Page 21


Washington, D. C. THE RECENT imbroglio over refinancing the Federal Savings and Loan Insurance Corporation important lesson on how not to wield the prerogatives of power. As Congress spent most of the spring wrestling with this urgent legislation, Wright changed horses in midstream, only to find himself, last month, on the losing side of the issue. The Speaker’s bungle came about like this: earlier in the year, Wright used his considerable prestige as Speaker by personally testifying, in a closed banking committee caucus, against the administration’s request for $15 billion to aid the virtually bankrupt FSLIC. The Treasury Department claimed the FSLIC needed at least $15 billion in order to restructure, and if necessary, have become insolvent. The S&L lobbyists in D.C. had been pushing for a lower figure of $5 million they said would give the FSLIC more than enough funds to act against those institutions that genuinely deserved to be shut down. Across the country hundreds of S&L’s have found their assets depleted far below the level of their liabilities. Because of the fall of agriculture, oil, and land prices, Texas institutions were especially hard hit: by this spring the Federal Home Loan Bank Board, which administers the FSLIC, listed 80 Texas thrifts as officially insolvent. To illustrate the magnitude of the problem, consider these figures: nearly 10 percent of Texas thrifts are hopelessly indebted, and their delinquent loans total $5 billion dollars. Since the situation in Texas is only a magnified version of the financial crisis throughout the industry, it’s not hard to understand why failing S&L’s were cropping up faster than the FSLIC could close them. At the beginning of the year the FSLIC, which insures deposits at S&L’s, found itself so cashpoor that it couldn’t afford to shut down the unsalvageable thrifts, because it couldn’t cover the money these institutions owed to their depositors. Richard Ryan is the Observer ‘s Washington correspondent. To complicate matters for Texas congressmen, many of the state’s thrift executives insisted their wobbly companies could be restored to health, if the FSLIC would only give the Texas economy time to turn around. Wright and other Texas pols plugged the concept of forbearance, a policy under which potentially profitable S&L’s would be given time to balance their books. The House Banking Committee voted out a $15 billion recapitalization plan, a figure that particularly horrified the S&L’s \(which are assessed for the Speaker Jim Wright money to finance FSLIC, as it so ately went into high gear, sending thrift executives from around the country to Washington to smooze with their congressmen. Then, in a move that surprised everyone, Wright announced he had changed his position, and was ready to support the higher, $15 billion limit. Not that it mattered: in the face of industry pressure the House passed the $5 billion bill, by a wide margin. Interestingly, the final vote divided the Texas delegation almost evenly. Supporting the $15 billion plan in the face of industry opposition were not only such liberal stalwarts as Henry Gonzalez and Mickey Leland, but also archconservatives like Steve Bartlett and Bill Archer. According to Congressman Bartlett the FSLIC would need many times the requested $15 billion to close any but the most catastrophically indebted S&L’s. The real solution, says Bartlett, is to enact some clear standards under which some hopelessly indebted S&L’s would be closed and other, more viable companies granted forbearance, while at the same time making sure the FSLIC has enough money to protect ordinary investors. So why did Wright change his mind and end up pushing the higher limit? Rep. Bartlett courteously asserts that the Speaker simply rethought his position after receiving better information about the serious condition of the FSLIC, but one Congressional staffer suggested to me that the cascade of articles in the national press implying the speaker had acted as an errand boy for the S&L’s also must have influenced his policy reversal. Whatever Wright’s personal feelings on the matter, his willingness to use the influence of the speakership in the service of narrow special interests showed surprisingly poor judgment and Lord knows there are already enough Texas congressmen willing to carry water for various industry lobbies in any case. There looms, however, a higher good above all this. In remarks included with the Banking Committee’s final version of the bill, Rep. Gonzalez argues that “the thrift industry has been the mainstay of home ownership in this country,” and that leaving the FSLIC severely under-financed eroded an already destabilized industry which millions of Americans depend on for credit. Such an unstable situation cannot long prevail. Rep. Bartlett told me that even the allies of the S&L’s admit that with only $5 billion available the FSLIC will soon have to be refinanced, and Congress will go through the same process yet another time. \(Sources say this could that’s the case, Wright is going to have to try and think through his position on the savings industry a little more clearly. In the meantime, his office says he doesn’t care whether the FSLIC gets $5 billion or $15 billion; “he just wants the bill passed.” ANDERSON & COMPANY E HE TEA SPICES TWO JEFFERSON WARE AUS’T’IN TEXAS Wal 512 453-1533 Send me your list. Name Street City Zip The Speaker’s S&L Dilemma By Richard Ryan THE TEXAS OBSERVER 7