Even these revised figures still look low to some experts. Brady’s total excluded $52 billion in bailout costs–unfunded losses on thrifts sold in the Reagan years–that could bump the total as high as $182 billion. Add other charges, including interest costs, and the figure rises to as much as $300 billion. Diehard doomsayers add in the costs of bonds the government will have to issue to pay off the debt, bringing the tab to as high as $500 billion. Even some Republicans are now hedging their bets by starting to use the $300 billion figure. As Bert Ely, a thrift-industry analyst and financial consultant, puts it, “It is a politically fail-safe forecast, making darn sure Bush doesn’t have to make a larger one as the ‘92 elections approach.”
If that kind of talk is supposed to be calming, it isn’t working. “The size of this hole is astronomical,” fretted Federal Reserve Chairman Alan Greenspan. Congress and the administration are struggling to bring down the estimated $140 billion federal deficit; the new S&L numbers make it certain that one way or another “the whole bailout will have to be ignored,” as one budget expert put it. But how? Some want to put the losses “off budget,” not counted anywhere. Last week a new gimmick was gaining ground: keeping the S&L cost officially on budget but insisting that it not count in calculations under the Gramm-Rudman-Hollings deficit-reduction law.
Drop in the bucket: While the numbers in the big picture piled up, the S&L spotlight touched George Bush’s family last week. Neil Bush, the president’s son, appeared before the House Banking Committee to answer accusations of conflict of interest while serving as an outside director of the failed Denver-based Silverado Banking, Savings and Loan Association. Regulators claim that inside officers did the main damage to Silverado, but Democrats grilled the younger Bush on his dealings with two developers who owed the bank heavily. One gave Bush $100,000 to invest with the understanding that Bush would share in profits but not in losses. Bush admitted, “I know it sounds a little fishy.” He denied any conflict, and he had abstained from voting on the developer’s loans. Democrats remained skeptical. Said Jim McDermott of Washington, “We understand abstaining on votes around here, and we understand sometimes that people who have an interest can still move things through Congress.” The Denver S&L’s failure will cost taxpayers $1 billion. By the latest counts, that’s just a drop in the S&L bucket.
The government’s estimate of the cost of the S&L bailout has increased at least three times.
March 1985: An internal estimate leaks out of the Federal Home Loan Bank Board, and the technician responsible is fired. $10 billion
Spring 1986: The Treasury Department comes up with its first “official” estimate. $10.8 billion
August 1989: The administration’s “final” rescue package puts the price tag at 10 times the earlier figure. $113 billion
May 1990: Treasury admits the cost will be even higher than expected. $182 billion
