When President Bush announced his savings and loan depositors' bailout plan last week, Treasury Secretary Nicholas Brady referred to "Dan Wall's excellent leadership" in dealing with $40 billion of the problem during 1988.
Those comments concerning former Utahn M. Danny Wall were just about the only words of praise for anyone involved in the savings and loan disaster.Wall, a former Salt Lake City redevelopment director, was named chairman of the Federal Home Loan bank board in mid-1987. He had served as Republican staff director of the Senate Banking Committee under Sen. Jake Garn, R-Utah, for more than eight years.
Wall worked on the Hill with the wobbly congressional efforts to deal with the failing thrift institutions. Then, 18 months ago, he stepped into the cauldron of billion-dollar failures and political fault-finding. From the reasonably quiet offices of a Senate committee on the fifth floor of the Dirksen Building, Wall has gone to the chairman's suite at the FHLBB, across the street from the White House, where early morning appearances on nationwide television have become a routine part of the job.
Now, under the Bush administration's plan, Wall is to become the single chairman of the Federal Home Loan Bank System, his two fellow commissioners' jobs are to be abolished, and his agency, if Congress agrees, will become part of the Treasury Department.
The challenge is immense. Brady estimated the overall cost of buying, reorganizing or closing more than 500 savings and loan companies, which have failed or are failed but still operating, will come to $90 billion.
Wall is the second Utahn to move from Salt lake City to head a federal bank insurance agency. Twenty years ago Kay Randall, who headed a small Utah bank, was recommended by then Sen. Wallace F. Bennett, R-Utah, to chair the Federal Deposit Insurance Corp., which insures commercial bank deposits, a counterpart to the FHLBB's Federal Savings and Loan Insurance Corp. Bennett, like Garn, was a ranking member of the Senate Banking Committee.
Randall, who served at a time of relative quiet in the banking industry, went on to head a major bank in Richmond, Va., and later the Conference Board.
Wall's path to the top went through South Dakota, where he headed the Fargo Urban Renewal Agency for seven years. Born in South Dakota in 1939, Wall graduated from North Dakota University in 1963 with a degree in architecture. He subsequently took graduate courses in planning and public administration at the University of Minnesota, the University of Utah, the John F. Kennedy School at Harvard, and the Hoover Institution at Stanford.
In 1971, when Salt Lake City first organized an urban renewal agency to handle financing of the Salt Palace, federal housing officials in Denver recommended Wall to Salt Lake Commissioner George Catmull, then in charge of garbage collection and urban development. Catmull hired Wall on the phone and brought him to Utah. Shortly after he arrived, Water Commissioner Jake Garn won election as mayor, and, four years later, went to Washington as a senator, taking Wall along as director of legislation. In 1979 he moved to the Banking Committee when Garn became a senior member there.
As he moves to deal with the failing thrifts, Wall sees himself as neither a technician, adept only at mastering the arcane details of financial institutions, nor political deal-maker, putting together a package that will "fly on the Hill." As an architect and planner, he will plan and then build a structure that will allow the government to put insured thrifts on a sound basis for the depositors, whether by taking them over, paying the depositors and closing them, or by merging them into strong institutions in such a way that the deposits will be protected and the stronger thrift can survive.
The failings that brought the thrift industry close to collapse have many roots, Wall told the Deseret News last week. In the very beginning, when Sen. Carter Glass wrote the FDIC/FSLIC acts in 1934 the rate for deposit insurance was set at one quarter of one percent of deposits as sufficient to cover ordinary losses. Within a year however, Congress cut that rate in half, to an eighth of one percent. It stayed at that level for nearly half a century until it was recently raised to 23/100 of one percent.
"The surprising thing is that these premiums covered insured deposits for so long," Wall said.
Despite the extremely low deposit insurance premiums, FSLIC covered all losses until the oil boom and bust hit the southwest in the early 1980s. That bust was made worse by unfortunate federal deregulation, engendered by high interest rates during the Carter Administration. Suddenly, thrifts whose loans were all five, six and seven percent home mortgages were in trouble. Interest rates skyrocketed and depositors drew their money out of accounts where the federal interest ceiling was five percent.
Congress lifted the interest rate ceiling and allowed savings and loans to invest in higher-paying, but more risky, shopping centers and commercial buildings.