Financial Fiascoes: A Mess Beyond Our Measure

If you thought the savings and loan disaster couldn't get much worse, well, think again. In the gloomiest assessment of the megamess yet, U.S. Comptroller General Charles Bowsher said last week the Resolution Trust Corporation, which is handling the bailout, was in such disarray that government accountants cannot even audit its books. That means Washington has no clear idea of how much the bailout will ultimately cost as the RTC shuts more than 1,000 bankrupt S&Ls and sells off real estate and other assets.

There is little doubt, however, that the price tag is going up. While the Bush Administration has earmarked $130 billion for the bailout, Bowsher said the RTC will require at least $150 billion as depressed real estate markets slash the value of RTC holdings. When interest charges are included, the final cost of the cleanup could approach $500 billion over the next 40 years.

Bowsher warned that taxpayers may also have to bail out the banking industry if Washington cannot agree on how to replenish the dwindling Federal Deposit Insurance Corporation fund. It could lose more than $23 billion over the next two years as the commercial real estate depression causes hundreds of shaky banks to fail.