Head of Thrift Cleanup Quits, Complains of Lack of Authority

The executive in charge of the $164-billion savings and loan cleanup quit Friday, dealing another setback to the White House’s most costly domestic initiative and giving Congress a new chance to blame the Bush Administration for delays that are costing the taxpayers $10 million a day.

Complaining that he was not given “the authority that I believe is essential to be effective,” Daniel P. Kearney resigned as president of the Resolution Trust Corp. Oversight Board, the Cabinet-level agency created to set policy for the S&L; cleanup.

Kearney, who declined to talk with reporters, issued a statement saying there had been a “mutual misunderstanding of the scope” of his job. He told associates that he blamed himself for not discovering before he took the post that although his title was “president and chief executive,” he would have to take orders from the Treasury Department.

William Taylor, the Federal Reserve Board’s director of bank supervision and regulation, was named as Kearney’s temporary replacement.

Congressional banking committee leaders reacted angrily to the resignation and announced that Kearney will be called to tell Congress why he is quitting and what is going wrong with the S&L; bailout.

House Banking Committee Chairman Henry B. Gonzalez (D-Tex.) said the resignation was “more evidence of the growing disarray in the Bush Administration’s implementation of the savings and loan bailout legislation.”

“This disarray and the indecision will do nothing but increase the cost of the bailout,” Gonzalez said. Banking Committee members calculate it is costing taxpayers $10 million a day--and perhaps twice that much--to keep savings associations open after they have gone broke.

Since the S&L; bill was signed by Bush last August, the government has found buyers for only 49 failed thrifts. Another 312 are under federal control and from 200 to 300 more are expected to fail. There is widespread belief in Congress that the $164 billion will be exhausted and more money will be needed, in part because of the delays.

Senate Banking Committee Chairman Donald Riegle (D-Mich.) said Kearney’s loss “is especially damaging because the Administration has yet to fill other key vacancies.” He listed half a dozen unfilled policy-making posts created by the bailout bill.

Rep. Douglas Barnard (D-Ga.), who heads a government operations subcommittee, and Rep. Bruce Vento (D-Minn.), chairman of a special S&L; oversight task force, issued a joint statement announcing new congressional hearings.

Vento called for abolishing the RTC Oversight Board, and Rep. Frank Annunzio (D-Ill.), chairman of another banking subcommittee, said the S&L; cleanup agency “has accomplished nothing and has cost taxpayers millions of dollars.”

Kearney’s resignation made him the third top official involved in the cleanup to blame the Treasury Department and the complicated bureaucracy for delaying the process. Federal Deposit Insurance Corp. Chairman L. William Seidman and RTC Director David C. Cooke made the same charge in congressional testimony a few days ago.

Under the system designed by the White House, Cooke--a career government employee in charge of the day-to-day cleanup--reports to Seidman, who doubles as chairman of the board of the RTC. The RTC board in turn reports to the RTC Oversight Board, and Oversight Board President Kearney gets marching orders from Treasury Secretary Nicholas F. Brady, who doubles as chairman of the Oversight Board. Brady has delegated much of the responsibility to Deputy Secretary John Robson.

“The structure was nuts to start with,” said Karen Shaw of the Institute for Strategy Analysis, a Washington consulting firm that specializes in financial policy issues.

Congressional banking committee leaders, who approved the plan, said it was not only the system that is flawed but also the White House’s management of it.

“The basic problem is that there hasn’t been much focus from the Administration,” said Rep. Charles Schumer (D-N.Y.). “This is the major financial crisis since World War II and you have a lot of unfilled positions and all these people bickering.”