More S&L bailout money needed, Bush warns

July 30, 1992|By New York Times News Service

WASHINGTON -- Breaking nearly four months of silence on an issue that both parties would prefer to postpone until after the elections, President Bush warned Congress yesterday that its failure to approve more money for the savings and loan bailout was costing taxpayers $4 million to $6 million extra a day.

The White House could not avoid the politically painful subject any longer because of a legal stipulation that administration officials testify twice a year before Congress on the bailout.

The bailout has virtually halted because the federal government essentially ran out of money on April 1 to pay for the closing of ailing institutions. These savings and loan associations now continue to accumulate losses that taxpayers eventually will have to cover.

Given a cost of $6 million a day, the higher of the figures Mr. Bush used, the current stalemate could cost taxpayers an additional $1.12 billion if Congress does not act until the next Congress begins handling major legislation in February.

But Treasury Secretary Nicholas F. Brady told the House Banking Committee yesterday that even the $6 million figure applies only to losses through the end of September. The daily cost later in the year is expected to continue rising slowly, as more institutions run into trouble and money is not readily available to help them.

Mr. Brady said the administration had raised its estimate of the cost of delays from $2.5 million a day because a growing backlog of savings and loans need help.

The total estimated cost of the bailout remains as high as $160 billion, Mr. Brady said, of which $87 billion has been authorized by Congress. The administration is seeking $43 billion more.

The final cost to taxpayers, including interest on government bonds sold to pay for the bailout and deals made during the Reagan administration, has been estimated by government audits at $500 billion over 40 years.

Rep. Jim Leach, R-Iowa, the second-ranking minority member of the Banking Committee, said that two letters from Bush to House leaders yesterday improved the odds for the passage of legislation this year, but not by much. "I think Congress has as high as a 1-in-3 chance of dealing with the issue this fall before adjournment," he said.

The comments by Mr. Bush and Mr. Brady highlighted an issue considered political poison this year by the White House and by Republicans and Democrats in Congress.

Congressional Democrats have worked with the Reagan and Bush administrations first to deregulate the industry, then to vote billions of dollars for the bailout amid ethics debates over whether some members of Congress put pressure on federal officials to delay closing institutions owned by political contributors.

Arkansas Gov. Bill Clinton, the Democratic presidential candidate, seems to feel safe in attacking the administration on the savings and loan issue, even though his attacks may bring pain to Democrats in Congress. In a speech in Washington June 15 before the national convention of the Rainbow Coalition, Mr. Clinton called the savings and loan debacle, "the worst financial scandal in the history of this country."

Mr. Brady provided several examples yesterday of better ways to spend $6 million a day. He said the money could be used to cover 2,400 Pell grants to send young people to college, or to add 12,000 people to a federal welfare program that helps infants and pregnant women.

"It is like someone walking out on the steps of the Capitol each day and setting fire to $6 million of the taxpayers' money," he said.

Rep. Joseph P. Kennedy III, D-Mass., criticized Mr. Brady's examples, pointing out that the bailout is being financed separately from the rest of the budget. Money saved for the bailout now may reduce the eventual tax bills of today's children, he said, but it cannot readily be spent on the children now.

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