Tackling the S&L Cleanup

December 03, 1992

President-elect Clinton has little choice but to tackle the savings and loan cleanup question early in his administration: Every day's delay costs the U.S. treasury $6 million -- and prolongs the political and fiscal headaches for the new administration in coming to grips with this nightmare.

This isn't a popular issue. In fact, Congress would just as soon never vote again on another bailout bill. But the harsh reality is that between $25 billion and $50 billion are still needed to close insolvent savings and loans and pay off all the depositors. Anywhere from 50 to 400 more floundering financial institutions may have to be closed before it's over. That's an enormous burden which will only add to the mammoth federal deficit, but the sooner Mr. Clinton disposes of this problem, the better for everyone.

President Bush made a half-hearted attempt earlier this year to persuade Congress to give the Resolution Trust Corp. another $43 billion to keep the S&L cleanup effort on track. But politics intervened. Congress blocked attempts to free up money for the RTC. The result: Since April, the RTC has been without the funds it needs to do the job.

In trying to unload its $400 billion in loans, real estate and securities of failed S&Ls, the RTC has been criticized by Congress both for being too slow in disposing of the property and for not getting a high enough price for these dubious assets. But depriving the RTC of funds only prolongs the problem, driving up the cost of the cleanup for taxpayers. Between now and the time Mr. Clinton takes office, the delay will mean a loss of over $400 million to the federal treasury.

Mr. Clinton recently has expressed reservations about some of the RTC's decisions to unload major assets -- at steep discounts -- to giant real estate investment firms and Wall Street buyers. And he has been puzzled by the conflicting assessments coming from Bush administration officials about the remaining cost of the S&L cleanup.

Yet as the next president, he brings a fresh perspective to the discussion. His influence with congressional Democrats should make it easier to craft a cleanup plan that puts this problem to rest once and for all. It might be painful to add such a huge sum to the federal deficit during his first year, but Mr. Clinton should not be hesitant about wiping the savings and loan IOUs off the government's books -- for good.

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