$45 Billion Sought to Mop Up S & Ls : Banking: Clinton Administration asks Congress for $12 billion more than Bush’s estimate. Funds are marked for closing failed thrifts and restoring safety net.

The Clinton Administration, coming to grips with the unfinished business of cleaning up the savings and loan industry, on Tuesday asked Congress for an additional $45 billion to dispose of insolvent thrifts and provide a hefty safety margin against future failures.

The request is $12 billion higher than the Bush Administration’s final estimate of the cost of closing failed savings and loan associations and selling billions of dollars worth of their mortgages and real estate now held by the government.

If the money is approved, the total tab for the S&L; crisis would be $132 billion in current dollars. That does not include interest costs on bonds issued by the government to finance the disposal of more than 700 failed S&Ls.; Depending on future interest rates, the ultimate costs could reach $300 billion or more.

The Administration is confident that a Democratic Congress will give a Democratic President what it refused to grant President George Bush last year: money to finish the work of the Resolution Trust Corp., the agency handling the cleanup.

“I know that a vote to fund the RTC is a tough vote,” Treasury Secretary Lloyd Bentsen told skeptical members of the House Banking Committee on Tuesday. “I’ve been there; I’ve got the scars to show for it,” said the former senator.

“But I also know that this is a vote for depositors, for the safety of our financial institutions, and that if we fail to meet this obligation, we will pay a far greater price, and deservedly so,” he said.

Congress refused to provide RTC funding last year during an election season. Democrats said they wouldn’t vote for the bill unless the White House could deliver a majority of House Republicans to support the funding. But the Bush Administration was unsuccessful.

The S&L; cleanup became necessary because federal insurance guarantees Americans’ bank and thrift deposits up to $100,000. The government has protected the funds of nearly 22 million depositors in failed S&Ls; in the past four years. The money being spent by taxpayers represents the difference between those insured accounts and the value of thrift assets in real estate and mortgages. Those assets plunged precipitously during the late 1980s because of excessive speculation and a collapse in real estate values in many markets.

The Clinton Administration did not originally include a figure for the RTC cleanup in its first budget estimate, issued last month. Budget officials said they left it out because they were not certain how much money would be needed.

Now, however, the budget will be adjusted to include $34 billion of the $45 billion request, which means the budget deficit will be $34 billion larger than the $262 billion figure for fiscal 1994 included in the economic plan Clinton issued in February.

The other $11 billion sought by the Administration will not be included in the deficit projections because budget officials are not certain the money will have to be spent.

“We hope and believe that ($34 billion) will be enough,” White House spokesman George Stephanopoulos said Tuesday. Authorization to spend the additional $11 billion would provide “plenty of cushion to cover any conceivable S&L; cleanup costs,” he said. “We hope and believe that we will not be forced to spend the extra $11 billion.”

Bentsen told the committee that the Administration wants a “clean bill,” giving full funding with no strings attached to its operation of the RTC.

The money sought by the Clinton Administration would be used to complete the sale or shutdown of 83 crippled S&Ls; now being run by the government. Because Congress failed to approve funding last year, these institutions continue to operate and lose money, perhaps as much as $6 million a day. In addition, the RTC would be responsible for any S&Ls; that fail between now and Sept. 30.

Of the $45 billion request to Congress, the Clinton Administration seeks $28 billion for these current and anticipated expenses for the RTC.

After Sept. 30, the protector of thrift deposits will be the new Savings Assn. Insurance Fund, which replaced the Federal Savings and Loan Insurance Corp. that was wiped out by the wave of thrift failures.

The new fund would receive $17 billion under the Clinton plan, an amount significantly higher than the $8 billion estimated in analyses by the Bush Administration and Albert V. Casey, the Republican appointee who served as president of the RTC until Monday.

The extra money requested by the White House would provide a generous safety margin if the economy weakens, interest rates rise and there is an unexpected surge of failures in the thrift industry. It also gives the Democratic Administration a political cushion.

“They are over-asking to be sure that people understand it isn’t their problem, that they didn’t make it,” said former Postmaster General Anthony M. Frank, a veteran financial industry executive who is now running the new Independent Bancorp of Arizona.

“If you over-ask, you can get what you need and still allow Congress to cut (the request) back some,” he said.

However, Bentsen told the committee that the Administration had made “a very earnest attempt to estimate the costs.”

“We hope that we will use less than $45 billion, but we believe our request is sufficient to complete the job, once and for all, so that we will not come back to you to ask again for funds,” he said.

The RTC, which has disposed of more than $300 billion in assets and has at least $100 billion left to sell, is unpopular among many members of Congress because it has relied on huge bulk sales. The agency says it has such a huge inventory of assets that it must rely on large-scale sales. But critics say the RTC may be able to get more money if it sells individual assets to individual investors.

Throughout the three-hour hearing on Tuesday, members of the committee complained to Bentsen that their constituents were unhappy because they had been unable to buy properties from the RTC.

Reliance on bulk sales “is disturbing,” said Rep. Jim Leach (R-Iowa), the committee’s ranking Republican.