FDIC Chairman Asks $30 Billion Bailout in 1989

The chairman of the Federal Deposit Insurance Corp. called today for spending $30 billion next year to shut down the “worst losers” in the savings and loan industry.

“We need to close the worst first,” FDIC Chairman L. William Seidman said in a luncheon speech to the National Press Club. “. . . These institutions are losing over a billion dollars per month.”

Seidman’s agency insures deposits in commercial banks, not thrift institutions, but his agency is offering recommendations for solving the crisis in the savings and loan industry.

Some analysts recommend tapping Seidman’s fund, a move he opposes, and estimate that the S&L; cleanup will eventually cost $50 billion to $100 billion.

The Federal Savings & Loan Insurance Corp., which insures deposits in thrift institutions, is technically insolvent. Regulators have been spending as little cash as possible, putting together rescue packages with promissory notes and guarantees committing revenue they expect to receive for the next 30 years from an assessment on healthy S&Ls.;

Few analysts believe the industry can bear such a burden for that long.

‘Up to Treasury’

Seidman did not call directly for a taxpayer bailout, saying only, “It’s up to the Treasury Department and Congress to determine which alternative makes the most sense.”