The House Banking Committee voted Thursday to tap Federal Reserve surpluses to cover $3-billion of the cost of cleaning up the savings and loan losses of the 1980s.
In an unexpected development, the panel adopted an amendment directing the Fed to devote part of its surpluses to help pay off Financing Corp. _ better known as FICO _ bonds related to the bailout.
The amendment was part of a package later approved by the committee for reviving the thrift industry's deposit insurance fund and setting the stage for S&Ls to convert themselves to commercial banks later.
Sponsored by Reps. Bill McCollum, R-Fla., and Henry Gonzalez, D-Texas, the package would require banks and thrifts to share the burden of paying off bonds at a rate of $790-million a year used to cover the loss of government-insured S&L deposits.
The thrift fund rescue package had been stalled as banks and others fought to avoid being forced to help pay off the bonds.
The amendment tapping Fed surpluses to help cover the bailout was sponsored by Rep. William H. Orton, D-Utah. Banking Committee spokesman David Runkel said it would effectively reduce the payment of banks by $100-million a year.
The Fed, which sends interest on its surpluses to the federal treasury, opposes Orton's measure, but a spokesman declined to comment Thursday. Banking Committee chairman Jim Leach, R-Iowa, also opposes using the Fed money.
The development is the latest twist in the proposal to rescue the Savings Association Insurance Fund, which insures S&L deposits up to $100,000 per account. While most of the nation's remaining S&Ls are financially strong, the fund's reserves have been depleted, partly because of repayment of bonds from the S&L crisis and the ever-smaller number of thrift institutions.
The Clinton administration fears a financial crisis if Congress doesn't act to revive the fund. Healthy thrifts are converting into commercial banks to avoid the high fees charged by the SAIF, leaving the marginal S&Ls to foot the hefty payments.
"Passage of this legislation remains one of this administration's foremost and urgent priorities," White House chief of staff Leon Panetta said in a letter to House Speaker Newt Gingrich, R-Ga.
Under the McCollum-Gonzalez plan, thrifts would make a onetime payment, estimated at $5.5-billion, to bring the SAIF to full funding. Banks would help make the annual $790-million FICO bond payments on a rising scale from 1997 to 1999. Then banks and thrifts would make the payments on a pro rata basis, with banks paying an estimated $600-million year.