Regulator: Bank Failures Won’t Harm Economy : Finance: The acting FDIC chairman reassured Clinton advisers that some troubled institutions may attract new capital and avoid insolvency.

The acting chairman of the Federal Deposit Insurance Corp. said Monday that he has assured the Clinton transition team that bank failures anticipated next month will not jolt the economy.

Andrew C. Hove Jr., who took over at the FDIC after the death of Chairman William Taylor in August, said he told a senior Clinton adviser that about 40 banks with $10 billion to $15 billion in assets could be subject to seizure starting Dec. 19. That’s the effective date of a new law giving regulators power to take over weak banks before they actually lapse into insolvency.

Speaking to reporters covering the annual convention of the Savings & Community Bankers of America in San Diego, Hove said he told the Clinton team that some of those banks may be able to attract new capital from investors and stave off seizure.

“They were reassured,” he said. “There will be some failures but it’s not something that is going to destroy the economy.”

Hove, a former Nebraska banker and a Republican, also said he would be willing to remain on the five-member board even if Clinton appoints a new chairman. The terms of all board seats expire in February. By law, only three can be of the same party as the President.

“If the President were to ask me to stay, I would stay. However, that’s his choice,” Hove said.

Little is known about the precise changes in banking policy that Clinton might push, but Hove said he believed that Clinton recognized that the crackdown on banks and savings institutions after the savings and loan debacle has gone too far and is discouraging lending needed to revive the economy.

“It is my sense that there is an interest both in the Congress and in the new Clinton Administration to take a look at how heavy this (regulatory) burden is . . . and I’m optimistic that they will perhaps relieve some of it,” he said.

Timothy Ryan, who is resigning next month after 2 1/2 years as director of the Office of Thrift Supervision, said despite repeated pleadings from the Bush Administration, bank and thrift examiners are still being too strict.

The memory of examiners, unused to the public spotlight, being forced to explain their actions to congressional committees is still fresh, he said.

“This created a climate of fear, and fear produced overly restrictive supervision” that reduced credit availability, he said.

To encourage new lending, Ryan advocates that banks and thrifts be given more time to write off previous commercial real estate loans that have soured.

However, Robert T. Parry, president of the Federal Reserve Bank of San Francisco, said banks and thrifts are willing to lend, but borrowers don’t want the money because business activity is sluggish.

“There’s not a great deal that should be done about it. . . . If the economy does perk up, I think there will be less of a reluctance to borrow,” he said.

He predicted that economic growth would pick up from sluggish this year to moderate, with the gross domestic product growing at a 3% annual rate in 1993.

Nevertheless, the core rate of inflation, excluding volatile food and energy prices, should decline from 4.5% in 1991 to 3% this year to 2.5% next year, he predicted.