U.S. Seeks Aid of Japanese in S&L; Bailout

The United States today took the first concrete step to enlist Japanese investors in the bailout of its ailing savings-and-loan institutions with a presentation by a top-level team in Tokyo.

Officials of Resolution Funding Corp., including a high-level U.S. Treasury official, presented details of an auction of securities to be held next week and aimed at raising funds to rescue the troubled thrift industry.

Congress authorized total borrowing of $50 billion to pay for the S&L; cleanup. The first $20 billion has already been borrowed by the Treasury Department, and most of that amount has been spent by the Resolution Trust Corp.

The presentation was attended by about 75 local dealers in U.S. Treasury bonds and their clients.

The agency will auction Oct. 25 the first installment of Resolution Trust Corp. bonds, which will be used to fund ailing thrift institutions, the officials said.

The officials said the meeting here was aimed at ensuring that Japanese investors have enough information to participate in that auction.

A dealer at the meeting said Japanese investors will find the securities attractive if their yield spread above Treasury issues is large enough to compensate for expected poorer liquidity.

The thrifts are expected to bear the main responsibility for making interest payments, through asset sales if needed, but the U.S. Treasury is prepared to make payments that they are unable to cover. However, RTC officials emphasized that the bonds are not full-faith obligations of the U.S. government.