Bush Vows Prison for S&L; ‘Cheats’ : His Warning Is ‘Too Little and Woefully Late’--Democrats

President Bush launched a counterattack today against charges his Administration has reacted slowly to the savings and loan crisis, promising prison sentences for “the cheats and the chiselers and the charlatans.”

Speaking at the Justice Department, Bush also said he will ask Congress to increase next year’s spending to combat thrift fraud from the current $50 million to $100 million in the 1991 budget year.

For 1990, the Administration sought and accepted only $50 million, even though Congress had authorized $75 million.

Flanked by Atty. Gen. Dick Thornburgh and Treasury Secretary Nicholas F. Brady, whose agencies are leading the effort to unravel the S&L; catastrophe, Bush spoke to 88 of the nation’s 93 U.S. attorneys, summoned to Washington for the event.

Bush also announced that he is establishing a new position in the attorney general’s office, a special counsel for financial institution fraud who will coordinate investigations and prosecutions in that area.

On Capitol Hill, Democrats lashed out at Bush’s initiative as inadequate.

“It’s too little and woefully late,” said Rep. Charles E. Schumer (D-N.Y.), a member of the House Banking Committee. He said that $100 million might have been enough for 1990 but that it is not enough for 1991.

“The Administration is now moving only because the political heat is up,” said Sen. Howard M. Metzenbaum (D-Ohio).

Bush in his talk did not mention questions about his son, Neil, who was a director of the failed Silverado Savings & Loan in Denver.

Congressional Democrats have charged that the Administration has been lax in pursuing thrift fraud cases, partly because the Silverado collapse alone will cost taxpayers $1 billion and raises the possibility that the President’s son used his director’s position to benefit himself and business associates.

Thornburgh, who introduced Bush as “the boss,” quickly blamed Congress for some of the delay in thrift prosecutions. Thornburgh maintained that his prosecutors are making progress “despite congressional delays and funding shortfalls.”

Bush acknowledged, “We could have been moving even more rapidly” to combat thrift fraud, but said Congress had delayed in providing enough money.

Bush said the Justice Department secured 791 major fraud convictions last year involving banks and savings and loans. But there was no specific detail on how many of those convictions were related to the thrift disaster.

Schumer scoffed at some of the figures the President rattled off.

“Sure, we’ve recovered $100 million. That’s 1% of the over $20 billion lost to fraud. Yes, there’ve been 150 convictions, but there are 21,000 referrals lying on someone’s desk and gathering dust because there aren’t enough people to work on the case,” Schumer said.