Cost Estimate for S&L; Cleanup Hits $500 Billion : Thrifts: The economic slowdown and the collapse of the junk bond market are exacerbating the problem, the U.S. controller general says.

The economic slowdown is likely to increase the bill for cleaning up the savings and loan mess to about $500 billion, the head of the General Accounting Office said Thursday.

Charles A. Bowsher, comptroller general and head of the congressional watchdog agency, cited the growing threat of a recession and the collapse of the junk bond market in offering his sober assessment of the likely cost to taxpayers.

Last spring, Bowsher had estimated that there was an outside chance that the costs would reach the half-trillion-dollar level. Thursday, for the first time, he said that figure is the likely final bill for the cleanup.

“The recession and the junk bond collapse are both contributing to the fact that the costs keep creeping up on you,” Bowsher told reporters after appearing before the House Banking, Finance and Urban Affairs Committee.

Bowsher also joined a growing chorus of experts both in and out of government who have called on federal regulators to move more quickly to sell off the real estate and other properties held by the Resolution Trust Corp., the agency that has taken on the assets of hundreds of failed thrifts bailed out by the government.

Bowsher warned that if the federal government tries to hold on to some real estate to avoid flooding the market at a time of depressed prices, the properties held by the RTC will deteriorate and rapidly lose even more of their value.

“If you don’t move these assets, the costs will keep getting higher,” he said.

The economic slump not only will make it more difficult for the government to sell off properties held by the RTC, but also could lead to more S&L; failures.

Meanwhile, the collapse of the junk bond market will also increase the government’s costs because many of the non-real estate assets held by the RTC are junk bonds bought by failed S&Ls.; Those assets will now be worth even less than federal regulators initially had expected.

Bowsher also noted that the RTC still does not have adequate management systems to determine the value of the properties it has in its massive inventory. The agency is moving slowly on selling off its holdings partly because its headquarters staff does not know what the agency has, Bowsher said.

He said his $500-billion estimate of the final price of the S&L; debacle takes into account the fact that more thrift institutions are likely to fail. Excluding those future costs, the price tag still would be at least $370 billion--about $45 billion higher than earlier GAO estimates, Bowsher said.

In April, Bowsher said the cost, excluding future failures, would be $325 billion.

Bowsher’s grim numbers contrast sharply with the $170-billion cost estimate still used by the Bush Administration. But Administration figures do not include interest costs that the government will have to pay.

Bowsher chided the White House Thursday for its refusal to use more realistic cost estimates, saying that an admission of higher costs would give “a more complete picture.”