Banking Panel Angry Over ‘Timid’ Pace of S&L; Cleanup
Angry Senate Banking Committee members complained Wednesday that federal regulators are moving much too slowly in closing failed savings and loans and disposing of their assets.
“Act decisively--don’t be timid,” Sen. Jake Garn (R-Utah), the committee’s ranking Republican, lectured a panel of regulators. “Surely, there must be something you can do to speed up the process.”
“My fear now is that the federal government will manage these assets in perpetuity,” said Sen. Phil Gramm (R-Tex.), whose state has the most foreclosed real estate properties. “I want to urge you to be bold. Go out and sell some of this property.”
One senator after another expressed irritation with the pace of the federal cleanup of failed thrifts. The Resolution Trust Corp., the government agency created last August to dispose of thrift assets, has seized 256 insolvent institutions but so far has sold or closed just 40 of them.
Lawmakers’ frustration is compounded because they fear that the cleanup will cost more than the $50 billion approved by Congress last year to shut down insolvent S&Ls; and pay off depositors, whose accounts are insured up to $100,000.
The unpredictability of interest rates and the uncertain ability of weak S&Ls; to return to financial health raise the threat that additional taxpayer funds will be needed.
“How many S&Ls; will most likely be liquidated?” asked Sen. John Heinz (R-Pa.).
No one had a specific answer. The decision will depend on how much investors are willing to pay to take over all or part of an insolvent S&L;, said Daniel Kearney, president of the Oversight Board, a federal panel that sets operating policies for the RTC.
Banking Committee Chairman Donald W. Riegle Jr. (D-Mich.) warned that the inventory of failed S&Ls; and their assets will continue to accumulate.
As many as 620 additional institutions--with assets of $400 billion or more--may falter financially and come under control of the RTC, Riegle said.
“I don’t think anyone is going to pick a figure and say it will hold,” said Garn. “We’ve got one hell of a big problem; it’s going to get worse before it gets better.
“I’m tired, I’m frustrated,” he complained.
The chief regulator presiding over the S&L; cleanup, RTC Chairman L. William Seidman, defended the work of his agency and the Oversight Board. Both “really have accomplished a lot,” he said. “I would challenge any private sector organization to move faster.”
Several senators chastised the Administration for failing to nominate candidates for two Oversight Board seats designated for non-government members. The board includes Treasury Secretary Nicholas F. Brady, Federal Reserve Board Chairman Alan Greenspan and Secretary of Housing and Urban Development Jack Kemp. The RTC also does not yet have an inspector general.
