Aug. 4--Miami native Kenneth H. Thomas relishes his time relaxing at his Pinecrest home with his sidekick, Chevy, a 13-year-old Italian shepherd that keeps close by his side. Or fishing in the Florida Keys. But those opportunities can be rare.

Much of the time, Thomas, a nationally known banking expert, is traveling, often to Philadelphia to lecture at The Wharton School of the University of Pennsylvania, where he got his doctorate in finance. That puts him among the top-tier of frequent flyers at US Airways.

Thomas, 60, has logged four trips to China in the past year or so as part of his teaching. He also spends a lot of time on the road as a consultant for banks, especially for those that need help with the federal Community Reinvestment Act. He has written books on the act, which mandates that banks address the credit needs of the local communities they serve, including the needs of low-income groups.

Most recently, he is pushing to have the Community Reinvestment Act extended to cover investment banks, since the federal government, in a bid to stabilize jittery markets, recently authorized those institutions to borrow from the Federal Reserve's discount window, just like commercial banks are able to do.

He also is preparing to debate those who attempt to pin blame for the current banking crisis on CRA requirements that banks help meet the needs of lower-income groups in their communities.

"CRA did not get us into this mess. What got us into this mess is just bad bankers," Thomas said. "There are a lot of banks out there with very good CRA ratings that are very profitable, because of good underwriting. CRA does not cause banks to fail. It's bad bankers who cause banks to fail."

In a recent interview, Thomas, a trim man with bushy black eyebrows and a ready smile, weighed in on the state of the banking industry and the economy.

Q: When will the housing market begin to turn around?

A: I don't think the market will improve in terms of normal price appreciation until perhaps two or three years, which could be the end of 2010, maybe 2011. I don't think we're going to really have a turnaround any time soon.

We have a situation now where we have a lot of excess supply inventory in the market and where demand has fallen quite a bit. And, of course, it doesn't help to have a credit crunch, where demand falls even more, because even if you like a house you can't get a mortgage to get into one. So until supply and demand becomes more equal, we will have this continued overhang in the market.

Q: Are the U.S. banks worse off now than during the savings and loan crisis or the Third World debt crisis?

A: I think, overall, they're probably in better shape. Because during the S&L crisis we had many thrifts, including many here in South Florida, that had little or no capital. In fact, some of them had negative capital. We have nothing like that now.

Certainly some banks need more capital. And certainly many banks have a significant amount of problem loans, and they'll need more reserves for those. But overall banks are in better shape than they were back then. There are some individual banks that have significant problems. But overall, what we had before -- hundreds of problem banks resulting in hundreds of failures a year in the '89 to '91 period -- we don't have that now.

Q: What's the main thing the average depositor or banking customer needs to know about a bank?

A: The main thing is that there is the FDIC sticker in the window and that they can have full confidence that the full faith and credit of the U.S. government is behind the FDIC up to the limits, which is $100,000 for individual accounts and $250,000 for retirement accounts. Secondarily, things like convenience, interest rates and other factors are important, [such as] 'Can I get a loan from that bank if I need it?'

Q: Do you see more regulation ahead for financial institutions, and is that good?

A: We are entering an era of what we call re-regulation. First we had regulation, then deregulation, and then we're going more into a re-regulated environment. It started with the problems with Enron and WorldCom, with Sarbanes-Oxley, and of course with the recent subprime crisis and the bailout of Bear Stearns, [problems with] Fannie Mae and Freddie Mac.

Increased government intervention is really the price that is paid for government assistance on these deals. In short, I see more government regulation. Is it a good thing? Not necessarily. Because I would prefer that markets regulate, rather than the government. But there are cases where we need government regulation when markets fail, and we've seen many market failures in the last year or so.

Q: Who is to blame for the current banking woes?

A: When we do the postmortem in a few years, the way we did with the S&L crisis, I'm certain we'll conclude that there were many factors. In my belief, chief among them will be the fact that former Fed Chairman Alan Greenspan kept rates too low for too long. And it may very well be he was inordinately influenced by the White House -- based on my analysis of his very frequent visits there. But we don't really know that. But I would say the fact is the punch bowl was left out too long.

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