RTC chief says lower interest rates will help to reduce cost of S&L bailout

May 17, 1992|By New York Times News Service

WASHINGTON -- After several years of steadily higher forecasts of the cost of bailing out the nation's insolvent savings and loans, a federal regulator has brought in a lower estimate of the cost to taxpayers.

Albert V. Casey, head of the Resolution Trust Corp., the federal agency that oversees the bailout, has told lawmakers in recent days that because of lower interest rates, which bolster the balance sheets of savings and loans, he believes the bailout will cost no more than $130 billion.

That is 19 percent less than the administration's top estimate of $160 billion in June.

The General Accounting Office told some congressional aides Friday that Mr. Casey's estimate appeared reasonable.

But some lawmakers and financial specialists expressed skepticism about the new calculations.

And some suggested that the numbers were politically motivated, an effort to get Congress to provide the additional $42 billion that Mr. Casey has requested to complete the bailout. The agency's spending authority expired two months ago.

"Based on past experience, Congress applies limited credibility to government estimates," said Rep. Jim Leach, an Iowa Republican and a senior member of the House banking committee. "But if one has some understanding of macroeconomics, it's extremely hard not to be optimistic that the worst is over."

And Rep. Henry B. Gonzalez, the Texas Democrat who heads the committee, said: "The administration has experienced great difficulty keeping its numbers straight on the savings and loan cleanup, either by design or incompetence. The history of missed projections may make it difficult to restore the agency's credibility."

Some on Capitol Hill warned that it was too soon to predict the final bill, particularly since the bailout costs could go up if interest rates -- now at their lowest point in many years -- rise.

They also noted the government's poor forecasting track record -- Reagan administration officials often disputed that any taxpayer money would be needed to bail out the industry, and when Mr. Casey's agency was created almost three years ago, the administration predicted that $50 billion would be the most the disaster would cost.

Always a difficult political issue, financing the highly unpopular bailout has run up against a brick wall, even though everyone acknowledges that Congress will ultimately have to provide more money.

The administration says the House should provide more money. The Democratic leaders say they will not seek Democratic votes until the administration enlists strong Republican support so that the Democrats cannot be singled out as the driving force behind the financing.

The Senate has already approved a financing measure, but there is no sign of the House acting soon. Mr. Casey has met in recent days with dozens of lawmakers, but sometimes when he travels to Capitol Hill, lawmakers seem to have little interest in receiving him and send their lower-level staff members instead.

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.