WASHINGTON -- Congress needs to provide an additional $80 billion for the savings and loan bailout and overhaul the Resolution Trust Corp., which directs it, RTC Chairman L. William Seidman told the Senate Banking Committee yesterday.
Amid rising congressional outrage at the rising cost of the bailout and allegations of bureaucratic bungling that plague it, Mr. Seidman raised his estimate of the total cost to $155 billion and conceded that even that could prove too low.
Mr. Seidman said that the bailout costs to date could hit $235 billion with a full accounting, not including interest on the bonds used to finance it. Over 40 years, according to the General Accounting Office, Congress' auditing agency, the cost to taxpayers could total $500 billion.
"The RTC has become Congress' 800-pound gorilla. It does what it wants, and we don't seem to do anything about it. We just keep feeding it and feeding it," said Sen. Alfonse M. D'Amato, R-N.Y.
"The gorilla is back, and it's still hungry. This time it wants another $80 billion. Should we keep feeding this gorilla? What will happen when we have to say, 'We ain't got no bananas?' " Mr. D'Amato said.
Mr. Seidman's $155 billion bailout estimate omits major bailout-related costs. For instance, it assumes that the RTC will get the price it seeks in selling as much as $150 billion worth of assets seized from failed S&Ls, a prospect that the GAO said last week is unlikely.
Mr. Seidman's estimate also does not include the $65 billion spent on failed S&Ls in 1988, the year before the RTC was created. It does not include up to $15 billion needed to refinance the Savings Association Insurance Fund that backstops
still-solvent S&Ls. Including those costs drives the total to $235 billion, he acknowledged.
And even that does not include interest payments on the 40-year debt securities the Treasury issues to pay for the bailout, which drive the total cost to about $500 billion, the GAO estimates.
Mr. Seidman acknowledged all of those aspects but said his $155 billion estimate is his best guess of the total Congress must appropriate directly. Debt service on the bonds would be paid as part of the national debt.
He conceded, however, that the $155 billion estimate depends on economic developments that experts can only guess at, especially the rate of recovery in real estate, the source of the worst S&L problems.
"There certainly is the possibility that these estimates are too low," Mr. Seidman said.
He has said similar things about his separate request to Congress for authority to borrow up to $70 billion to cope with the related crisis in the banking industry, which Mr. Seidman oversees as chairman of the Federal Deposit Insurance Corp.
Banks are expected to repay the $70 billion in FDIC borrowings, but taxpayers will have to if they can't.
The FDIC is widely respected as a model of government efficiency, but the RTC is in such internal disarray that an audit is impossible, the GAO said last week.
"I'm not prepared to come up with any additional money until we have a restructuring" of the RTC, Sen. Richard H. Bryan, D-Nev., told Mr. Seidman yesterday, expressing a position that is almost unanimous in Congress.
Mr. Seidman's suggestions for restructuring the RTC would end FDIC management of the S&L bailout and create a new RTC chief executive officer to run it.