WASHINGTON -- A House banking subcommittee, expressing anger over the growing cost of thrift industry cleanup, has voted to provide only 25 percent of the $80 billion requested by the Bush administration, and called for a pay-as-you-go funding system for the rest of the job.
Yesterday's vote would allow the Resolution Trust Corp., the agency overseeing the savings and loans rescue, to borrow an additional $20 billion. But more funds would have to come from an unlikely agreement between President Bush and Congress to raise taxes or cut spending in other federal programs.
The amendment, offered by Rep. Joseph P. Kennedy II, passed by a vote of 18-17 after a long and contentious debate in the financial institutions subcommittee of the House Banking Committee.
The subcommittee also approved another amendment by voice vote that would streamline the RTC by creating the position of chief executive officer. The new executive would be charged with day-to-day operating responsibility for the savings and loan bailout.
In the debate on funding, Kennedy said that by avoiding borrowing $60 billion through 30-year bonds the nation could save $145 billion in interest costs, and stop the "destructive practice of passing our bills along to our children and grandchildren."
But opponents insisted that the amendment was a futile gesture, arguing that a Congress unable to pass a 5 cent increase in the gasoline tax during the summer is hardly likely to find a politically acceptable way to raise $60 billion.
The committee's ranking Republican, Rep. Chalmers Wylie of Ohio said the amendment would "clog the process of providing funds" for the S&L clean-up, and warned that it would draw a certain presidential veto if approved by the full Congress.
A similar amendment was approved by the House Banking Committee earlier this year, but defeated in the full House as part of a funding bill for the thrift clean-up.
The RTC will have spent $80 billion by year's end to close more than 600 defunct thrifts and pay off depositors, whose accounts are insured up to $100,000. The Bush administration says it needs another $80 billion, and wants to raise the money through the sale of bonds. The total price tag, including interest payments, could reach $500 billion or more over the next 40 years.
The subcommittee members were clearly restive and agitated about the performance of the huge agency, which has a massive portfolio of more than $160 billion in securities, mortgages, loans and foreclosed real estate properties from failed thrifts.
The subcommittee approved an amendment offered by Rep. Frank Annunzio, D-Ill., the subcommittee chairman, that would limit RTC's borrowing ability to 85 percent of the value of the assets under its control. In addition to the $80 billion to cover direct losses at defunct S&Ls, the RTC also seeks to borrow additional funds for temporary working capital. The Bush administration has said all of this money can be repaid by the sale of assets.
However, Kennedy cited a Los Angeles Times study that disclosed the RTC expects to recover only 60 percent of the original value of the assets currently under its control. The Times computer review of RTC records shows the agency estimates the assets will bring about $25 billion when they are sold -- $15 billion less than the $40 billion values listed on the books of the failed S&Ls.