By Steven Greenhouse
N.Y. Times News Service
WASHINGTON _ The savings and loan mess was swept under the rug during the 1988 presidential campaign only to explode immediately afterward. Whether the nation's commercial banks are a similar time bomb has emerged as an issue in this year's campaign.
Ross Perot says both Republicans and Democrats are trying to hide a crisis in which commercial banks may require a huge taxpayer bailout. President Bush and Gov. Bill Clinton say the banking system is fundamentally sound, despite some problem banks.
As politicians wrestle over how large the problem is and who is to blame, federal banking regulators insist they have nothing to hide. They like to recall that months ago they stated their intention to step up the pace of closing weak banks on Dec. 19, when bank regulations, required by Congress last year, take effect.
The closings will certainly make the situation appear more dire. But more than a dozen banking experts in government, industry and academia said in interviews that they did not see a crisis akin to the savings and loan bailout, which will cost taxpayers more than $200 billion.
Yes, the commercial banking industry is fragile. But it is far stronger than the hemorrhaging savings and loan industry was four years ago.
"To assume the commercial banking industry is the savings and loan industry in sheep's clothing is terribly misleading," said James J. McDermott Jr., a banking analyst with Keefe, Bruyette Woods in New York.
And L. William Seidman, the former chairman of the Federal Deposit Insurance Corp., said: "The disaster scenarios we're seeing are based on a total collapse in real estate markets in the future. The real estate markets are terrible and will stay terrible, but I don't think they will get a lot worse."
Like the savings institutions, the ailing banks are usually plagued by problem loans for commercial real estate, including office buildings or shopping malls. Unlike most savings institutions, some banks are also saddled with soured loans for leveraged buyouts, oil and gas exploration and third world nations.
Still, federal regulators insist that the worst of the commercial bank crisis is over. They project that they will shut 100 to 125 failing banks, with combined assets of $76 billion, in 1993. That compares with an average of 175 failures annually during the last four years.
But the amount of assets of failed banks, at $76 billion, would be a record amount for one year.
As for the cost, the government says it will put up about $13 billion to protect depositors in those failed banks. Regulators say that these costs will be covered by the deposit insurance premiums collected from the banking industry. These premiums go into a bank insurance fund that is already short of money.
Banking experts are leery of the government's estimates. Regulators systematically underestimated the costs of the savings and loan bailout.
Some experts say they are certain that taxpayers will be called on to make up the difference between what the bank insurance fund takes in from premiums paid by banks, and what is needed to finance the bailout of commercial bank depositors.
The FDIC's latest estimate of the overall costs of bank closings through 1996 _ $45 billion _ could be underestimated by tens of billions of dollars, these experts say, especially if the nation falls back into recession or if real estate values continue to move downward.
"They're giving a very rosy projection, no matter how you cut it," said Edward J. Kane, a professor of finance at Boston College. He predicts that the government will need $69.7 billion to protect depositors at failing commercial banks in the next few years.
Analysts also say that all projections are out the …