House Proposes Emergency Funds for RTC : Thrifts: Without the money, insolvent institutions could collapse and insured deposits could go unpaid.

With the government’s multibillion-dollar effort to close down failed savings and loans about to grind to a halt Tuesday, House leaders proposed an emergency funding bill to keep the thrift cleanup going.

By failing to approve more money for the Resolution Trust Corp., Congress risks reneging on its promise for the first time since the Great Depression to reimburse small depositors at federally insured thrifts.

Without the money, insolvent thrifts could collapse and the government would have no cash available to cover insured deposits.

House Banking Committee Chairman Henry Gonzalez (D-Tex.) and the committee’s senior Republican, Rep. Chalmers Wylie of Ohio, introduced a stripped-down RTC funding bill late Tuesday, saying it has the best chance for quick passage.

“It’s the best we can do,” Gonzalez said in proposing the bill to the House Rules Committee Tuesday evening.

The leadership’s last-minute move was forced by House Republicans, who had blocked action the past week on a banking committee bill approved earlier in the month.

The latest funding proposal could go for a vote on the House floor as early as today and then be reconciled with a broader Senate bill in conference committee, probably next week.

One problem with the House measure though is it would only keep RTC operating through September, forcing another decision on the thrift cleanup just before the election.

Gonzalez’s move was backed by House Speaker Thomas Foley and by the Bush Administration, a senior aide said.

Foley has said he will only take an RTC funding bill to the floor that can win bipartisan support. In an election year, Democrats refuse to be tarred with the volatile thrift issue. Wylie said he believes Republicans will back it.

The bill would lift RTC’s April 1 deadline to spend the $25 billion it was given last December. The agency has $17 billion left from that spending authority, which it estimates would last it through September.

The money is used to close down failed thrifts and pay off insured depositors. RTC staff and its sale of failed thrift assets is financed through another budget, so some of its operations can continue without more money.