making a lot of money -- what is the point of going in and writing down that loan or penalizing the bank for making that loan just because the real estate market has gone down and the value of the widget building has gone down? If, in fact, the loan is fully collectible, the borrower is paying the money, there's every reason to believe that his business is successful, or her business is successful and the loan is going to be paid off, this is crazy.

And so we're going to go back to the fundamentals of, what are you really looking at in terms of the ultimate collectibility of principal interest in the loan, not the artificialities of what may be going on in tomorrow morning's or today's real estate market.

Q On all of the real estate points, or on many of them, you say you're going to reexamine appraisal threshold, review and substance foreclosure, review the rules on -- does that mean you haven't made up your mind yet what you're doing?

SENIOR ADMINISTRATION OFFICIAL: That's a good question. It means that we haven't yet got agreement among all four agencies as to exactly how we're going to treat it. We're going to make some changes. The term "review" is a very cautious regulatory term, but the real implication is we're going to make changes. We have not yet decided exactly what changes; we're going to try whenever possible to get agreement amongst the four agencies. It may not be possible in every circumstance, but it would obviously make life a lot easier if we had agreement. And it's going to take some time to hammer out the exact wording on each one of them.

Q Will you be putting these down as proposed rules for a period of public comment and so on?

SENIOR ADMINISTRATION OFFICIAL: Well, let me go back to something since we'll be moving on to appeals. This is really a detailed program, and you haven't had a sufficient opportunity I don't think to sort of go through the page meticulously because there's been a lot of effort spent on each paragraph.

In a sense if you view this area, what's been stifling lending is not a blow to the jugular, but like many things in the financial services area, it's more of an accretion of sort of a blow to the capillaries. And consequently, unfortunately, it's a dull business going capillary by capillary to sort of unplug the system, but that's really what's needed to do this in a prudent fashion.

Q Are you going to be proposing rules which will be subject subject to public comment?

SENIOR ADMINISTRATION OFFICIAL: They will be -- in many cases these items can be addressed merely by agency action. And we don't intend -- and this is one of the reasons to talk about this today -- we don't intend to wait until we have the whole basket done. Rather we want to get rolling, and there will be things coming out constantly. Many will be changes to practice. Several will be changes in regulation and the notice and comment period will be shortened as much as permitted by law. Our view is that we can conclude most of this in three months.

Q Just to go back to what was said before. The cumulative effect of these in layman's terms would seem to be to reduce regulations that are overprotective on the risk factor. And yet it's said that there will be zero cost to the taxpayer. How can you lower the risk even nominally without having some taxpayer risk under the FDIC?

SENIOR ADMINISTRATION OFFICIAL: A great deal of what's burdened this industry has been duplication and excess. And I'll come to that. In other words, you don't have to do things five times, an overlay burden to actually get prompt and accurate supervision.

Let me go on to the next one --

Q it was unnecessarily --

SENIOR ADMINISTRATION OFFICIAL: It was excessive, I think I would --

SENIOR ADMINISTRATION OFFICIAL: Let me just add to that one, because I think it's a very important point. In the example I just gave you about the business, as long as, in fact, that business is doing well and its cash flow is doing fine, there's no reason for that loan to go bad, regardless of what the latest appraisal says on that business. And there's no reason to believe it's going to cause any more losses.

In addition, there's something in here that notes that some of the procedures that are going to be put in place are going to be limited to those banks that are already strong and well managed, that have good ratings. So the likelihood, even if there were to be some additional small losses at the margin, they would not -- they would have to be 100 times what might be reasonably expected in order to have any impact of any measurable significance on the capital position of a well-capitalized bank. We're talking about very small things at the margin.

SENIOR ADMINISTRATION OFFICIAL: Let me just go through the rest of this and answer your questions.

One thing that we think is really quite significant is enhancing the appeals procedures and making them fair and workable. You've undoubtedly heard that bankers complain frequently that examiners come in and sort of miss the boat and has been overly critical of a particular item. And it really chills their whole effort, discourages the staff. They're unwilling to take any prudent risk at all. They really -- the rules currently provide for appeals, but the appeals really aren't successful.

Bankers have been afraid -- they've been afraid that they will be black-balled if they take an appeal. We're refining the rules so that they will be encouraged to take appeals and, on the other hand, that examiners will not feel they're being black-balled if it goes the other way. This is really, I think, a critical element, because it will also provide information up to us when examination is not really being handled in a precise way. Examination is much s as much an art as it is a science. And to get it exactly right, one wants to really know what's going on in each examination, and this should help.

In addition, under appeals is you might call complaints. It's not just the banks that appeal complains, it's frequently the public. And we want to make sure that our complaint processes are such that people have a fair right -- these are public agencies -- to make their complaints heard and understood and listened to. And we're going to place a significant emphasis on giving people a fair shake in terms of being able to come in and lodge a complaint that's taken seriously, whether it's a bank, or an individual, a potential borrower or just Joe Q. Public.

