An interview with Congressman Bill Orton: Utah's freshman congressman tackles banking reform.

• Author: Bullinger, Cara M.
• Position: Interview

AN INTERVIEW WITH CONGRESSMAN BILL ORTON

Utah's Freshman Congressman Tackles Banking Reform

Congressman Bill Orton, D-Utah, serves as the representative from Utah's Third Congressional District. Orton graduated from the Brigham Young University Law School in 1980. He established a reputation as a tax attorney with clients across the country and by teaching tax seminars nationwide. Orton was born and raised in Odgen, Utah. He is one of eleven freshman congressmen to serve on the Banking Committee. UB: Looking at the history of the S&L industry and the current banking crisis, do you think both industries should have been unregulated from the beginning and forced to remain viable under free-market conditions? Orton: That's a basic philosophical question there probably isn't an answer to. You can make all kinds of arguments on the whys and hows of a free-market system that should prevent taxpayers from having to bail out banks when they fail. On the other hand, you have an interest in a sound, progressing economy. If everyone makes a run on the bank and pulls his or her money out, if money has no value, or if currency is at a high rate of inflation, you cannot have a secure economy.

The way we ensure that we have a stable economy is by ensuring that we will have stable financial institutions. So the government made the determination that it is in the taxpayer's best interest to have a stable economy. The most reasonable and certain means of doing that was to guarantee financial institutions and deposits.

The government, however, is not guaranteeing investors. If someone owns the bank, puts up capital in the bank, or owns the stock in the banking corporation, the federal government doesn't pay them back for the money they lost. The only thing that's guaranteed are the deposits made into that bank.

So now if we're going to have the government guarantee deposits, your next question becomes, "Is it valid for government to regulate what banks can do with that guaranteed money?" What we have done by licensing banks and guaranteeing the deposits is we have told the bankers they can go out and offer to pay people a certain percentage interest to receive their deposits, and they can take those deposits and invest them--but if the bankers lose the deposits, they don't have to pay the loss. The government will.

Now the question is if the taxpayer is carrying the burden of that loss, should the government tell the bank where they can invest the money? Or should the government say they can go do anything they want with it? Should the government say banks can only use the depositor's guaranteed money for those things which the government determines are the least risky or the most beneficial to the economy, the greatest good for the public? UB: In some opinions, the S&Ls were basically a defunct institution by the 1970s. In your opinion, did deregulation come too late? Orton: Yes, the S&Ls were bankrupt by the late 1970s. With 100 percent hindsight, deregulation probably was a bad idea, and it was a solution that didn't work. The whole question is when it became evident that the S&L industry was insolvent, whether we should have deregulated it in hopes that it could attract new capital, invest in more risky but more profitable activities, and grow out of it.

It was clearly a bad idea because the combination of federal deregulation, separate state deregulation...