WASHINGTON — The House, in a surprise move, voted Thursday to reject any attempts by the Senate to give special breaks to individual companies as part of the sweeping savings and loan rescue legislation.
The Senate bill includes carefully crafted amendments on behalf of Columbia Savings & Loan, First Interstate, Sears, Merrill Lynch, Paine Webber, Chemical Bank and other firms. Generally, these amendments provide relief for these firms from the rules and standards of the legislation.
However, House members had become convinced that the public would become angry over favored treatment for a handul of institutions in a bill that will become the biggest bailout in history, costing nearly $300 billion over 30 years. The taxpayers will shoulder about 70% of the financial burden to close hundreds of crippled S&Ls and pay off their depositors, whose accounts are guaranteed by the federal government up to $100,000. The House stripped all special-interest provisions from its version of the S&L bill, approved last week. But the Senate bill is replete with these amendments, and many could have been expected to survive in the House-Senate conference that will craft a final version to be sent to President Bush. On Thursday, the House by voice vote instructed its members at the conference to refuse to accept any special-interest provisions offered by the Senate. The instruction is a signal to the Senate that the House won't compromise.
The motion, by Rep. Chalmers Wylie (R-Ohio), ranking Republican on the House Banking Committee, enjoyed bipartisan support.
The provisions benefiting specific firms are "superfluous baggage" that should be "dispensed with in this important legislation," said Rep. Henry Gonzalez (D-Tex.), Banking Committee chairman and leader of the conferees.
House members working on the issue had been unable to get from the Senate a complete list of the special-interest provisions and the particular companies involved.
Earlier in the day, the conferees met formally for the first time on the S&L bill, agreed the issue must be handled quickly and then adjourned until July 11.
The conference won't meet formally because the Senate has two weeks of recess on its schedule, which could add as much as $500 million to the cost of the rescue package.
The insurance fund is insolvent, lacking the cash needed to dispose of S&Ls that continue to lose money. Private experts and members of Congress have estimated that the industry's losses are mounting by $1 billion a month. "The sense of urgency must be maintained," Gonzalez said. "I feel this is really a race against time."
Other conferees from the House and Senate agreed, but no effort was made to change the Senate's previously scheduled recess.
Until the conference resumes, staff members will discuss the easily compromised issues in the two massive bills and prepare documents for their bosses.
The key issues in the conference, Gonzalez said, will be the capital standards, which govern the amount of cash that must be contributed to S&Ls by their owners, and the handling of the legislation for federal budget purposes.
The House bill has the toughest capital standards, requiring that S&L owners furnish $3 in cash for every $100 in loans made by the financial institution. Goodwill, the value of an institution beyond its financial and physical assets, may now be counted toward the 3% standard. But goodwill must be eliminated by 1995 and replaced by cash. The Senate bill, by contrast, allows S&Ls to write off the value of goodwill over 25 years. The S&L owners would be required to raise billions of dollars in cash to replace goodwill. Institutions unable to meet the standard would be restricted from growing and would come under close regulatory supervision. The S&L industry fears that several hundred S&Ls would disappear through sale or merger if they cannot comply with the strict standards in the House bill.
Gonzalez predicted that lobbying from the industry would be "unremitting" in trying to persuade the conferees to adopt a standard less stringent than the House version.