History
The OTS was established in 1989 in response to the savings and loan crisis. On television, President George H. W. Bush said,
| “ | never again will America allow any insured institution operate without enough money | ” |
and "trashed" the predecessor Federal Home Loan Bank Board; soon thereafter, the sign was changed to the "Office of Thrift Supervision". Savings and Loan legislation—the Financial Institutions Reform, Recovery and Enforcement Act of 1989—"abolished", or renamed, the independent Federal Home Loan Bank Board to the Office of Thrift Supervision and placed it under Department of the Treasury supervision. On 22 March 1990, in a setback to the George H. W. Bush Administration, Federal District Judge Royce C. Lamberth ruled that OTS appointments of the former director and acting director, M. Danny Wall and Salvatore R. Martoche, had been unconstitutional because they were not nominated by the President and confirmed by the Senate.
In 1992, under Director T. Timothy Ryan, the OTS aggressively shut down troubled Savings and Loan (S&L) outfits, and was criticized by the industry and industry lawyers for not allowing some S&Ls that might survive to have a chance. Ryan contrasted the OTS cleanup of the S&L industry to the former situation.
| “ | We're the regulator of the industry. We aren't the trade association and we're not its promoter. That's how they got into trouble the last time. They had a regulator who was a promoter. | ” |
S&Ls were "dropping like flies" and this presented problems for OTS staff—declining revenues led to a declining staff. The OTS responded by marketing itself at industry meetings. At one such meeting, federal regulators were "announcing a campaign to ease regulation" and they were in a photo-op over a stack of the federal regulations—holding garden shears signaling their intent to cut through them. OTS Director James Gilleran brought a chainsaw. "Companies got the message." In 1998, OTS approved 43 charters, with more than a third going to non-banks. In 2004 Gilleran said "our goal is to allow thrifts to operate with a wide breadth of freedom from regulatory intrusion". The OTS "adopted an aggressively deregulatory stance toward the mortgage lenders it regulated... allowed the reserves the banks held as a buffer against losses to dwindle to a historic low."
In March 2007, a Government Accountability Office report noted that "In contrast, a substantial minority of the firms OTS oversees—especially the large, complex ones—have primary businesses other than those traditionally engaged in by thrifts, such as insurance, securities, or commercial activities."
Section 312 of the Dodd-Frank Wall Street Reform and Consumer Protection Act mandated merger of OTS with the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corp. (FDIC), the Federal Reserve Board, and the Consumer Financial Protection Bureau (CFPB) as of 21 July 2011. The OTS ceased to exist on 19 October 2011.
The end of the OTS prompted at least one thrift, Thrivent Financial for Lutherans, to convert to a credit union rather than meet the "strict" insurance regulations set forth in the Dodd-Frank Act.
Read more about this topic: Office Of Thrift Supervision
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