In addition, we're going to try to make the examination process more realistic. Right now, some banks have had the experience where they'll find three or four regulators coming in one right after the other. And that can be terribly disruptive. If you take a small institution -- and one banker gave me the example of one of his subsidiary banks that had 150 employees and there were 30 examiners that came in over a period of months completely disrupting things. Well, there's no reason you need 30 examiners for an 150- person institution. You should have one examination, except where required by law, by one examiner. And the agencies have agreed that that's what they're going to do, and where it's necessary to go in with more than one agency, to do it in a coordinated fashion so it is not disruptive.

If you take an institution that may be going through an examination for several months, that's time taken away from the loan officers to actually make loans. And that's one of the reasons we think this program is going to be so effective.

Q Let me ask a question if I may. I'm hearing that bank examiners are properly doing their job, but I'm hearing a lot about bank examiners being involved in the problem. Can you explain this in layman's terms?

SENIOR ADMINISTRATION OFFICIAL: Well, what I was just addressing was not people doing -- not doing their job, it's really a lack of coordination in terms of a number of different agencies coming in to the same institution. Again, there's no reason to have three people do it when one person can do it or three agencies do it when one agency can do it.

Q Are you suggesting there is too much bank examination?

SENIOR ADMINISTRATION OFFICIAL: There has been an excessive amount -- sort of going the other way -- there has been a lack of coordination and multiple examinations in cases where there simply shouldn't have been.

Q Does this follow on to the S&L debacle?

SENIOR ADMINISTRATION OFFICIAL: There is no doubt that press stories, the S&L debacle, made people sort of do things twice instead of do things once.

Q So basically the suggestion is you want the bank examiners to back off after having --

SENIOR ADMINISTRATION OFFICIAL: Not at all. That is your term. What we are looking to do is have a system that, one, identifies real risk and examines it properly and prudently; a system that is a shift away from excess to an identification of real risk. We're looking at a program that deal with specifics not generalities and just exhortation. And we've got a list of specifics here. And we're also looking for a program that continually identifies areas where regulations may be outmoded because of passage of time and where there is a need for a change. So, in a sense, it's sort of a three-part effort in that regard.

If I can just go through, there are a couple more things -- one more thing I think is worth emphasizing here. And that is, in some ways you can be very cynical about a reduction of paperwork burden. But one thing that I feel very strongly about is that if you have been inside a bank and looked at the vast amount of papers they have to keep and the papers they require people to produce, this can be very significant and sort of overblown. We're going to be looking at this -- and again, this is a capillaries issue -- meticulously so that we get what we need, we're disciplined enough to do it in a way that we're careful for the safety and soundness of the system, but we just don't have excess. You know, there's a human tendency to say oh, my God, something went wrong, I want 15 instead of one when one is really needed.

Q But it sounds as if, going back to what you were talking about before, that you're sympathetic to proposals on the Hill to merge the regulatory agencies into one.

SENIOR ADMINISTRATION OFFICIAL: I don't think I talked about that all. We're talking about a specific program addressing specific items.

Q Aren't you really here saying that it's now an amorphous process with many agencies and it's at a regional level, et cetera? Aren't you trying to centralize it? Isn't that what overall you're trying to do -- with greater coordination, with telling people what types of loans, how to evaluate certain types of loans, et cetera, et cetera? Aren't you trying to centralize the examination process?

SENIOR ADMINISTRATION OFFICIAL: No, I wouldn't go -- I wouldn't say that. I think we are trying in a hard-headed way to address specific issues, however boring they may seem to some people, but issues that are really meaningful to banks and really meaningful to borrowers that people have excessively regulated and burdened. And we're trying to pull that back in a way that -- or change it, better said, in a way that really addresses risk and really gets those pieces of paper, that amount of regulation that's necessary.

Q How soon will a potential -- how soon will a loan applicant, a potential loan applicant see any results from this, considering you're saying that there are a number of provisions that even the four agencies can't agree on yet?

SENIOR ADMINISTRATION OFFICIAL: There's a great deal of agreement here. And having sat in the room, my colleague and I, there really is -- this is a coordinated statement that everybody's issued, everybody understands what it means. And there will be regulations coming out within the next weeks. I think we're going to be seeing effect almost immediately. And it will grow over time.

Q How will that manifest itself to a company that's been hassled and has not been able to -- or small farm or whatever -- that's been hassled, and not been able to receive a loan if they're creditworthy?

SENIOR ADMINISTRATION OFFICIAL: Look, we are going to have to wrap up here. I understand that somebody fairly important is about to make some comments and we don't want to miss it. But realistically, we know that a lot of this has built up over a period of time. It's affected people psychologically -- their views on things. And it's not going to go away all at once. It's going to take reinforcing. On the other hand, there are some things here that we think are going to be very meaningful to actual loan officers on the line and people making policy at banks. Again, I presume that you will be talking with some of them soon. And we believe that they will be treated as substantive and useful right away.

Thank you.

THE PRESS: Thank you.

END1:15 P.M. EST