Bank Board Accused of Misleading : Funds for S&L; Bailouts Overstated, House Panelists Say

The Federal Home Loan Bank Board supplied Congress with revenue estimates that disguise a gap of billions of dollars in the resources that the agency will have to clean up the savings and loan industry during the next decade, according to members of the House Banking and Senate Budget committees.

In testimony this summer, Bank Board Chairman M. Danny Wall told Congress that the agency would have $12 billion more than it needs to close or merge hundreds of sick S&Ls.; But congressional aides and industry analysts said Tuesday that Wall used unorthodox accounting techniques to show that result.

In fact, aides to House Banking Committee Chairman Fernand J. St Germain (D-R.I.) said, the bank board will fall at least $18 billion short of the amount it needs to dispose of the troubled institutions.

A spokesman for the bank board acknowledged that the agency used inconsistent methods to compute costs and income over the 10-year period. The effect was to make it appear that income exceeded costs, congressional aides said.

Wall is scheduled to appear today before the Senate Budget Committee, which is concerned that the bank board has understated the costs of cleaning up the S&L; industry and that taxpayer funds will be needed.

“I am mystified by the bank board’s apparent willingness to allow these number games,” St Germain said. He said he did not realize that the discrepancy existed until aides on his staff studied revenue and cost estimates that the bank board had supplied to the panel.

“The miscalculations are serious. They are the result of either gross incompetence or deliberate attempts to mislead and minimize the problem to Congress and the public,” he said.

Sen. James R. Sasser (D-Tenn.), who is a member of the Senate Budget Committee, said: “When a federal agency comes to the Hill and gives projections for income and expenditures, I expect that they will compare like kinds of numbers. If that’s not being done by (the bank board), if they’re comparing apples and oranges, they may be hiding the true magnitude of (the agency’s) deficit and the potential taxpayer exposure.”

Wall repeatedly has estimated before Congress and in interviews that the cost of closing about 500 S&Ls; during the next five years will be about $30.9 billion, but that the bank board’s revenue over 10 years will be $42 billion, or about $12 billion more than needed.

But what Wall has not made clear is that the $42 billion and the $30 billion have been calculated using two different methods that in effect are inconsistent.

The $42 billion is the amount of cash the agency expects to collect over 10 years. But the $30-billion figure reflects the cost in today’s dollars of resolving the industry’s problem in the next five years.

If both revenue and obligations were calculated the same way as occurring over a period of years, the $42-billion figure would remain the same. But the estimate of bank board obligations would climb to $42 billion--according to the bank board--or nearly double to $60 billion, according to aides on the House Banking Committee.

That leaves FHLBB either with no surplus or $18 billion short of what it needs through 1998.