Public Papers

Remarks to the Association of Bank Holding Companies


Well, thank you all very much. And it is a pleasure to do what's known in Washington as a cameo appearance, a drop-by. But I'm delighted to be here -- these very busy and very interesting times. I first want to thank Gene Miller and, of course, my friend -- I don't want to put him in an age category, but my classmate -- Lud Ashley, an old friend, and, of course, the leading lights of the banking industry here today.

Back in February of 1989, the members of your organization came out early for our S L program, the reform bill. Your strong support helped us take a critical first step toward restoring the integrity of our S L system, and we are very grateful for that. And since then, Nick Brady, who is known to, I guess, everybody here, has been conducting a thorough review of the key issues and the concerns of the American banking system.

What he's found is the need for significant structural reform, reforms that keep pace with the revolutionary changes in financial services that have marked the past two decades. And today in the age of the ATM and the 800 number, and in the face of intense competition from nonbanks to meet the consumer's credit needs, we must rethink and reexamine our existing regulations and the need for change.

The regulatory system that served us very well, indeed, from its inception in the thirties, is today, in my view, increasingly outmoded, is likely to prevent banks from staying competitive as it is to allow them to serve customers and sustain confidence in the system. The result can be counterproductive: Denying banks the opportunity to enter new markets actually encourages risky ventures that fall within the old rules and regulations.

In January, the Treasury Department will make its recommendations on comprehensive banking reforms, including provisions on deposit insurance. The legislation that we will propose will make a significant contribution to the long-term health of the banking system. And once again, I will be in close touch with Lud and Gene and all of you here today to help secure a speedy passage of this reform package in the 102d Congress. What's at stake is not just the confidence of the American people in the banking system but the profitability and the competitiveness of a key American industry, because our banking system can never be truly safe if it's not also economically sound.

Lud tells me the theme of the conference is managing risk. And I don't need to tell you how the events of the past few months have clouded over the crystal ball out there for everybody. For the people in this room who face the challenge of mapping corporate strategies in an environment that at best is uncertain, the task you face is extraordinarily complex.

I know that -- I see Jim Leach back here, another old friend of mine, and I know that he's been up here preaching some wisdom. I'm not sure exactly what he says, but listen carefully to him. [Laughter] He's one of the sanest and greatest Members of the Congress, I can tell you that. I also understand that Richard Breeden was here -- I don't know if he's here now -- but the head of the SEC [Securities and Exchange Commission] was here -- good man. They've spoken about -- in more detail than I'm capable -- spoke to you about the challenges that confront you. And they are serious. No question about it.

Interest rates, frankly, are higher than any of us would like them to be. I am very hopeful -- and I'm not one who is a Fed basher or anything of that nature -- but I'm hopeful that the deficit agreement that was not the world's most popular piece of legislation -- budget deficit agreement will lead eventually to lower rates. And of course, we've seen some come down. I happen to think that's very good for the economy. I know your concerns about a credit crunch, and we've been having a series of very interesting meetings with private sector people at the White House, which has helped me understand better the credit crunch.

I mentioned earlier the concept that some of you all have in this industry of overregulation or excessive zeal in the regulatory business, and I think we're now more attuned to that problem than heretofore. And so, what I hope is, is when we get the new Congress here we can take more of a leadership role out of the White House in not only helping to strengthen the business that you all are in but to sometimes relieve a little pressure from the overzealous nature of some of the regulations.

So, we are in a period that concerns me of a sluggish economy. I suspect that each one of you here has economists that you believe in. And some are saying recession, and some are saying slowdown, and some saying downturn. But one positive thing is that most, if not all, people are suggesting that whatever it is, it won't be long lasting. And I think that is very important to the overall good of the American people. I am confident that it will run its course. I think it will be relatively slow, based on the expert opinions to which I have access. I am certain that the institutions that are represented here and all of you business leaders in this room will play a leading role in reviving the economy and returning to the path of expansion and opportunity and growth.

So, I might add just a comment or two about the effects of what's happening halfway around the world on our own economy and on the economies of other countries. One of the most fascinating visits that I had on this recent trip to Europe -- a trip that preceded another good trip, incidentally, for those of you who are interested in matters south of our border, a trip to Mexico -- but one of the things that was really fascinating to me about the trip to Europe were the talks I had with the eastern European leaders.

