
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SATURDAY, April 7, 1990                   TAG: 9004070251
SECTION: NATIONAL/INTERNATIONAL                    PAGE: A1   EDITION: METRO 
SOURCE: Los Angeles Times
DATELINE: WASHINGTON                                LENGTH: Medium

S&L BAILOUT ESTIMATE UP BY BILLIONS

The savings and loan bailout, already pegged as the most expensive financial debacle in the nation's history, could cost as much as $500 billion over the next 30 or 40 years and will cost at least $325 billion, the General Accounting Office told Congress Friday.

The newest megabuck estimate by the auditing arm of Congress is $68 billion higher than an earlier GAO estimate last summer and is still "subject to significant change" if optimistic Bush administration economic assumptions of steady growth and declining interest rates do not pan out, Comptroller General Charles A. Bowsher told the Senate Finance Committee.

If those assumptions prove wrong and the economy stumbles, the outcome could be far worse, Bowsher told the scattering of senators to show up at the hearing. "It could easily go to $400 billion if more savings and loans fail and their asset base proves to be as bad as it has in many cases," Bowsher said. "If there is a recession, it could be as high as $500 billion."

But Bowsher said that he could not estimate how much of the added cost would be incurred during the next few years. Fifty billion dollars already has been authorized under the bailout legislation to cover the operations of the Resolution Trust Corp., the new government entity created to close ailing thrifts, sell their assets and pay their depositors.

He called on Secretary of the Treasury Nicholas F. Brady and Federal Deposit Insurance Corp. Chairman L. William Seidman, who is administering the bailout, to "develop proposals to provide the additional funds." And he recommended that both the Resolution Trust Corp. and the FDIC come to Congress twice a year with updated estimates of cash needs, costs and current income so the progress of the bailout can be tracked steadily.

Bowsher's report made it clear, however, that about half of the estimated $68 billion overrun will probably fall during the next few years. For instance, the cost of the rushed closure of failing thrifts engineered by the now-defunct Federal Savings and Loan Insurance Corp. in the closing weeks of 1988 would cost $68 billion instead of the $56 billion originally earmarked. The total, including the extra $12 billion, would have to be paid by 1999.

The GAO report, while widely expected to reflect substantially higher costs for the huge bailout, was nevertheless greeted with cries of anguish by Senate Finance Committee Chairman Donald W. Riegle Jr., D-Mich., Bob Graham, D-Fla., and Larry Pressler, R-S.D., the only committee members present.

Graham declared Bowsher's report a "devastating statement" that "should be a call to arms for all people involved, from the administration, to Congress to the industry."

by CNB