Sen. Jake Garn, R-Utah, said he couldn't believe his ears Thursday as some members of Congress said that savings and loan regulators are now being too tough and creating a "credit crunch."
Of course, many had blamed the S&L crisis on regulators being too lax - and Garn couldn't let the irony pass."Let's be careful. You don't have to have a long memory to remember that we went through this before," Garn said, noting that members of Congress had urged regulators to ease up on Southwest S&Ls, whose eventual failures created the S&L crisis.
"This senator, if he has to err, will err on the side of tougher regulation," Garn added.
His comments came after Sen. John Kerry, D-Mass., and Rep. Joseph Kennedy, D-Mass., complained that regulators are being too tough on S&Ls in the Northeast for fear of repeating mistakes they made in the Southwest. They said that creates a "credit crunch."
In an interview after the hearing, Garn said little evidence points to overregulation causing a credit crunch. "There are a few anecdotal stories, but I don't think it is widespread."
Also in testimony before the Senate Banking Committee - where Garn is the ranking Republican - Federal Reserve Chairman Alan Greenspan said an overall cutback in bank lending for commercial real estate construction and corporate mergers hasn't harmed the economy as a whole.
"With the exception, perhaps, of the troublesome situation in the New England region, credit availability more broadly appears not to be significantly impaired," Greenspan said.
"Enough credit appears to be available to fuel" economic growth nationally, he said. But he also warned, "significant problems cannot be ruled out in the period ahead."
"We are attentive to the possibility that this more cautious stance in the granting of credit could cumulate to threaten the expansion."