From: mpye@netcom.com (Michael Pye)
Subject: Consider this
Organization: Netcom - Online Communication Services  (408 241-9760 guest) 
Date: Tue, 13 Oct 1992 12:54:20 GMT

Before you rush out to cast a vote for either Bush or Clinton, consider 
the following.  After what happened four years ago, I can't see how
ANYONE could even think of voting republicrat ever again.
 

One Issue That Bush and Clinton Won't Touch

Bailout: Experts say another wave of bank and thrift failures looms 
after Election Day. For different reasons, neither candidate wants to 
talk about it.

Los Angeles Times  - SUNDAY October 11, 1992
By: JAMES RISEN; TIMES STAFF WRITER
Edition: Home Edition   Section: Business   Page: 1  Pt. D  Col. 2

    WASHINGTON - Neither George Bush nor Bill Clinton is talking 
about it, but a nasty surprise will confront the nation almost as 
soon as next month's presidential election is over.

    Experts say the savings and loan crisis, the bete-noire of 
national politics, could rear its head again with a vengeance in 
December, before the next President even has a chance to take the 
oath of office. And its evil twin, the banking crisis, will be right 
beside it.

    More than 100 banks and thrifts could fail within months of the 
election because of tough new regulatory standards imposed last year, 
but purposefully delayed until after November.

    The new rules, which take effect Dec. 19, make it more likely 
that regulators will seize troubled thrifts and banks once their 
capital falls to 2% or less of their core assets. Federal regulators 
say about 50 banks and 30 to 40 thrifts could be seized almost 
immediately.

    And that is just the leading edge of what could be a new wave of 
failures as the biggest financial scandal in American history 
continues to sweep across the nation's economic and political 
landscape.

    Some analysts believe that as many as 700 more thrifts and 1,000 
additional banks could go belly up in the coming years, especially if 
rising interest rates cause further losses at problem institutions.

    Senior federal officials caution that at least half a dozen of 
the nation's largest commercial banks are among those teetering on 
the edge of failure, although they decline to identify them publicly.

    "We can run from this, but we can't hide," cautioned Robert 
Reischauer, director of the Congressional Budget Office.

    Yet the federal agency created to deal with the thrift crisis is 
scheduled to go out of existence next fall, and Congress and the 
White House have not figured out what to do if the crisis has not 
abated by then.

    Last week, Congress fled Washington for the year without 
approving $43 billion in funds needed to keep the government's thrift 
cleanup agency running until next spring. Meanwhile, the Bush 
Administration has not yet asked Congress for any money to finance a 
new deposit insurance fund that is supposed to cover thrifts starting 
next fall.

    The looming failures are likely to increase the cost of a bailout 
that has ballooned far beyond the initial estimates of even the 
Administration's harshest critics. So far, the S&L cleanup alone has 
cost taxpayers $84 billion; officials expect the figure to rise to at 
least $130 billion and with interest to more than $300 billion.    In 
addition, new federal standards make it more likely that regulators 
will seize uninsured deposits--those above the $100,000 limit on 
federal insurance--to help pay the government's costs of closing 
banks and thrifts. Before the new regulations went into effect, the 
federal government routinely covered uninsured deposits to avoid the 
possibility of runs on weak institutions.

    Despite the continuing troubles, many observers contend that 
Washington has been playing politics with the issue all year, 
delaying any real action on S&Ls and banks until after the election. 
Democrats accuse the Republican White House of deliberately delaying 
the closures of sick thrifts and banks in California and elsewhere in 
an effort to reduce the political fallout on President Bush. And 
Republicans say the Democratic Congress has purposefully deferred 
approving funds to finance the remainder of the S&L cleanup.

    "Bush claims that this problem is over, and that is dishonest," 
charged Rep. Bruce Vento (D-Minn.), a key Democrat on S&L and banking 
issues. "There is no question they have held off closing institutions 
this year. There is no question that there will be a December 
surprise."

    Countered Tim Ryan, director of the Office of Thrift Supervision: 
"It is an incredible situation, a ludicrous delay that is costing us 
$6 million a day, because Congress has refused all year to provide 
the money needed to finish the thrift cleanup."

    No matter who is to blame, the federal effort to clean up the S&L 
and banking debacles has come to a virtual standstill since last 
spring. Bush's desire to downplay the S&L and banking crises during 
his reelection campaign is an understandable strategy, given his role 
in the deregulation drive of the Ronald Reagan Administration and his 
involvement in the cleanup that began under his Administration.

    But Democrat Clinton has been strangely silent as well; in fact, 
the Democratic Party as a whole has seemed inclined to help Bush try 
to bury the mess.

