RTC Says Funding Delays to Cost $350 Million : Thrift bailout: The agency blames Congress, but the chairman of the House Banking Committee says the Administration refused to cooperate.

The cost of the savings and loan cleanup will rise $350 million by year’s end because the failure by Congress to provide additional funds makes it impossible for regulators to sell money-losing thrifts, the Resolution Trust Corp. said Monday.

The bill could grow to $900 million if the delay in funding continues well into the first three months of next year, after Congress returns from its recess, according to RTC spokesman Stephen Katsanos.

Private analysts put the price tag for a three-month delay as high as $2.5 billion.

The agency had 18 S&Ls; with assets of $30 billion ready to sell at the end of last month but could not afford to arrange any deals, Katsanos said. Whenever an insolvent S&L; is sold, the RTC must provide funds to protect depositors by covering the difference between deposits and the value of the thrift’s assets.

However, Rep. Henry B. Gonzalez (D-Tex.), chairman of the House Banking Committee, insisted that the RTC has enough temporary borrowing authority to get the money it needs to sell insolvent thrifts.

A skeptical Congress wouldn’t furnish further funds because of “widespread concern” about the cost of the S&L; bailout and the “manner in which the program is being administered,” Gonzalez said Monday.

But Katsanos said the Treasury is uncertain whether it is legal for the RTC to borrow money for this purpose.

Gonzalez also chastised the Bush Administration for staying on the sidelines while the battle for funding was taking place. “There was absolutely no evidence that anyone in the Administration turned a hand to help us gain support in the closing hours of the session.”

The Senate Finance Committee had voted for $57 billion to fund the RTC for the full fiscal year, while the House Banking Committee approved a $10-billion measure. Advocates of funding failed Saturday night in efforts to win passage of any additional funding for the RTC.

The bill for closing or selling hundreds of insolvent thrifts may be as high as $132 billion, according to the Administration’s most recent estimate. This figure does not include the future cost of interest on the bonds used to finance the fiscal cleanup.

With the price tag running far above the $50 billion voted by Congress in 1989, many legislators have become concerned about granting additional funds.

“In 1989 when we struggled with the Administration’s bailout package, there was active daily support from the President and his Cabinet officers,” Gonzalez said. “This time, nothing,” he said, referring to the abortive effort to get funding as Congress completed the massive deficit-reduction package.

Treasury Secretary Nicholas F. Brady refused to testify on the issue, generating “a feeling among (House) members that the Administration was attempting to dodge any responsibility for the operation of the bailout and its massive costs,” Gonzalez said.

The price tag for the shutdown rises when insolvent institutions stay in business. Each day, these crippled thrifts spend more on operating costs and interest payments than they collect on their assets. Often the assets include real estate loans far behind in payments, or in foreclosure.

The RTC has virtually exhausted its working capital and cannot advertise new S&L; sales “until Congress returns and approves the money,” Katsanos said.

After completing the current round of deals, which involve 65 S&Ls; with total deposits of less than $10 billion, “the pipeline will be dry,” he said. The RTC fills the financial hole when an S&L; is sold, providing the institution with enough funds to protect the depositors. Eventually, the government will recover a portion of this money when it sells some of the assets from the failed institutions. The new buyers keep the good assets and give the dubious ones to the government.

Meanwhile, the RTC needs billions in working capital. This money is advanced to the S&Ls; to stabilize them financially, making it possible to sell the thrifts to private buyers who will invest new capital.

Gonzalez said he will hold hearings on the activities of the RTC early in January, “before the new Congress convenes so that there will be no delay in taking up the funding issue next year.”

Separately, Congress also passed legislation over the weekend that provides rewards for information leading to S&L; fraud prosecutions and the recovery of ill-gotten gains. That is similar to a reward system set up by Congress for defense fraud whistle-blowers.

The provisions, enacted as part of the crime bill passed over the weekend, offer rewards of up to $50,000 for information leading to prosecution of S&L; crooks.

Whistle-blowers who help Justice Department investigators trace improper gains would share a percentage of the seized money if the attorney general declared the information was crucial to its recovery.

A person who helps the government recover S&L; money would share 20% to 30% of the first $1 million, 10% to 20% of the next $4 million and 5% to 10% of the next $5 million, according to the bill.

The bill also creates so-called S&L; kingpin crime that carries a sentence of 10 years to life and fines up to $10 million for individuals and $20 million for corporations.