Congress OKs $166-Billion S&L; Bailout

After a long day and night of parliamentary wrangling and strong dissent from powerful House Democrats, Congress enacted the $166-billion savings and loan bailout bill just after midnight today and sent it to the White House.

The measure--embracing a compromise on funding worked out with the White House--was closely contested in the House, where it passed 201 to 175. With chairmen of four major committees that oversee budgetary, fiscal and other economic issues in united dissent, the outcome was in doubt there to the very end.

Rounds Up Support

But the House leadership backed the compromise and President Bush rounded up heavy GOP support for the final package just 24 hours after threatening to veto an earlier version.

In the Senate, by contrast, only 21 senators were still present late Friday when the bill was approved on a non-roll call tally in a chamber long since abandoned by many members anxious to begin their scheduled August recess.

The main substance of the bailout plan, which will stretch out over 30 years, had been settled more than a week ago, but a last-minute controversy erupted over how to pay for it without appearing to break the ceiling on the federal budget deficit mandated by the Gramm-Rudman law.

Democratic leaders in the House had insisted that all of the first $50 billion in scheduled outlays be included in the budget but specifically exempted from Gramm-Rudman. The White House objected to this approach and Bush threatened a veto.

The final compromise provides that $30 billion of the initial $50 billion would be off the federal budget and $20 billion would be on budget but fall outside Gramm-Rudman.

Though Bush roundly endorsed the compromise Friday and lobbied Republicans to support it, four powerful Democratic committee chairmen in the House opposed it at the last minute.

Initially, House Speaker Thomas S. Foley of Washington had supported the House Democrats who insisted on full on-budget funding.

As the clock ticked toward the scheduled monthlong summer recess, however, Foley parted company with the committee chairmen. He declared that, while he had misgivings over the compromise, he said that “the bill needs to be passed.”

It has been estimated that losses of up to $20 million a day are hemorrhaging from the Treasury so long as the rescue remains unenacted.

The bill, which would authorize the largest federal bailout in history, would provide an immediate $50 billion to close hundreds of insolvent S&Ls; and make good on federally insured deposits. The bill also would require S&Ls; to maintain at least 3% of their assets as cash and prohibit them from investing in high-risk, high-yield “junk bonds.”

Against Plan to Bitter End

House Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.) opposed the compromise version of the bill to the bitter end. Rostenkowski had throughout made a major issue of putting all $50 billion on the budget--but also excluding that sum from the spending ceilings mandated in the Gramm-Rudman law.

Rostenkowski pulled 135 Democrats with him, throwing on the defensive the chief House architect of the bill, Banking Committee Chairman Henry B. Gonzalez (D-Tex.). In the end, it took GOP support to bail Gonzalez and the bill out, with 119 Republicans voting in favor of the compromise compared to only 39 who approved the version on Thursday, when a Bush veto was still threatened.

And, in the final countdown to the vote, one of Rostenkowski’s dissenting colleagues, Commerce Committee Chairman John D. Dingell (D-Mich.), recanted and declared last-minute support for the bill.

The hourlong Senate debate in a nearly empty chamber was dominated by Democrats eager to go on record as disapproving of the compromise agreement. They also complained of a subsidiary Senate voice vote Friday temporarily extending the national debt limit to $3 trillion.

The arguments were largely rhetorical, however, apparently designed for political consumption. Earlier in the day, these senators had raised no objections to giving unanimous consent to the procedure for rapid-fire, non-roll call votes, which assured approval of the plan.

In a letter to congressional leaders, Bush urged immediate approval of the compromise to deal with what he called “this extraordinarily serious problem.”

He added: “Final passage remains critical to the stability and solvency of the financial system.”

After Thursday night’s close 26-22 vote among the conferees to accept the compromise on the funding issue, the Senate had planned to act on final passage Friday morning, with the House to follow.

But as opposition mounted, especially among House Democrats, that timetable was derailed. The 55-member House-Senate conference, presided over by Senate Banking Committee Chairman Donald W. Riegle Jr. (D-Mich.) and his House counterpart, Gonzalez, was unable to assemble a bare majority of 28 signatures of approval until late Friday afternoon.

During the day, Rostenkowski picked up support from Dingell and two other chairmen. They saw their authority over the nation’s budgetary and economic future sapped because the Administration had negotiated the compromise with the House Banking Committee as well as with elements of the House leadership.

A letter opposing the bill was circulated by Rostenkowski and by Reps. Dingell, Leon E. Panetta (D-Monterey) and John Conyers Jr. (D-Mich.)--chairmen, respectively, of the Energy and Commerce, Budget and Government Operations committees. Panetta even predicted that the bill might fall to defeat on the House floor--thereby necessitating yet another last-minute rescue compromise, as senators and congressmen struggled to leave town for the recess.

House Majority Whip William H. Gray III of Pennsylvania also predicted that the measure might fail in the House, unless more Republicans backed Bush. Gray said many of the 132 GOP lawmakers who opposed the bill on the floor Thursday, after Bush threatened his veto, would have to switch sides to ensure passage Friday

“If the Republicans will not carry the President’s water, why should we?” Gray asked earlier Friday.

During the negotiations Thursday night, GOP conferees were predicting confidently that from 60 to 90 votes would swing behind the bill once Bush declared his support. On Thursday, the pre-compromise version of the bailout mustered an unexpectedly small majority in the House, only 221 to 199, but Republican opposition was aimed chiefly at the on-budget funding provision that the Administration opposed.

“This is a compromise that we didn’t prefer to make,” Foley said of the late-night agreement Thursday between Senate and House, Administration and Democratic leadership negotiators. “The bill wasn’t as good as it could have been.”

The compromise made the legislation more costly to taxpayers than if lawmakers had stayed with the on-budget financing plan favored by the House but opposed by the President, Foley argued. Still, he concluded: “I think the bill needs to be passed.”

The compromise would put $20 billion on budget in fiscal 1989, but because of a loophole in Gramm-Rudman, it would not count against the deficit ceiling. The other $30 billion would be raised in off-budget bonds to be sold by a new government agency in the ensuing two years.

This approach is expected to be more costly than straight on-budget funding because the bonds of the new agency will probably have to pay slightly higher interest rate than normal government bonds issued by the Treasury.