More S&L funds sought Bentsen asks Congress to approve additional $45 billion

March 17, 1993|By Robert A. Rosenblatt | Robert A. Rosenblatt,Los Angeles Times

WASHINGTON -- The Clinton administration, coming to grips with the unfinished business of cleaning up the savings and loan industry, asked Congress yesterday for another $45 billion to dispose of insolvent thrifts and provide a hefty safety margin against future failures.

The request was $12 billion higher than the Bush administration's final estimate of the cost of closing failed savings and loan associations and selling billions of dollars worth of their mortgages and real estate, which are now held by the government.

If the request for the money is approved, the total tab for the S&L crisis would be $132 billion in current dollars. That does not include interest costs on the 40-year bonds issued by the government to finance the disposal of more than 700 failed S&Ls. Depending on future interest rates, the ultimate costs could reach $300 billion or more.

The administration hopes that the Democratic-led Congress will give the new Democratic president what it refused to grant President George Bush last year: money to finish the work of the Resolution Trust Corp., the government agency handling the cleanup.

"I know that a vote to fund the RTC is a tough vote," Treasury Secretary Lloyd Bentsen told skeptical members of the House Banking Committee yesterday. "I've been there. I've got the scars to show for it.

"But I also know that this is a vote for depositors, for the safety of our financial institutions, and that if we fail to meet this obligation, we will pay a far greater price, and deservedly so," he said.

Congress refused to provide RTC funding last year during the election season. Democrats said they would not vote for the bill unless the White House could deliver a majority of House Republicans to support the funding. But the Bush administration could not.

The S&L cleanup became necessary because federal insurance guarantees the bank and thrift deposits of Americans up to $100,000. The government has protected the funds of nearly 22 million depositors in failed S&Ls in the past four years.

The Clinton administration did not originally include a figure for the RTC cleanup in its first budget estimate, issued last month. Clinton budget officials said they left it out because they were not certain how much money would be needed.

Now, the budget will be adjusted to include $34 billion of the $45 billion request, making the budget deficit $34 billion larger than the $262 billion figure for fiscal 1994 included in the economic plan that Mr. Clinton issued in February.

The other $11 billion sought by the administration will not be included in the current deficit projections because budget officials are not certain the money will have to be spent.

"We hope and believe that $34 billion will be enough," White House communications director George Stephanopoulos said yesterday. Authorization to spend the additional $11 billion would provide "plenty of cushion to cover any conceivable S&L cleanup costs," he said. "We hope and believe that we will not be forced to spend the extra $11 billion."

The extra money requested by the White House would provide a generous safety margin if the economy weakens, if interest rates rise or if there is an unexpected new surge of failures in the thrift industry. It also gives the administration a political cushion.

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