By CRAIG SANDERS

IT DIDN'T take Bill Schilling long to learn what goes with being a government regulator. He had scarcely settled into his job as Illinois Commissioner of Savings and Loans last fall when a number of savings and loan presidents stopped by his Chicago office to complain about the overabundance of laws and regulations governing their industry. Worse yet, that industry was sailing into stormy times after nearly two years of relative calm and prosperous waters.

The work of the 32-person Office of the Commissioner of Savings and Loans, with a budget of just over one million dollars, rarely attracts newspaper headlines. The commissioner has the power to step in and take over a financially troubled institution, but Schilling said the recent takeover of the Washington Federal institution in Cleveland was the first takeover — state or federal — since 1970.

The main job of his agency is to constantly monitor the financial stability of the 230 state-chartered savings and loans in Illinois. If trouble is spotted, Schilling's office works with the institution to solve the problem. On-site field inspections are conducted at each institution by one or more of 14 investigators at least every 18 months and usually every 13 months, Schilling said. The inspections are conducted jointly with the Federal Home Loan Bank because almost all state-chartered institutions are insured by the federal government. State institutions also file monthly reports with Schilling's office, and special reports are required for certain types of loans.

The savings and loan industry that Schilling regulates is weathering a very difficult time. Home mortgage rates have skyrocketed and forced many prospective home buyers out of the market. Interest rates on money market investments have shaken the traditional family savings plans at the institutions. The result is uncertainty and very tight money.

Schilling doesn't believe that savings and loans will leave interest rates at their high levels. He said it's a competitive industry, and "as all the other rates are coming down, mortgage rates are coming down too. The industry, as far as I can see, is not being irresponsible."

Right now, "It's not neccesarily a situation where savings and loans don't want to lend money; in some cases it's a situation where homeowners simply aren't interested in taking a loan out at the current rates."

While it is also true that the inflation cycle gripping the country has led to a slowdown in savings deposits, Schilling said a recession should help ease that problem, and he admits the country is in a recession. During a recession, according to Schilling, savers normally deposit more money. Although it is too early to see a trend, Schilling said savings are beginning to increase.

The institutions themselves entered the recession in rather good condition, according to Schilling. They had built up healthy reserves and profit margins during the good times earlier.

There are 230 state-chartered savings and loan associations in Illinois. There are also 135 federally chartered institutions, which Schilling's office does not regulate. Although the state institutions outnumber the federal ones, total assets of the federal institutions are greater — $27 billion in federal institutions compared to about $19 billion in state institutions.

Both state and federal savings and loans conduct the same type of business, but Schilling said there are differences between state and federal regulations, the most significant of which is the ability of the federals to branch. The state institutions cannot. Because of the no-branching restriction for state-chartered savings and loans, there is a trend in Illinois for state institutions to convert to federal institutions, Schilling said. A state institution can open a branch through the costly and time-consuming process of relocating its main office to a new facility and then retaining its former main office as a "branch." The only other way to create a branch savings and loan under state law is for one or more institutions to merge and then operate facilities at all original locations. On the other hand, a federal savings and loan can open a branch office without much problem. An application must be filed

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in Washington with the Federal Home Loan Bank Board, and Schilling said such applications are generally approved quickly.

At one time state institutions had the advantage over federal institutions. State institutions could offer non-interest bearing accounts — similar to a checking account at a bank — while the federals could not. Now, in order to compete with the federal institutions, many state savings and loans tend to be service corporations, offering diversified services to attract customers. In addition to loans, they offer services ranging from insurance to travel arrangements.

The institutions entered the recession in rather good condition - with healthy reserves land profit margins

Schilling, a native of Mattoon, was named commissioner of savings and loans in October 1979 by Gov. James R. Thompson to fill the remainder of the term of Timothy E. Griffin, an appointee of former Gov. Daniel Walker. Griffin resigned from the position. Schilling is expected to be reappointed when the term expires in July, and upon Senate confirmation, would have a full five-year term to serve. The position of commissioner was established with a five-year term designed to overlap administrations. The intent was to create a "relatively apolitical" position, yet Schilling is the seventh commissioner since the post was created in 1965. "Theoretically," said Schiller, "the commissioner could say, 'Go away, governor, don't bother me.'"

As commissioner of savings and loans, Schilling enforces the state statutes regulating savings and loans. But an institution which disagrees with a ruling by Schiller can file a grievance and have a hearing before the Illinois Savings and Loan Board, whose members are appointed by the governor, but terms are overlapping.

There's little likelihood, however, that Schilling will be at odds with the Thompson administration. Although he put off Thompson's initial call for joining the 1975 gubernatorial campaign, Schilling accepted a second offer after he had finished a full three years as an executive assistant U.S. attorney in Chicago. Schilling was scheduling manager for Thompson's campaign and later served on the governor's transition team. Among other duties, he handled the administration's response to emergencies caused by the severe winter of 1977 and the Nazi march in Skokie. And Schilling loved the work. "But," said Schilling, "I had no intention of hitching my wagon to his [Thompson's] star." Then only 32 years old, Schilling said, "It was time for me to determine professionally where I wanted to be when I was 50." One of those things he wanted to do was to head a state agency.

At first, Thompson appointed Schilling assistant director of the Department of Financial Institutions, and then, last October, Thompson appointed him commissioner of savings and loans.

Schilling said his first goal as commissioner was to reduce the paperwork. He demands that the industry convince him that a regulation, form or procedure is unnecessary before he will eliminate it. He considers his number one responsibility to be the protection of depositors not the mortgage money supply or institutional profits. "The first thing I have to think about is the savings of the citizens of the State of Illinois," Schilling said.

But, he added, he can understand how some institutions think there is unnecessary paperwork. "As a regulator, we tend to deal with the troubled parts of the industry — institutions that have gone sour, done things illegal or otherwise gotten into trouble," Schilling said. If some problem area is identified in one institution, it is necessary to question every institution in case they might be heading for the same problems. Filling out such forms is a "nuisance" to the institutions that don't have the problem, "but it's important to find out who else might get into trouble," said Schilling.

How to respond to the nation's pent up demand for housing in a time of recession and tight money: that is the challenge for savings and loans today. The state can help, but there is a limit to what it can do. For instance, state Treasurer Jerome Cosentino recently committed $50 million in state deposits in Illinois financial institutions to spur lower mortgage rates on single-family homes started in 1979 and never occupied. Savings and loans are involved in the program but are at a disadvantage compared to banks because insurance regulations limit the state deposit to $300,000 per savings and loan institution.

Craig Sanders is a reporter for the Mattoon Journal Gazette.

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