$60 Billion More Needed for Rescue of S&Ls;, U.S. Says : Thrifts: Total bailout costs estimated at $132 billion. About 1,000 institutions may fail, Treasury chief reports.

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The Bush Administration, acknowledging that it vastly underestimated the cost of bailing out the savings and loan industry, told Congress Wednesday it will need as much as $60 billion in additional cash to complete the job.

S&Ls; are continuing to fall as their real estate investments turn sour, Treasury Secretary Nicholas F. Brady said in testimony before the Senate Banking Committee. He added the debacle could claim more than 1,000 institutions--fully one-third of the once-proud industry--before it ends.

Brady blamed much of the disaster on past real estate and lending practices that contributed to "overbuilding," adding that the nation will spend years working itself out from under the burden of the S&L; industry's collapse. "The S&L; problem is totally a function of how much overbuilding there has been in this country," he said.

Current estimates by the Resolution Trust Corp., the government junkyard for failed S&Ls;, now range from $89 billion to $132 billion, Brady said, far above the $73 billion the Administration said it was granted by Congress last August to dispose of dead or dying thrifts and to close down institutions that fail in the future.

Independent analysts, however, argued that about $15 billion to $20 billion of that amount is committed to other S&L; bailout expenses and is not available to close down institutions and pay off borrowers. This fact, they contend, will force the Administration to seek even larger amounts of borrowing authority from Congress. The White House said it will need approval from Capitol Hill to spend more money by the end of the year.

"There are no magic solutions," Brady said. "We cannot predict with certainty the amount of money or the amount of time it will take to finally resolve this problem."

But, he added: "It is now clear that the amounts projected and authorized (for the S&L; cleanup) will fall short of what is required."

The Administration also conceded that it will have to boost the $40-billion estimate for thrifts that were acquired by the government before Bush took office, but said no specific figure would be available until this summer. Sen. Jim Sasser (D-Tenn.) said he had been told the taxpayer tab for those previous deals, arranged in late 1988 by former chief thrift regulator M. Danny Wall, could run as high as $70 billion.

The latest thrift estimates are based on the amount that would be needed if the government wrote a check immediately to pay off all depositors at the crippled S&Ls;, whose accounts are insured up to $100,000 by the federal government.

The Administration, supported by most industry analysts, contends that its figures provide a more accurate view of the cost of the bailout than the widely reported forecasts that the ultimate price tag is likely to reach as high as $500 billion.

Those far bigger numbers, included in estimates by the congressionally sponsored Government Accounting Office, are derived by including projections of the full interest bill the government will face over the next 30 to 40 years.

"The size of the problem is certainly large enough for anyone to choke on," said Federal Reserve Chairman Alan Greenspan, who also helps oversee the thrift cleanup. "There are various different ways of . . . adding up the numbers, but we're continuously looking at apples and oranges."

Bert Ely, a thrift industry analyst whose early cost estimates proved to be far more accurate than those offered in the past by government officials, praised the Bush Administration for at last facing up to the size of the problem.

"We're finally seeing realistic numbers starting to come out of the Administration," he said.

By claiming he inherited the S&L; scandal and by moving quickly to present Congress with a solution, President Bush has largely escaped political blame for the thrift disaster. But Democrats sought Thursday to lay responsibility for the latest problems squarely at the doorstep of the White House.

"Today marks the beginning of the second S&L; crisis," said Rep. Charles E. Schumer (D-N. Y.). "What there has been is indifference, backbiting, delay and confusion. . . . Like an untended wound, the thrift crisis has festered without presidential leadership."

The need to finance the soaring costs of the S&L; cleanup, combined with the government's new strategy aimed at selling off thrift assets quickly, is pushing next year's federal deficit far above the $74-billion ceiling established by the Gramm-Rudman budget law.

That is adding to the challenge facing budget negotiators from Congress and the Administration, who face months of closed-door struggles over how to avoid the automatic spending cuts this fall called for by Gramm-Rudman if lawmakers fail to pare the deficit themselves.

Until recently, Administration officials had refused to confront the budgetary implications of the S&L; bailout, failing to even include an estimate for next year's cost in the spending blueprint presented in January by Bush.

In addition to the extra borrowing authority being sought by the Administration, the budget negotiators also have to deal with the highly charged issue of "working capital," which adds to the federal deficit.

Congress has already approved $45 billion in short-term borrowing to pay the up-front costs of buying S&L; assets, but the bailout is expected to require tens of billions of additional financing dollars over the next two years. The money is supposed to be largely recouped after the assets, such as real estate and mortgage securities, are sold.

The overall budgetary costs of the thrift bailout have now escalated to about $39 billion this year, $61 billion in 1991 and $51 billion in 1992, according to estimates presented to negotiators by White House Budget Director Richard G. Darman.

The annual costs are projected to fall sharply in later years as the RTC sells S&L; assets and pays off some of its debt.

When President Bush presented his plan last year to clean up the savings and loan mess, Administration officials argued that it would require shutting down no more than 350 to 500 thrifts.

But Brady's latest testimony confirms what many independent financial experts said at the time: The S&L; industry is destined to undergo a massive shakeout that will destroy at least one-third of the thrifts that once existed, leaving most of the survivors with little more than a minor role in the banking business.

Up to now, the federal government has acquired 423 failed thrifts and disposed of 93 of them. Thrift regulators hope to pick up the pace dramatically by selling off another 141 by the end of June.

To do so, regulators have switched strategies from trying to find buyers for "whole" thrifts--deposits and both good and bad loans with charter included--to auctioning off only those parts the private market will swallow.

"It's no secret that healthy banks and thrifts have become much more leery about taking real estate assets," Brady said. "Unfortunately, that is exactly what the RTC is trying to sell to them."

The rise in the number of casualties now expected is based on a new study by the Office of Thrift Supervision. It has identified 299 S&Ls;, with $193 billion in assets, "most likely" to be seized by the government within the next two years. By the time all those assets are sold, the government is expected to recover only about 72% to 78% of the value of their deposits.

This group of thrifts lost $2.6 billion last year, OTS director T. Timothy Ryan Jr. told reporters, and is concentrated in seven states--Texas (42), Florida (29), California (25), Illinois (25), New Jersey (16), Louisiana (16) and Ohio (15).

Another group of 315 S&Ls; with $152 billion in assets is in a category of dangerous uncertainty, with the fate of individual institutions linked to interest rates and local real estate markets. If all these thrifts succumb to insolvency, the government takeovers would exceed 1,000.

DEEPER IN DEBT--Several factors contribute to higher S&L; bailout cost. D1

BILLIONS UPON BILLIONS

The estimated cost of cleaning up the savings and loan industry and paying insured depositors has mounted inexorably since President Bush made his initial bailout proposal last February. The following figures show the estimated cost of immediately paying off depositors.

Source Date Estimate Bush Administration February, 1989 $113 billion Industry analyst Bert Ely April, 1990 125 billion General Accounting Office April, 1990 140 billion or more Bush Administration May, 1990 89 to 132 billion

Many analysts also include the interest costs over 30 or 40 years of various approaches to borrowing the funds needed to pay S&L; depositors. Here are some of those figures:

Source Date Estimate Bush Administration February, 1989 $198 billion* General Accounting Office July, 1989 257 billion General Accounting Office April, 1990 325 billion

* Includes only 10 years of interest expenses

Sources: Office of Thrift Supervision, Congressional Budget Office

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