S&L; Deals Too Sweet, House Panelist Says

The chairman of the House Banking Committee today described some government sales of failed savings and loans in late 1988 as “a giveaway” and said many of the deals should be renegotiated.

The Bush Administration’s top banking official said the government is considering ways to renegotiate some of the sale contracts but does not intend to break them.

In a report released at a House hearing, investigators for the banking committee said outside investors in troubled thrifts received $78 in assets and government-granted benefits for every $1 of capital they put up to buy the institutions.

“These so-called deals bear all the earmarks of a giveaway--with the recipients of the government largess being some of the fattest of the nation’s financial fat cats,” Rep. Henry B. Gonzalez (D-Tex.) said. “We are hopeful that there can be renegotiations that rectify some of the excesses.”

Gonzalez said his committee will “haunt” the Resolution Trust Corp., the agency responsible for disposing of failed S&Ls;, “until we have hard evidence that everything is being done to recover as many of the billions as possible.”

L. William Seidman, who heads the RTC and the Federal Deposit Insurance Corp., told the committee that the RTC’s efforts “are to minimize costs to the government within the provisions of the contracts.”

“We are not considering breaking the government’s agreements,” he said.

The committee report concluded that 94 S&L; deals completed in late 1988 will cost the government about $71 billion in assistance to buyers of the thrifts, including as much as $4.2 billion in tax breaks.

The investigators’ study focused particularly on the sales of American Savings Bank FA of California and two giant Texas thrifts, Southwest Savings Assn. and First Gibraltar Federal Savings Bank.