The Savings And Loan Crisis: Finally, the Bill Has Come Due

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In the end, depositors stayed calm, even though some chafed at the idea of the cost of the bailout. "Honestly, it's the stupidest thing I've heard," said Leroy Scrues, a Detroit retiree. "Why should the public be paying for these rich peoples' mistakes?" Yet legislators and savers were relieved that Bush repudiated a proposal that his Administration had floated two weeks earlier: to levy a fee -- 25 cents for each $100 of deposits -- on all insured accounts. That ploy was widely seen as a tax in everything but name. The short-lived proposal was so distasteful that it made Bush's new plan seem all the more palatable. Said Fred Dorey, a Los Angeles medical statistician: "We were going to pay for it one way or another. At least the banks have to pay some too. It's a fair deal."

The healthy portion of the thrift industry will pay its share through an increase in its insurance premiums. The rate would rise from the current $2.08 per $1,000 of deposits to $2.30 from 1991 until 1994, after which it would decline to $1.80. The rate for banks would increase too, from 83 cents per $1,000 to $1.20 in 1990 and $1.50 thereafter. Even though both industries' insurance funds would be administered by the FDIC, their proceeds will be kept separate.

One reason for raising the banking industry's fees as part of the rescue package is to ensure that they do not obtain too much of a competitive advantage over thrifts in terms of their costs of doing business. Another reason is simply to bolster the banking industry's reserve fund so that it does not run into the same problems encountered by the FSLIC. In the end, at least some of the increased costs will probably be passed along to consumers, since thrift profits are already squeezed. Said Texas Democrat Henry Gonzalez, chairman of the House Banking Committee: "The little consumer will pay in the form of higher fees on checking accounts, new fees for automatic tellers and a myriad of other charges."

* The thrift industry seemed to meet the proposal with grudging acceptance but a fair amount of grumbling. Healthy S & Ls object philosophically to paying excessive cleanup costs for their fraudulent and incompetent brethren. Says Adam Jahns, chairman of Chicago's Craigin Federal Savings & Loan: "I don't think we should have to pay for serious crimes committed by others." Another complaint by S & Ls is that by combining thrift and banking supervision, the Bush plan may blur the distinction between the two and eventually remove any competitive advantage the thrifts still have, principally the ability to borrow long-term funds from federal Home Loan banks. Commercial banks are restricted to taking shorter-term loans from Federal Reserve banks. Besides paying higher premiums under the Bush plan, S & L owners would be required to follow stricter accounting rules and to boost their reserve capital from 3% of assets to 6%.