S&L; Bailout Passed Despite Veto Threat : House Approves Plan Over Opposition From Bush on Including Costs in Deficit

The House today passed and sent to the Senate a $159-billion bailout of the savings and loan industry, defying a last-minute veto threat from President Bush.

The 221-199 vote set up a confrontation in the Senate where minority Republicans vowed to block passage in hopes of forcing Democrats into negotiations with the White House over the bailout’s financing plan.

Bush said in his veto threat that he hoped for agreement on a new bill by Friday when Congress is scheduled to begin a monthlong recess. Final congressional action on the measure would give the Administration the money necessary to close or merge hundreds of insolvent S & Ls.

Not Enough for Override

The vote in the House was short of the two-thirds needed to override a veto. Supporting the bill were 182 Democrats and 39 Republicans. Voting against it were 67 Democrats and 132 Republicans.

In a letter to congressional leaders, Bush complained that the legislation, as adopted by a House-Senate conference last week, sets a precedent that could undermine the Gramm-Rudman budget-balancing law.

The President called for a compromise on the thorny issue before the House and Senate adjourn for the August recess.

But Democratic leaders rebuffed him. Senate Majority Leader George J. Mitchell of Maine said Bush’s proposal for calculating the cost of the bailout was “fiscal gimmickry at its worst” that would add $5 billion in interest costs.

Bush’s objection to the Democratic plan centers on the method for calculating the cost in the federal deficit. The legislation would balloon the budget deficit, but the bailout cost would not be included in calculations requiring automatic spending cuts in federal programs.

Bush favors evading the cuts by simply keeping the spending out of the deficit in the first place.

Democrats complain that the President’s method, which requires that a private agency borrow bailout money, will inflate borrowing costs.

‘No Way to Compromise’

“To charge the American people more to hide budget costs is a crime, and we’re not backing off,” said Rep. Charles E. Schumer (D-N.Y.), a member of the House Banking Committee. “There’s no way to compromise. It’s cutting the baby in half.”

The veto message threatened one of the critical pieces of legislation making its way through Congress this year.

The legislation, in response to the worst financial crisis since the Depression, would pump $50 billion into government deposit insurance funds depleted by hundreds of S & L failures due to poor, and often fraudulent, loans.

It also would institute a major overhaul of the government’s regulation of the nation’s nearly 3,000 thrifts and require their owners to put billions of dollars more of their own money at risk.