Federal regulators came into line with other estimates today and revised the cost of cleaning up the ailing savings and loan industry upward to between $45 billion and $50 billion. That was more than a third higher than their earlier projections.
M. Danny Wall, chairman of the Federal Home Loan Bank Board, which regulates the nation’s 3,000 S&Ls;, told Congress this summer that the cost would be $31 billion.
Today he revised his figure to bring it more in line with other government estimates, including the $45-billion to $50-billion projection of Congress’ General Accounting Office. But the figure is still far short of private estimates ranging from $75 billion to $100 billion.
$20 Billion Spent
Noting that the bank board has resolved 122 cases so far this year at a cost of $20 billion, Wall said it will cost an additional $24.9 billion to $29.9 billion for the work that remains to be done.
Wall said that cost could be covered by the current resources of his agency, but only if a special assessment on healthy thrift institutions is extended over the next 30 years.
S&Ls; currently pay 21 cents a year in regular and special assessments to the bank board to insure every $100 in deposits, nearly triple the 8 cents per $100 regular assessment paid by commercial banks.
The special assessment for thrifts had been scheduled to be phased out. When Wall suggested earlier this summer that the assessment would have to continue over 10 years, he unleashed a flood of protests from industry lobby groups.
The bank board’s new estimate comes at a time of rising debate over whether taxpayers will be required to rescue the thrift industry. Senate Banking Committee Chairman William Proxmire (D-Wis.) said last month that taxpayers will likely have to contribute $20 billion to fixing the problem.
No Taxpayer Bailout Yet
Wall told reporters that some institutions would not survive under a continuing special assessment. But he added: “I don’t think we’re to a taxpayer bailout yet.”
The updated estimate reflects industry losses during the April-June period of this year and the bank board’s cost of resolving cases through September, which have been greater than originally anticipated, Wall said.
Money-losing institutions posted red ink of $5.1 billion in the second quarter. That was only partly offset by $1.5 billion in profits made by 71% of the industry.