White House Sees No Need for Taxpayers to Shore Up System : S&L; Policy Puts Consumer First, U.S. Asserts

The Reagan Administration’s savings and loan rescue policy is aimed at protecting the customer’s money and preserving the public’s confidence in the system, a White House spokesman said Tuesday.

At the same time, Marlin Fitzwater insisted there was no plan to resort to the use of general taxpayers’ funds to bail out troubled institutions. He pronounced the White House satisfied with the way the federal regulators are handling the problem.

But Fred Wolf, director of accounting and financial management of the congressional General Accounting Office, said that, considering the state of the industry, the federal government might have to use general taxpayer revenues to shore up the system.

Wolf said some 500 savings and loans across the country are insolvent, and 200 of them are “what we would classify as hopelessly insolvent.”

Fitzwater acknowledged that “clearly, we’ve got some difficult problems in that industry.” He commented a day after the Federal Savings and Loan Insurance Corp. ordered a record $1.35-billion cash bailout payment to customers of two failed California S&Ls.;

The $1.35-billion figure represents roughly 40% of the FLSIC fund for financial institution rescue attempts. Analysts have said it likely will cost billions of dollars more than is in the budget to bail out other institutions.

Fitzwater, when asked about how the bank regulatory agency could withstand such financial pressures, said FSLIC has $10.8 billion in borrowing authority over the next three years.

He took issue with estimates it likely would cost as much as $50 billion to put the industry back on a steady course.

“A lot of the S&Ls; that are in trouble are being bought out by other companies. A lot of them are in bankruptcy and they’re trying to work out arrangements for them to stay in business. So, I don’t think it’s fair to suggest that we’re suddenly (going to) have a $50-billion bill.

“This is not a new problem and it’s one that is being planned for and the regulatory agencies have been handling it well and effectively,” Fitzwater said.

“But be assured that protecting the customers’ money and the public’s confidence in the system is the first priority of the regulatory agencies. And that’s the way they’re approaching it. And I think they have a very rational scheme for doing that,” Fitzwater added.

He would not say where the money would come from, however. Pressed to say whether taxpayers’ money might eventually be used, Fitzwater said, “Well, right now we think the regulatory scheme is--the regulatory complex is the right way to approach this money. There is a trust fund, money goes into it from the banks and from the member S&Ls;, and, at this point that’s adequate, and we think the right way to handle it.”

In an interview on ABC-TV’s “Good Morning America,” Wolf said the government would continue to stand behind the nation’s troubled savings and loan institutions, but that eventually could mean having to turn to the taxpayers for more money.

“I don’t know of any other source you could tap,” Wolf said. “The federal government has clearly said that regardless of the problems . . . we stand behind the insurance.”

But, considering the state of the industry, if savings institutions are not able to supply the money needed by the insurance fund, “there’s only one other source, and that’s ultimately the taxpayer,” Wolf said.

Fitzwater said: “Right now the situation is being managed, and we’ll leave it at that.”