By a vote of 201 to 175, the House sent to President Bush legislation (HR 1278) designed to bail the thrift industry and the federal government out of the financial calamity caused by thecollapse of hundreds of savings and loans in the 1980s. The Senate had passed the bill on a non-record vote.
The first phase of the S&L salvage will be for the government to borrow $50 billion primarily for closing or merging troubled thrifts and meeting federal reimbursement obligations to those who lost billions in U.S.-insured deposits. About $20 billion will be incurred by Treasury borrowing and included in the fiscal 1989 budget. The remaining $30 billion will be borrowed by a new government-chartered corporation but will not be counted on the budget nor tallied as part of the federal debt.
Although the thrift industry will have to repay the $50 billion principal, taxpayers will be required to pay borrowing costs. Conservative estimates are that the total bailout will cost at least $160 billion, including debt service over 30 years with the average taxpayer supplying $1,000 of the amount. Other estimates double those projected costs.
Supporter Chalmers Wylie (R-Ohio) said: "We are not bailing out S&Ls. We are not bailing out their stockholders or their managers. We are delivering on our promise that the federal government stands behind the safety and the life savings of millions of Americans."