Magazine article American Banker

Deteriorating Balanced-Budget Talks Threaten to Derail Thrift Bailout Plan

Magazine article American Banker

Deteriorating Balanced-Budget Talks Threaten to Derail Thrift Bailout Plan

Article excerpt

Talks over a balanced-budget deal are close to collapse, and the plan to replenish the thrift insurance fund could crash with them.

The Savings Association Insurance Fund bailout was tucked in the budget bill this summer to shield the plan from attacks - the budget measure is not open to amendment - but observers here say that strategy could doom the rescue if Congress and the White House can't make come to terms.

The bill would have forced thrifts to ante up roughly 80 cents for every $100 in insured deposits, while requiring banks to pay $600 million annually for 23 years to help pay off Financing Corp. bonds used to fund the last thrift bailout.

"My take is if the balanced-budget bill dies, it would appear that the Fico payments and the premium assessment die with it," said Samuel Baptista, president of the Financial Services Council.

So far, legislators are not pursuing alternatives.

"People haven't focused on it at all," said Edward L. Yingling, chief lobbyist for the American Bankers Association.

Still, lawmakers have options if they want to move the thrift fix quickly. If the budget talks fail, Congress will probably pass a "continuing resolution" to keep the government running through the fiscal year. The thrift plan could be added to that legislation.

Also, House Banking Chairman Jim Leach has said he may push a stand alone bill passed by his panel's financial institutions subcommittee this fall.

Another option is to do nothing. It may take months to prepare an alternative, and Congress faces a session abbreviated by elections, leaving precious little time to craft a new plan. …

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