A regulation making it possible for savings and loan institutions to finance automobile leases has been issued by the Federal Home Loan Bank Board. The regulation became final on January 14 as number 81-584 in the Federal Register.

Earlier AUTOMOTIVE FLEET re­ ported that regulations and legislation that would allow these institutions to engage in some forms of leasing arrangements were pending. Under regulatory procedure, the Federal Home Loan Bank Board issues a proposal for a rule change, and then allows comments pro and con on the recommendation. "Usually the Board's comment period runs from 60 to 90 days, and then our staff will analyze the comments for an indefinite length of time," explained John Ghizzoni of the Board's Office of General Counsel. "Following the comment period, our staff found that the response to this proposal was quite favorable, so we placed it on our agenda as a final regulation."

The change will affect about 4000 savings and loan associations governed by the FHLBB, an independent agency within the Executive Branch. Ninety-eight percent of all saving and loan associations' deposits are insured by the Federal Savings and Loan Corporation, which is directed by the FFILBB.

The consensus of officials in Congress, which has veto power over regulatory decisions should it choose to exercise that power has been favor­ able, too, which means that the regulation will likely stand. Daniel Wall, staff director for the Senate Banking Committee, explains: "The favorable response to the Bank Board's action gives the indication that the time was proper for legislation" erasing these restrictions on S&Ls anyway.

The response to the changes by the institutions themselves has been enthusiastic, and should signal an immediate entry into the leasing market. Dean Cannon, executive vice president of the California Savings and Loan League, whose 190 institutions ac-said, "Most of our members will welcome this opportunity as a new means of financing in the relatively short term, which we need." Blair Holman, a 23-year industry veteran who is currently vice president in charge of consumer loans at California Federal Savings and Loan Association in the huge car market of Los Angeles, agrees. The new rule, he said, "offers us an opportunity to expand into a growing area in the short-term money arena. Obviously, it's another kind of leverage in that market that we haven't had before."

If the thrift institutions are correct, the business they will take will be from existing or new business that banks and leasing companies enjoy. "Our market rates, I think, will be favorable compared to what banks are offering," Cannon said. The only hedge on Cannon's optimism is that a time frame may be needed for adjustment. "It may take some time to adjust because this type of financing requires an expertise that some institutions may not have," he said.

Another factor in the rule's impact may be the rumors surrounding the lower of new-car prices by the auto makers. If that occurs, it is possible that the residual value of used cars will level off or fall in relation to the new cars' prices. Traditional leasing firms as well as the banks might then find themselves forced to relinquish some of their market share to those eager aspirants among the ranks of the savings and loan associations.

If these assessments prove to be correct, the lessee can look forward to lower finance rates, and the savings and loan institutions can find the road to their economic comeback a little smoother.

 

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