WASHINGTON — President Bush, declaring that Americans "have every right to be disturbed and shocked" by the savings and loan crisis, Wednesday called for the House to pass a bill forcing thrift owners to supply billions of dollars in additional capital for their businesses.
Top officials of both parties conferred at the White House with Bush and predicted that the House will vote this week to give the President the S&L rescue legislation he wants.
Thumping his hand on the table in the Cabinet room as he opened the meeting with congressional leaders, the President said, "In my view, it is time for the American public and our Administration to say that enough is enough and to earnestly ask for the support of the Congress."
The parade of prominent congressmen to the White House, combined with the President's strong statement, was designed to neutralize a revolt among Republican House members, who are being lobbied hard by the S&L industry. Many of the Republicans are sympathetic to the arguments of some S&Ls that want to count goodwill as part of their capital rather than raise additional funds as the financial foundation for their business.
S&Ls that acquired failing thrifts in the early 1980s were given goodwill certificates by federal regulators. The goodwill, which is the intangible value of a business beyond the cash and physical assets, can be counted in these cases as capital for regulatory purposes.
But the House Banking Committee approved a bill requiring S&L owners to put up real capital, $3 in cash for every $100 in loans made by the institution. The use of goodwill to help achieve the 3% standard would be phased out and would be barred by 1995.
The President and many members of Congress favor this standard, arguing that S&L owners are less likely to make risky loans if they must furnish more of their own money to the thrift institution.
"Now, some of the smaller--or the weaker, I would say--S&Ls are demanding the right to continue to treat goodwill as capital, even though goodwill has no tangible value," the President said.
The S&L industry now counts as capital about $20 billion in goodwill. The President said this would result in as much as $600 billion in loans "without one dollar in real capital for decades to come."
The President underlined the urgency of quick passage of the S&L legislation, which would provide $157 billion over 10 years to close or sell crippled thrifts and pay off depositors, whose accounts are insured up to $100,000.
"I think that every American citizen has every right in the world to be disturbed and shocked by this situation," he said.
"I wanted you to know how strongly I feel about it," Bush said. "I have a certain sense of obligation to the American people to get legislation through that is going to protect the people against the abuses of the past and to fix it once and for all."
It is costing about $10 million, the President said, "for every day that action is not taken."
The House began consideration Wednesday of the S&L package, with 15 amendments up for debate, including a proposal to ease the capital standards. House Speaker Thomas S. Foley (D-Wash.) told the President, "There'll be a strong bill from the House."
The Senate already has passed a similar bill favored by the Administration.
"It seems to me it's sort of a time bomb that might go off one of these days unless we have a very strong piece of legislation, stripped of all the special-interest amendments, and knock out the goodwill wherever you can," said Senate Minority Leader Robert Dole (R-Kan.).
"There isn't much goodwill for S&Ls," Dole said, drawing laughter. "Most of the people have been taken for a ride long enough."
Talking to reporters in the White House driveway after the meeting, Senate Banking Committee Chairman Donald W. Riegle Jr. (D-Mich.) said the President was "exactly right in making a very strong stand for . . . (tough) capital standards."
House Majority Leader Richard A. Gephardt (D-Mo.) predicted that the House will demonstrate "bipartisan support" for the Administration's position on capital rules. The minority whip, Rep. Newt Gingrich (R-Ga.), also predicted support from both parties for the President, and welcomed Bush's strong statements on the eve of the voting.
"It's helpful to have the President step up to the plate and take a swing at the ball," Gingrich said. Meanwhile, the President sent a letter to House members asking for their support.
In the House, the S&L industry continued a heavy lobbying drive on the goodwill issue.
"There's a heck of a campaign going on," said Rep. Chalmers P. Wylie (R-Ohio), the ranking Republican on the House Banking Committee and a strong supporter of the Administration.
The U.S. League of Savings Institutions, a major trade association, "has someone in today from nearly everybody's district working it," Wylie said.