WASHINGTON -- The cost of the savings and loan cleanup will rise $350 million by year's end because Congress' failure to provide additional funds makes it impossible for regulators to sell money-losing thrifts, the Resolution Trust Corp. said yesterday.
The bill could grow to $900 million if the delay in funding continues well into the first three months of next year, after Congress returns from its recess, according to an RTC spokesman, Stephen Katsanos.
The agency had 18 S&Ls with assets of $30 billion ready to sell at the end of last month but could not afford to arrange any deals, Mr. Katsanos said. Whenever an insolvent S&L is sold, the RTC must provide funds to protect the depositors by covering the difference between the deposits and the value of the thrift's assets.
But Representative Henry B. Gonzalez, D-Texas, chairman of the House Banking Committee, insisted that the RTC has enough temporary borrowing authority to get the money it needs to sell insolvent thrifts.
A skeptical Congress would not furnish further funds because of "widespread concern" about the cost of the S&L bailout and the "manner in which the program is being administered," Mr. Gonzalez said yesterday.
But Mr. Katsanos said that the Treasury is uncertain whether it is legal for the RTC to borrow money for this purpose.
Mr. Gonzalez also chastised the Bush administration for staying on the sidelines while the battle for funding was taking place. "There was absolutely no evidence that anyone in the administration turned a hand to help us gain support in the closing hours of the session."
The Senate Finance Committee had voted for $57 billion to fund the RTC for the full fiscal year, while the House Banking Committee approved a $10 billion measure. Advocates of funding failed Saturday night in efforts to win passage of any additional funding for the RTC.
The bill for closing or selling hundreds of insolvent thrifts may range up to $132 billion, according to the administration's most recent estimate. This figure does not include the future cost of interest on the bonds used to finance the cleanup.
With the price tag running for far above the $50 billion voted by Congress in 1989, many legislators have become concerned about granting additional funds.
"In 1989 when we struggled with the administration's bailout package, there was active daily support from the president and his Cabinet officers," Mr. Gonzalez said. "This time -- nothing," he said, referring to the abortive effort to get funding as Congress completed the massive budget-deficit reduction package.
The price tag for the shutdown rises when insolvent institutions stay in business. Each day, these crippled thrifts spend more on operating costs and interest payments than they collect on their assets. Often the assets include real estate loans far behind in payments, or in foreclosure.
The RTC has virtually exhausted its working capital and cannot advertise new S&L sales "until Congress returns and approves the money," Mr. Katsanos said.
After completing the current round of deals, which involve 65 S&Ls with total deposits of less than $10 billion, "the pipeline will be dry," he said.
The RTC fills the financial hole when an S&L is sold, providing the institution with enough funds to protect the depositors. Eventually, the government will recover a portion of this money when it sells some of the assets from the failed institutions.