Fee on Savings Is Defended by Bush : Says Treasury Plan to Aid S&Ls; Is Not a Tax; Lawmakers Assail Idea

President Bush on Wednesday defended a controversial Treasury Department proposal to charge 25 to 30 cents for every $100 on deposit in banks and savings and loan institutions, but members of Congress angrily denounced the idea.

Bush insisted that the Treasury plan, designed to raise funds to help bail out failing savings institutions, would not violate his pledge against raising taxes. “Is it a tax when the person pays the fee to go to Yosemite Park?” he asked.

Members of Congress, however, insisted that the Treasury proposal is nothing less than a tax on bank and S&L; deposits--and an unpalatable one at that.

The suggestion, which would require congressional approval, “only serves to scare depositors into withdrawing their federally insured funds and putting them into the nearest money market fund,” said House Banking, Finance and Urban Affairs Committee Chairman Henry B. Gonzalez (D-Tex.).

Calls It ‘Wrongheaded’

Rep. Charles E. Schumer (D-N.Y.), a Banking Committee member, added: “Not only is it a tax, it is a wrongheaded tax. It makes bad economic sense and bad political sense, and that usually means it won’t go anywhere.”

The fee on savings deposits “hasn’t come to me in a formal recommendation,” Bush told reporters from the New York Times and the Houston Post, who interviewed him in the Oval Office Wednesday morning. “I’m receptive to any idea that will solve this problem. I’m not receptive to a tax increase.”

The fee proposal, which would raise $5 billion to $9 billion a year, is one of a series of ideas that Treasury is preparing for President Bush to deal with the savings and loan crisis. A fee is attractive to Treasury officials because it would lessen the need to tap scarce taxpayer dollars to meet the S&L; crisis.

Estimates of the cost of closing or merging insolvent S&Ls; and making good on federally insured deposits run upwards of $100 billion. The government could raise the money by issuing bonds and use the billions of dollars collected from the fee on savings deposits toward paying the annual interest on the bonds.

The proposed deposit fee, however, immediately ran afoul of the rule laid down last week by Richard G. Darman, who was confirmed by the Senate Wednesday as Bush’s budget director, that anything that looks like a tax violates Bush’s campaign pledge not to raise taxes. Darman offered his version of the “duck test”--what looks like a duck and quacks like a duck is in fact a duck.

“If it looks like a tax to ordinary Americans, then it is a tax and the new President will oppose it,” Darman said. “At the point you get a significant dollar amount, it’s virtually guaranteed (that) the American people will view it as a tax and it will flunk the duck test.”

Donald G. Ogilvie, executive vice president of the American Bankers Assn., applied Darman’s test to the Treasury’s proposal and denounced it as “a thinly disguised duck--a tax by any other name.”

Seen as ‘Gross Injustice’

“Taxing bank customers to bail out the savings and loan industry would be a gross injustice,” he said. “Ford wasn’t asked to bail out Chrysler, Newark (N.J.) wasn’t asked to bail out New York, nor should every American consumer with a bank account be asked to bail out the Federal Savings and Loan Insurance Corp.”

Sen. John Glenn (D-Ohio) added: “In my view, this would violate the duck test. It is a major increase in revenues, no matter what the Administration calls it.”

“I think it’s ridiculous,” said Rep. David Dreier (R-La Verne), a member of the House Banking Committee. “They’re desperately looking for any place they can to get revenues.”

Savings institutions already pay an annual fee--$2.08 for every $1,000 in deposits--into the federal insurance fund that guarantees S&L; deposits of up to $100,000. Despite that levy, the insurance fund is woefully short of the money it needs to protect deposits in failing institutions.

Banks, by contrast, pay an annual fee of 83 cents for every $1,000 into the federal insurance that guarantees bank deposits of up to $100,000.

The new fee proposed by the Treasury Department would be levied on top of those existing charges. And it would be charged not to the banks and S&Ls; but directly to individual checking and savings accounts, probably according to the average annual size of each account.

White House Chief of Staff John H. Sununu insisted Wednesday that the existing charges have “never, never, never been referred to as a tax.” The money paid “is a fee for a service that has been traditional and important in the banking industry.”

The Administration argues that because the fee is not considered a tax when paid by banks and S&Ls;, it should not be considered a tax when paid directly by individual and corporate depositors on their accounts.

Staff writers William J. Eaton and Tom Redburn also contributed to this story.