Public Papers - 1989
Remarks on Signing the Financial Institutions Reform, Recovery, and Enforcement Act of 1989
Well, Secretary Brady and Secretary Jack Kemp, Chairman Greenspan, Senators Riegle and Gramm, and Congressmen Wylie and Gonzalez, and other distinguished Members of the House and Senate, ladies and gentlemen, and friends: Thomas Jefferson once observed that ``the care of human life and happiness, and not their destruction, is the first and only legitimate object of good government.'' And today we gather here to sign legislation, the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, which reaffirms those words.
This legislation comes to grips with the problems facing our savings and loan industry. It'll safeguard and stabilize America's financial system and put in place permanent reforms so these problems will never happen again. And moreover, it says to tens of millions of S L depositors: You will not be the victim of others' mistakes. We will see -- guarantee -- that your insured deposits are secure.
And this, of course, was government's intent when, in 1933, it created the Federal Deposit Insurance [Corporation]. And yet as that system incurred massive loans over the past couple of decades, the fund designed to protect depositors itself became insolvent. And the crisis has been told and retold: The Federal insurance fund was unable to make good on its commitments to the public or to close insolvent institutions, and -- their losses mounting -- hundreds of bankrupt institutions were allowed to continue operating.
On February 6, I announced a plan to change all that: to protect insured depositors and to responsibly finance the closing or other resolution of all insolvent institutions. And we sought to abolish lax regulations, to increase penalties for wrongdoing, and to reform the financial system. And above all, we sought to protect those who have relied on government to faithfully fulfill its obligations.
I take a special pleasure in the historic legislation that I will sign here this morning. For the Task Group on Regulation of Financial Services, which I was proud to chair, began the effort to strengthen our financial system. And its work, and that of many others, was debated and refined by the United States Congress -- and you see it here, all 371 pages of it. And, no, the bill is not perfect, but it is a first step, a crucial step, toward restoring public confidence. H.R. 1278 is responsive and responsible, and for that I salute the Congress. This bill balances America's need for financial security, competitiveness, and equity.
In particular, I want to thank two committee chairmen, Senator Don Riegle and Representative Henry B. Gonzalez, here with us today for their superb leadership in an extraordinarily difficult proceedings. And they were aided by Senator Jake Garn and Representative Chalmers Wylie, who helped make these proposals a reality; and of course, Senator Phil Gramm, who I mentioned earlier; and numerous other members of the banking and other committees, from both sides of the aisle, who took up the cause of the public's interest.
And then there's my friend, the Treasury Secretary, Nick Brady, whose dedicated efforts have been vital and whose leadership has been truly outstanding. And so have those of Director Dick Darman, over here, the head of the OMB. I'd also like to mention Richard Breeden of the White House. I'd be remiss not to salute hundreds of others on the staffs of the various regulatory agencies and congressional committees. They, too, deserve our thanks.
And because of them, of you here today, and so many others, this legislation will give us the tools to make our thrift institutions and our financial system as a whole strong and stable. With this bill's substantial funding, we will begin -- here and now -- to eliminate the ongoing losses of the insolvent firms and to ensure that not one dollar of insured funds will be lost by any depositor.
Toward that end, this legislation abolishes the agency once responsible for thrift supervision. And in its place a new agency will operate as part of the Treasury Department, ensuring the taxpayers' interests will always come first. And at the same time, a completely new insurance fund will protect deposits in thrift institutions. The obligations of the new fund, called Savings Association Insurance Fund, SAIF, will be fully guaranteed by the full faith and credit of the United States. The new seal displayed here symbolizes this new fund and our commitment to protecting depositors.
Good steps? I'd say vital steps, and this legislation goes still further. Beginning today, penalties for wrongdoing by officers and directors of insured institutions will be increased up to million per day. And criminal penalties will be toughened from yesterday's slap on the wrist to the clang of a prison door. Those who try and loot the savings of their fellow citizens deserve, and will receive, swift and severe punishment. And also, starting today, tougher requirements for safe and sound operating practices will begin to take effect. Never again will America allow any insured institution to operate normally if owners lack sufficient tangible capital to protect depositors and taxpayers alike. And today, too, we begin using the new resources available to accelerate the resolution of failed institutions and to recover every possible dollar from their assets for the taxpayer. And at the same time, we will seek to minimize adverse impact on local markets.
These reforms will help our system right itself. For while the S L crisis isn't behind us, we have met and passed our first critical test. More hard choices, more challenges, lie ahead. But we will meet them as we have this challenge -- consulting, cooperating between Congress and the executive branch. And as we do, we will keep the new Federal deposit insurance system solvent and help serve those millions of small savers who make America great -- the local paperboy looking ahead to college or the young couple dreaming of their first home, the retired teacher whose savings are her entire lifetime. We have a commitment to protect the savings of these Americans and millions like them across this country, and we will honor that commitment.
And so, together, Republicans and Democrats, we can keep America's economy number one in the world. We can and will preserve a safe, efficient, and equitable financial system for ourselves and, yes, for our kids. So, thank you all very much for coming here and for your support, both past and future, because plenty of work lies ahead. Thank you all very much and now, I'm proud to sign this monster.
Note: The President spoke at 10:49 a.m. in the Rose Garden at the White House. In his remarks, he referred to Secretary of the Treasury Nicholas F. Brady; Secretary of Housing and Urban Development Jack F. Kemp; Alan Greenspan, Chairman of the Board of Governors of the Federal Reserve System; Senators Donald W. Riegle, Jr., Phil Gramm, and Jake Garn, chairman and members of the Senate Committee on Banking, Housing, and Urban Affairs, respectively; Representatives Henry B. Gonzalez and Chalmers P. Wylie, chairman and member of the House Committee on Banking, Finance and Urban Affairs, respectively; and Richard C. Breeden, Assistant to the President for Issues Analysis. H.R. 1278, approved August 9, was assigned Public Law No. 101 - 73.