GAO Report Says 500 Regulators Earning More Than Allowed
WASHINGTON (AP) _ More than 500 federal savings institution regulators have been illegally exempted from government salary limits, according to a congressional report released Monday.
The General Accounting Office, in a report for Sen. David Pryor, D-Ark., said employees of three subsidiaries of the Federal Home Loan Bank Board are, in fact, federal employees and should be subject to civil service pay classifications. The top civil service salary is $75,500 a year.
The bank board, which regulates the nation’s 3,000 savings associations, has set up the three subsidiaries since 1972, in two of the cases specifically to get around salary limits. Top executives of the subsidiaries are paid six- figure salaries.
The Office of Regulatory Activities was created in 1986 as the Office of Regulatory Policy, Oversight and Supervision, or ORPOS, to formulate regulations and to oversee S&L examiners that work for the 12 district Federal Home Loan Banks. It has 146 employees.
The district banks serve as a central banking system for the savings and loan industry and are outside of the federal bureaucracy, but the GAO said regulatory office employees took over functions previously conducted by the board itself and should be considered part of the federal government.
A second subsidiary, the Federal Asset Disposition Association, was set up in 1985 to dispose of billions in dollars of loans and foreclosed real estate from failed S&Ls. It is the largest of the three with 313 employees.
Its president, Gerald P. Carmen, is a former head of the General Services Administration, which manages government property, and a former political fund raiser for President Reagan. He is paid $150,000 a year.
The third entity, the Office of Finance, has 52 employees and was formed in 1972 to oversee the issuance of debt to fund the bank board and the district banks.
″We believe the bank board acted improperly in creating ORPOS, the Office of Finance and FADA as entities whose employees are not subject to the salary limitations,″ Milton J. Socolar, special assistant to the comptroller general, said in a letter to Pryor.
According to bank board officials, the effects of forcing the three subsidiary agencies to abide by the salary caps is potentially devastating. Analysts in part blame the S&L industry’s problems on the inability of the bank board in the early 1980s to pay enough to attract experienced examiners.
By placing the examiners outside of salary caps, the bank board has been able to build up its staff, in part by hiring examiners away from other banking agencies.
The report for Pryor, chairman of the federal services, post office and civil service subcommittee of the Senate Governmental Affairs Committee, is the latest blow against FADA, which has been criticized by members of Congress as both too slow and too expensive.
Banking legislation approved by the House Banking Committee earlier this summer would abolish FADA, forcing the bank board’s insurance fund to reassume the disposition agency’s responsibilities.
Karl Hoyle, a spokesman for the bank board, said agency officials believe it will take court or congressional action to enforce the GAO findings. He contended that if the findings were enforced, many of the employees would be hired away by big accounting firms and financial institutions.
″We feel its important that we keep and retain these people. To lose that kind of talent, particularly in the regulatory area, would be devastating,″ he said.
Hoyle said about a dozen of the 500 employees in the three subsidiaries are paid more than the top salary within the federal civil service.
Pryor, in a statement released with the report, also complained that the three subsidiary agencies are exempt from federal conflict of interest and procurement rules.
″Something is drastically wrong. ... We have created a monstrous bureaucracy with almost no oversight by the Congress,″ he said. These officials ″don’t seem to have to comply with federal conflict of interest laws or federal salary caps. Yet they have the decision of life or death over hundreds of these institutions.″