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The S & L bailout bill: making the AICPA's voice heard.


Washington pundits have said for years that one shouldn't watch sausages or laws being made. The American Institute of CPAs Washington office did watch as the massive savings and loan bailout bill moved through Congress. And precisely because the AICPAA kept a close eye on the process, the S&L bill contains less onerous ingredients, making it more palatable to the accounting profession.

The Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) is very long and complex--it's probably fair to say most members of Congress haven't read its entire 700-plus pages--and some of its initial provisions were not very appetizing.

Moreover, several provisions in earlier Senate and House bills could have adversely affected the accounting profession. For example, as originally drafted the section of the bill that expanded the bank regulators' enforcement arm to impose penalties on accountants, attorneys, real estate appraisers and others was onerous. The efforts of the AICPA Washington office, state CPA societies and CPA firms led to a significant and appropriate modification of that provision--namely, inclusion of a "knowingly and recklessly" test (see "institution-affiliated party" below). Further, a provision in the Senate bill eliminating certain defenses properly available to defendants in lawsuits brought by federal regulators against certain individuals--including accountants--was dropped from the final bill.

Competing audit provisions also consumed much of the profession's efforts. The AICPA strongly opposed the Senate version, which would have provided federal regulators with legislative authority to prescribe rules and regulations governing applicable auditing standards and to select the thrift's auditor. (The initial proposal was even more drastic, requiring the institution to withhold payment of the audit fee until the regulator "accepted" the audit.) The House version included a General Accounting Office proposal that called for an "expanded" scope audit of all federally insured institutions.

Given both the Senate and House audit provisions, the AICPA preferred the House version. But the banking community did not. In the final analysis, the Senate and House conferees decided to drop both audit provisions.

In the final stages of the legislative process, two issues threatened the survival of the bill:

* Whether Federal Home Loan Bank Board (FHLBB) Chairman M. Danny Wall could transfer to the position of director of the newly formed Office of Thrift Supervision (OTS) without reappointment by the Senate.

* Whether the billions of taxpayer dollars needed to pay for the bailout should be "on budget" or "off budget."

Even though placing the financing of the bailout on the federal budget would have saved an estimated $3 billion in interest expense, a compromise was reached--Wall became the OTS director without reappointment, and the cost of the bailout is partially on the budget and partially off.

Legislation should be watched. By doing so, the profession did make a difference, and it will continue such scrutiny in the future.

Joseph F. Moraglio, CPA,

vice-president of the AICPA

federal government division
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Article Details
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Author:Moraglio, Joseph F.
Publication:Journal of Accountancy
Date:Dec 1, 1989
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