$25-Billion Rescue of S&L; Insurance Fund Rejected
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WASHINGTON — The insurance fund covering about $900 billion in savings and loan association deposits is broke by some accounting standards, but the House Banking Committee today rejected a proposal to spend $25 billion to get it out of the red.
The committee voted 25 to 24 against a rescue plan, approved by one of its subcommittees Tuesday, that would have funneled the money, none of it from taxpayers, into the Federal Savings & Loan Insurance Corp., which insures S&L; deposits up to $100,000.
The panel opted instead for a $5-billion, two-year program that the subcommittee voted down on Tuesday. The committee said it could return to the issue in 1989 if the problem needs further attention.
The General Accounting Office has said FSLIC would be broke if it followed ordinary accounting principles and set aside money to pay off depositors in S&Ls; that are already insolvent and should be closed.
The question does not affect depositors right now because those institutions are being kept open and operating--”warehoused,” some people call it--at a cost of $6 million a day in accumulating losses. That spares the insurance fund the immediate cost of paying off depositors.
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