    Clearly, the issue makes the Washington establishment uneasy. The 
Democratic Congress, which has drawn fire for passing the legislation 
that helped foster the S&L crisis in the early 1980s, seems to have 
swung to the other extreme. Increasingly fearful of the political 
impact of the financial crisis, Congress has, ironically, set the 
stage for the December surprise. Late last year, it approved the new 
regulations authorizing regulators to seize commercial banks whose 
capital falls to 2% or less of its assets. Previously, the government 
seized banks only after they had become insolvent.

    Congressional leaders have said privately they believe the S&L 
issue is double-edged: Both parties can be blamed for the debacle, 
and Democrats tend to get dragged down with Republicans any time the 
issue is raised.

    But Clinton has never served in Congress and had nothing to do 
with the legislation that contributed to it. But, like Michael 
Dukakis, another Washington outsider who ran against Bush in 1988, 
Clinton has declined to make the thrift crisis a major issue.

    "The campaign thinks it's too complex," observed Clinton economic 
adviser Rob Shapiro. Some outside analysts believe that questions 
about the involvement of Clinton and his wife with a failed Arkansas 
thrift, an issue that surfaced early in the presidential campaign, 
may have stifled his criticism of Bush on the issue.

    Only independent presidential contender Ross Perot has sought to 
turn the crisis into a campaign issue, assailing Bush personally for 
the soaring costs of the S&L and banking bailouts. In speeches, and 
in his new book, "United We Stand," Perot has charged that 
Washington's failure to deal with the financial disasters of the 
1980s underscores the need for leaders who are willing to take 
personal responsibility for their actions.

    Yet for the major party candidates, 1992 almost seems to be a 
replay of 1988, when the S&L crisis was clearly ignored only to 
become a hot political issue the moment George Bush took office. Just 
18 days after his inauguration, Bush introduced S&L bailout 
legislation that his staff had worked on for months, but had gone 
unmentioned during the 1988 campaign.

    "Nothing could be more ironic than the fact that one of the 
biggest public policy failures of the century was a non-issue in the 
last election, and is a non-issue again in this election," noted Rep. 
Jim Leach (R-Iowa), a leading Republican on the House Banking 
Committee.

    In 1989, George Bush designated L. William Seidman, chairman of 
the Federal Deposit Insurance Corp., as his point man on the S&L 
crisis and the looming troubles in the banking industry. Seidman took 
on the added role of chairman of the Resolution Trust Corp., the 
agency created in 1989 to clean up the S&L mess.

    But three years later, Seidman left his twin posts without ever 
having met personally with the President to discuss the debacle.

    For Seidman, the President's chair was always empty during policy 
deliberations on the thrift bailout. Seidman said he believes that 
Bush deliberately kept his distance from the biggest financial 
disaster since the Depression.

    "I met with (Treasury Secretary Nicholas F.) Brady, I met with 
(former White House Chief of Staff) John Sununu, but I never once saw 
the President," Seidman said.

    OTS chief Ryan, whom Bush appointed as chief S&L regulator in 
early 1990, said in an interview that he has met with Bush only once. 
"It was either late last year or early this year, I can't recall," he 
said.

    Even so, it has been difficult for Bush to distance himself 
entirely from the issue. As vice president, Bush chaired a Reagan 
Administration task force on financial deregulation that dealt with 
S&L regulatory issues. In addition, almost all of the taxpayer bills 
have come due during his presidency, and the scandal has even touched 
his family: One of his sons, Neil Bush, has been censured by 
government regulators for his role in the failure of a Denver thrift 
where he served on the board of directors.

    While Bush tries to keep the S&L crisis at arm's length, his 
aides have sought to make the case that the crisis is all but over, 
and that its resolution is only being delayed by an irresponsible 
Democratic Congress that refuses to provide the funds to close down a 
few remaining institutions.

    Since assuming control of the RTC in February, RTC Chairman 
Albert Casey has tried to demonstrate that the Administration is on 
top of the crisis. He set a goal to sell $100 billion worth of real 
estate and other assets seized from insolvent S&Ls by Oct. 1. He 
insists that all S&L assets, even "the absolute dregs," will be sold 
off by the end of 1996.

    RTC spokesman Stephen Katsanos said preliminary figures indicate 
that the agency has met its goal. But he acknowledged that the RTC 
will have to count deals still in escrow, meaning the sales have not 
been finalized, to reach the objective.

    Administration critics, as well as sources within the RTC, say 
the election-year push to rapidly dispose of assets has forced the 
agency to sell properties in huge blocks to rich investors at 
bargain-basement prices.

Newsgroups: alt.politics.perot