S L Bailout

The House passed and sent to conference with the Senate a bill (HR 1340) providing $18.3 billion for completing the savings-and-loan bailout. The Resolution Trust Corp. (RTC) would use the money to dispose of 80 bankrupt thrifts it is now keeping open. This brings to about $105 billion the appropriations approved by Congress since 1989 to reimburse lost deposits at more than 700 failed thrifts.

L. William Seidman, chairman of the Federal Deposit Insurance Corporation, said Monday that the S&L bailout probably will end up costing "much in excess of" $500 billion--partly because the recent slump in the real estate market will push more thrifts over the financial edge. Seidman's figures, provided during a television interview, are the highest estimate by any government official so far of the total cost of the S&L rescue effort. Private forecasters have been using such figures for months.

A former top thrift regulator predicted on Friday that the eventual cost of the savings and loan bailout could rise to $1 trillion unless swift action is taken in Washington to halt the hemorrhaging suffered by ailing institutions. "We're talking about a $500-billion problem as of today and I think it could well turn out to be a $1-trillion problem if we don't get some kind of political will and courage in the Congress to stop the losses," former Federal Home Loan Bank Board Chairman Edwin J.

The savings and loan industry bailout bill moving through Congress is likely to cost $20 billion to $50 billion more than the Bush Administration plans to spend to help clean up the most expensive financial disaster in U.S. history, experts say. The Bush plan provides $50 billion initially to dispose of all the S&Ls that now are insolvent and more that are expected to fail in the next three years. However, experts on Capitol Hill and in the banking industry say that the Administration's idea is too optimistic.

A combination of 16 minority, homeless and other groups, calling itself the "Greenlining Coalition," demanded on Wednesday that any savings and loan bailout "be linked to a homeless bailout." It is the same position supported by Housing and Urban Development Secretary Jack Kemp, said coalition chief spokesman attorney Robert L. Gnaizda of Public Advocates.

The final cost to taxpayers of the savings and loan bailout may reach $600 billion, Federal Deposit Insurance Corp. Chairman L. William Seidman indicated Saturday in an interview. Seidman, who also is chairman of the Resolution Trust Corp., said on the CNN television program "Evans and Novak" that the costs would swell because of interest paid on money borrowed to finance the bailout.

Resolution Trust Corp., faced with a limited pool of outside talent to help clean up the savings and loan mess, has bent its ethics rules to do business with some companies. The RTC, the federal agency responsible for disposing of hundreds of collapsed S&Ls, is signing on about 1,000 new contractors a week and could soon rival the Defense Department as a lucrative source of government contracts.

House members have flooded the Rules Committee with more than 100 proposed amendments to savings and loan bailout legislation, dimming the chances of floor action this week. The Bush Administration, which announced its S&L proposal on Feb. 6 and challenged Congress to act within 45 days, has shown increasing impatience with the pace of action in the House. The Rules Committee, chaired by Rep. Joe Moakley of Massachusetts, the ranking Democrat after the death last week of former chairman Claude Pepper, is scheduled to consider the S&L legislation today.

The House Banking Committee, after a marathon 14-hour session, voted Tuesday for a sweeping savings and loan rescue package that includes tough financial standards for S&Ls and new housing opportunities for poor people. The committee voted 49-2 to approve the biggest financial bailout ever, a $157-billion expenditure to restore the federal insurance fund that protects deposits up to $100,000. Only two members of the committee, Democrat Joseph Kennedy of Massachusetts and Republican Jim Leach of Iowa, voted against the measure, which had the enthusiastic support of the Bush Administration.

The General Accounting Office warned on Monday that the Resolution Trust Corp., the federal agency overseeing the savings and loan bailout, is understaffed and too heavily dependent on lawyers and consultants, making it vulnerable to fraud and abuse.