I started my trip by going to see [President] Vaclav Havel in Czechoslovakia. Here's a country whose economy is being devastated by what Saddam Hussein is doing in the Persian Gulf. I think he used a figure of .5 billion for 1 year estimated strain on that fragile economy. Comes at a very bad time for him. We had a little press conference outside of what they call the Castle there, which is his headquarters, in that marvelous center of Prague, and he was asked a question. And I think some who were inquiring thought that maybe there would be a wedge driven between the steadfast position of the United States, as we approach the dictator Saddam Hussein, and Czechoslovakia. But to the surprise of some, but not to me, since I had talked to him about it, in spite of the economic hardship to Czechoslovakia, he was about as strong as you could possibly be in standing up against the rape, the pillage, and the plunder, and the aggression against Kuwait. That was true also of the Polish and Hungarian leaders with whom I met a few days later in Paris at the CSCE meeting.

And so, on this subject of the Gulf, it is clear to me that those who can afford it the least are those who are getting hurt the worst by the speculation that's resulted in these higher oil prices. Some of you may have heard Alan Greenspan [Chairman of the Board of Governors, Federal Reserve System] in his rather eloquent testimony talking a day or two ago about the effect that the oil increases are having on the United States economy and what that means, trying to assess the slowdown or the recession or whatever one would call exactly what we're in now.

And it's very clear that they are having a very bad effect on our economy. But one of the reasons that the world is holding together as well as it is, is that the smallest countries -- and many of them, Moslem countries -- feel just as strongly as we do, and others, that the aggression must be returned not simply on the moral basis, which certainly is a profound reason to see the aggression turned around, but on the economic basis as well. Their economies are being hurt. It's not just eastern Europe. Take a look at Senegal. Some of you all do business all through Africa, and take a look at some of the countries that really are in tough shape there, and then see what the result of Saddam Hussein's aggression is doing to them. And then add to it what's happened in the United States. And that whole economic side of this equation comes much more clearly into focus.

I'm hopeful that this afternoon the United Nations will pass -- I believe it's its 13th resolution, maybe it's its 11th. But as one who served at the United Nations with sometimes frustration because of the failure of the so-called peacekeeping function of the U.N., I think one of the exciting and positive things to be coming out of all this strife and problems halfway around the world is the rejuvenation of the United Nations peacekeeping function.

It is not insignificant that it's not the United States alone but the United States backed -- or in conjunction with the rest of the Security Council -- indeed, with most of the members of the United Nations itself strongly supporting what we are about in trying to reverse the aggression over there. So, my point is, there's a moral underpinning to what we're doing. To me, it is very, very clear, and I don't intend to waver one single bit.

But there's also an economic side to this equation, and economic effects are devastating those who can afford it the least. So, we're embarked on a very interesting path here, and I hope that the resolution -- that it will be peaceful. That is certainly what everybody aspires to, certainly the President, who is also the Commander in Chief of the Armed Forces. But I think the main thing that I hope will come out of today's session of the United Nations is that we send perhaps the clearest signal of all to Saddam Hussein that the world is deadly serious about reversing this aggression and about lifting this economic oppression that he has wrought on many, many countries that can ill afford it.

So, we'll see where we go. I hope my optimism I feel at this point is not misplaced. If it is, we just go right back to the drawing board, because I know that we have to prevail. And I expect all of you who do business abroad, as most of you do, understand exactly what I'm talking about when I talk about the horrible economic effects that this man's aggression is having on all the economies of the world.

Listen, it is a great pleasure to be here. I salute you and your work. I'm delighted to be with you, and I would welcome from the private sector any input on how the Government, by either getting out of the way or by in one way or another doing our business better, can strengthen and encourage the banking system of this country. It is vital. And we've taken it for granted for years and years as a sign of the greatest stability -- one of the great stable points of our country. And I'm confident that if we conduct ourselves right and if you do your business right, that principle will be out there for all to see in the days ahead.

Thank you, and good luck to you in your work. And thank you for letting me come by for this cameo appearance. Thanks a lot.

Note: The President spoke at 1:26 p.m. in the ballroom of the Willard Hotel. In his remarks, he referred to Eugene Miller, chairman and chief executive officer of Comerica Corp, Inc.; Thomas Ludlow Ashley, president of the Association of Bank Holding Companies; Secretary of the Treasury Nicholas F. Brady; and President Saddam Hussein of Iraq.