Treasury Secretary Nicholas F. Brady on Tuesday sought to assure property owners in states such as Texas and California that federal regulators will not “dump” real estate on local markets when they sell the assets of insolvent savings and loan institutions under President Bush’s S&L; rescue plan.
On a one-day trip to Texas, one of the states hardest hit by S&L; failures, Brady said regulators “intend to proceed very carefully” when they begin selling property in order to avoid sending real prices of homes and commercial structures plunging. “The government also has a vested interest in avoiding dumping and (in) receiving the best possible price for the real estate,” he said. “We won’t necessarily be in a hurry to sell it off.”
Brady also warned Congress, which will begin work on the S&L; legislation next week, not to try to finance the whole $50-billion cost of the Bush Administration’s S&L; rescue plan in a single up-front appropriation, as some lawmakers want, because that would risk blowing apart the effort to reduce the federal budget deficit.
During a series of speeches and press conferences here and in Houston, Brady said to do so would push total government outlays far above the spending ceilings established under the Gramm-Rudman budget law and would “completely . . . render a sham the budgetary discipline” that the government is seeking.
That in turn would send interest rates up sharply and push the government’s own borrowing costs out of control, he contended. “If interest rates rise by as little as one-tenth of a percentage point,” he said, it would “overwhelm any cost savings” that might come from financing the S&L; rescue package all at once instead of stretching it out over several years.
Despite Brady’s concern over what Congress might do about the financing issue, the lawmakers are expected to act speedily next month to approve the Administration’s S&L; rescue plan and most likely will make only minor changes. Those calling for Congress to appropriate the money in one action contend that it would save money on interest costs.
A House Banking subcommittee is scheduled to start formal drafting of a bill next week, and the Senate Banking, Housing and Urban Affairs Committee is scheduled to begin work on its version of the measure the week after. Congressional leaders say they expect to send a final version of the legislation to Bush’s desk some time in May.
The secretary’s remarks were designed to head off any last-minute snags that might arise in congressional handling of the S&L; issue. Brady said later that, while he does not consider the financing issue a major one, he could “see it as (one) that could provoke endless debate” if it were permitted to get out of hand.
He also warned that if lawmakers were to approve breaching the Gramm-Rudman spending ceilings for the S&L; rescue plan, it would open the door for exceptions in a variety of other areas, from increased spending on social programs to larger defense outlays. He called the proposal to appropriate the entire $50 billion in one fiscal year “a stupid idea.”
Brady’s trip Tuesday was designed to promote the S&L; package in heavily affected Texas and to calm nervous property owners who are worried about the possibility that aggressive selling of S&L; assets might send local real estate values tumbling.
On a related issue, Brady said the Treasury intends to stand firm against pressure from some lawmakers that it postpone the mid-1991 deadline, by which the Administration’s plan would require savings and loan institutions to meet stiffer capitalization standards.
Although some legislators argue that the deadline is unrealistically close, Brady contended Tuesday that the Administration’s plan provides for granting exceptions to some troubled S&Ls.; But he said that any extensions should be allowed on a case-by-case basis. He argued that extending the deadline for all thrifts would only reduce the pressure on those institutions to put their economic houses in order.