THE water keeps growing muddier around the bailout of savings and
loan depositors, the most expensive financial bailout in United
Estimates of the ultimate bill have billowed out dramatically in
recent weeks - to as high as half a trillion dollars, if market
conditions are poor.
So far, market conditions have been poor. The cleanup, riddled
with political tensions, is proving slower and more difficult than
The growing bailout bill now has both officials and outsiders
growing more uneasy about other liabilities hanging over the heads
of American taxpayers.
"The problem is much broader than the S&Ls," says L. William
Seidman, chairman of the Resolution Trust Corporation (RTC), the
government body whose task is to clean up the industry. "It's
government guarantees, which have become pervasive in our economy."
A recent report from the US General Accounting Office (GAO) pegs
the federal government's total liability on loan guarantees and
insurance at $6 trillion, or five times the total federal budget for
No one sees any signs that most of these programs, which run from
student loan guarantees to the insuring of bank deposits, will
collapse as the thrift deposit insurance has.
But the federal fund that insures $1.8 trillion of bank deposits
has dropped to the lowest levels of assets compared to the amount of
money it insures since it was created just after the Great
Some Texas bank failures and low real estate values have run down
the bank fund's assets to 70 cents for every $100 insured. This is
about half the level of assets the fund should safely carry, says
Mr. Seidman, who also chairs the Federal Deposit Insurance
Most foresee the bank insurance fund building itself back up in
the early 1990s, not collapsing.
But with real-estate markets weak nationally, fewer close
observers are taking anything for granted.
"All of a sudden, everybody's very worried" about the whole range
of government guarantees, says Peggy Miller, a lobbyist with
Consumers Federation of America. Part of it is politics, she says,
as officials like Seidman seek to spread attention away from their
own troubled operations. But she adds that the concerns are quite
Seidman, though, has not been shy about the problems of the
bailout. His independent voice has not won him much favor with the
Bush administration. The bailout was one of the first major
initiatives of President Bush as president, and White House staff
members are sensitive to its political fallout. …