Congressional Budget Office Pans FSLIC Aid Plan. Calls Proposal 'Gimmickry' That Widens Deficit; Memo Threatens Consensus Behind Bill, Aide Says

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Congressional Budget Office Pans FSLIC Aid Plan

WASHINGTON -- An administration plan to aid the Federal Savings and Loan Insurance Corp. has run into trouble because the Congressional Budget Office has found that the plan would add to the federal deficit, congressional aides said last week.

The office's finding that the plan could enlarge the deficit by up to $12 billion "has definitely slowed down what was a consensus behind the FSLIC bill" in Congress, said an aide to a member of the House Banking Committee.

The Congressional Budget Office's conclusion came in a preliminary routine analysis of the FSLIC plan prepared at the staff level and sent to Congress earlier this month. The analysis attacked the FSLIC plan as "budget gimmickry" designed to delay the "budgetary consequences" of aiding the FSLIC.

That memo has weakened support for the plan because the Gramm-Rudman deficit reduction law has made legislators more aware of the political ramifications of voting for deficit-widening programs, aides said.

"Members [of the banking committees] are saying, 'We don't want to be put in the position of voting for a potentially budget-busting bill,'" said a House Banking Committee staff member.

The House Banking Committee's financial institutions subcommittee was scheduled to vote on the FSLIC plan earlier this week, but the meeting was postponed without any new date set. Sources in Congress and the thrift industry said the delay may stem from reaction to the Congressional Budget Office memo.

But an aide to House Banking Committee Chairman Fernand J. St Germain, D-R.I., said the meeting was canceled because of scheduling problems, not because of the memo. The aide added that the subcommittee probably would vote on the FSLIC plan next week.

The FSLIC plan calls for the creation of a "shell" funding corporation that would issue up to $15 billion of long-term bonds. The 12 regional Federal Home Loan banks as a group would contribute up to $3 billion of their capital for the funding facility to retire the issue through the purchase of zero coupon bonds.

The plan was developed because the FSLIC needs to liquidate a growing number of insolvent and near-insolvent savings and loans that it has kept open out of fear of jeopardizing its own dwindling reserves -- estimated at $6 billion -- if all were closed. The cost to the FSLIC of liquidating those thrifts could exceed $16 billion, administration officials have estimated. …