House Panel Votes to Slash Penalties Bush Seeks for S&L; Fraud

With Republicans taking the lead, the House Judiciary Committee voted today to cut by half the increased civil penalties that President Bush wants to impose on fraudulent savings and loan operators and embezzlers.

Voting 17 to 14, the committee adopted an amendment by Rep. William J. Hughes (D-N.J.) to reduce the proposed new civil penalties to $500,000 for each violation and to a maximum of $2.5 million against any one individual.

As part of his $90-billion S & L bailout package, Bush had sought to raise the civil penalties for defrauding banks, thrifts and other financial institutions backed by federal deposit insurance from the current maximum of $5,000 to $1 million for each violation.

‘Remedial’ Not ‘Punitive’

Hughes said his amendment, which was backed by the American Bankers Assn. but opposed by the Administration, was intended to make the civil penalties “remedial rather than punitive.”

Opponents, however, said the effect will be to reduce the government’s ability to recover billions of dollars in federal deposit insurance funds that might be lost in the future to insider loans, fraud and embezzlement--the major contributors to the S & L crisis.

“The taxpayers are going to have to fork up $300 billion because of a bunch of high rollers,” said Rep. Romano L. Mazzoli (D-Ky.). He referred to the interest costs over 30 years for the taxpayer share of Bush’s bailout plan.

“I don’t think we should be worrying about remedializing them,” Mazzoli said of fraudulent S & L operators. “We should worry about punishing them.”

Four of the Judiciary Committee’s 21 Democrats, including Hughes, and 12 of its 14 Republicans supported the amendment.

Although Bush got all he wanted and more from the Senate and the House Banking Committee in seeking to make S & L owners put more of their own money at risk, he faced new opposition to that as well today from members of his own party.

Lengthy Hearings Sought

Rep. Henry J. Hyde (R-Ill.) said he will offer an amendment before the House Judiciary Committee to make S & L regulators go through lengthy hearings before making thrift operators put up billions of dollars in new capital.

Robert Glauber, Bush’s No. 2 official at the Treasury Department, called Hyde’s measure “a grave error.”

Bush’s proposal, approved by both the full Senate and the House Banking Committee, would raise from the current five years to 20 years the maximum sentence for bank and S & L fraud and embezzlement.