House Defeats Bid to Blunt S&L; Reform

The House today defeated an attempt to blunt the key reform in savings and loan bailout legislation after President Bush threatened to veto a watered-down bill.

The vote was 326 to 94, with 114 Republicans and 212 Democrats supporting the President. Fifty-six Republicans and 38 Democrats opted to support the S&L; industry on the heavily lobbied issue of capital.

Bush is insisting that the government force S&Ls; to back their lending with more of their own capital.

Rep. Henry J. Hyde (R-Ill.) tried unsuccessfully to provide an exemption for S&Ls; that previously received an accounting break, known as “supervisory good will,” in exchange for taking ailing institutions off the government’s hands in the early 1980s.

Accounting Break

The accounting break allows some of the acquiring S&Ls; to operate without risking any of their owners’ money. Hyde’s amendment would have permitted 241 S&Ls; that would fail tougher capital standards to appeal administratively for an exemption.

However, critics complained that the procedure would burden regulators and effectively delay Bush’s key reform by 18 months for a significant portion of the industry.

Bush, in a letter to House Republican leader Robert H. Michel of Illinois, made it clear that he would veto the S&L; bill if it included Hyde’s proposal.

“Giving recognition to good will as capital or creating procedural changes that could have the same effect is not justifiable,” the President wrote. “Each of the amendments to the tough capital standards . . . would render this bill unacceptable to me.”