Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: FRIDAY, August 27, 1993                   TAG: 9308270115
SECTION: BUSINESS                    PAGE: A7   EDITION: METRO 
SOURCE: MAG POFF STAFF WRITER
DATELINE:                                 LENGTH: Medium

BANKS: DEMAND IS KEY

In a breakfast session with Sen. Charles Robb, D-Va., a group of 20 bankers and former bankers said banks are willing to make loans, but consumers are reluctant to borrow. The session was at the Radisson Patrick Henry Hotel.

Robb and the bankers said financial institutions may have overreacted to regulators' toughened stance on the soundness of loans by tightening lending standards.

Reginald Hutcherson, former vice chairman of CorEast Savings Bank and now in the insurance business, said both regulators and banks may - or may not - have overreacted to the savings and loan crisis.

If they did, he said, it is understandable.

But the need now, he said, is for the economy to continue to grow in order to create a demand for commercial loans.

"The door really went shut hard and tight" on commercial lending, Robb said, but now everyone from the president on down is urging banks to make loans. "Just don't make bad loans."

David Caudill, vice chairman of First Union National Bank of Virginia, said consumers feel a lack of confidence in the economy.

The informal conversation covered a wide range of topics:

Congress should extend the life of the Resolution Trust Corp. beyond its expiration date of Sept. 30, fully funding its operations.

Healthy thrifts should not have to finance cleanup of those that failed, said Bill Rakes, president of Southwest Virginia Savings Banks.

Banks and thrifts now pay 23 to 33 cents per each $100 of deposits for federal deposit insurance, he said, but the banks' fee could drop to about 8 cents per $100. He said that would create an uneven playing field.

Resolution Trust Corp. has disposed of local real estate seized from failed thrifts without depressing the local real estate market. But the reverse is true nationally.

Sales of repossessed real estate in Western Virginia were financed by venture capital, not financial institutions.

Robb said RTC has sold operating properties and held on to raw land when it should have done the opposite.

The government has taken over a portion of the student loan business, which should be private. Banks have properly handled those loans, a good source of banking business.

Local banks have done a good job lending in low-income neighborhoods, but the amount of government reporting and regulation is burdensome, the bankers said. Regulatory control should be lifted as banks continue to produce such loans, they said.

John W. Clarke of Catawba Capital Management said he had left banking and therefore could say what the bankers could not say: The amount of paperwork is "absolutely ridiculous."

Caudill said closing a mortgage, which once required three documents, now involves 30.

Congress should provide full deductibility for Individual Retirement Accounts. This would encourage deposits needed for investment.

Americans are prepared to do more than Congress has asked in order to balance the government's budget. Robb said he doesn't foresee more legislation in 1994.

"I'd take more from the middle class" and cut spending across the board, Robb said.

The problem, he said, is that "the American people want all these things but push very hard not to be affected."

Robb said he supports full interstate banking and asked if any of the bankers disagreed. Nobody spoke up.