WASHINGTON -- It took until nearly the end of the thrift crisis for a consensus to form on its ultimate cost $]50 billion, excluding interest.
Estimates of the price, a political hot potato in the time leading up to the 1989 thrift reform law, grew from $5 billion in 1986 to $1 trillion in the early 1990s.
The $150 billion estimate, subscribed to by the Congressional Budget Office among others, could have found other uses. If not for the need to clean up the failed thrifts, it could have paid for:
* A daily round of golf at Pebble Beach by every bank and thrift employee in America for a year.
* The purchase of 57,692 M-I Abrams battle tanks, seven times the current number in the U.S. arsenal.
* A Habitat for Humanitybuilt house for every homeless person in America - with $125 billion left over to cover President Clinton's health care plan through the year 2003.
Besides restructuring the thrift industry's regulators and insurance system, the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 set up the Resolution Trust Corp. and allocated the first taxpayer expenditure for the bailout.
Congress used a number of complicated devices - both on and off the budget. As recently as last fall, the cost was still being hotly debated on Capitol Hill.
The Savings and Community Bankers of America said that now that the industry has returned to health, the total costs can finally be tallied. The thrift trade group agrees with the Congressional Budget Office figure of $150 billion.
The RTC has just 11 failed thrifts, with $11.4 billion of assets, left to be sold. It also has an asset inventory of $36.9 billion bits and pieces of other failed thrifts - left to be sold.
Some observers say the $150 billion figure is a bit fuzzy. Philip F. Bartholomew, the economist who wrote the most recent Congressional Budget Office report on the cleanup, said: "We won't know the actual costs until all of the receiverships are finally closed, which could be well into the next century."
The cost depends on whether the RTC's own spending forecasts are accurate. The budget office relies on those figures. After the RTC sells a thrift, it usually retains some of the assets and sells them off in chunks.
The RTC doesn't track asset sales by institution - it puts them in a large pool and tries to drain it, using rough estimates of what the remaining inventory will bring in projecting cost.
While the 1989 law provided the first federal aid for dead thrifts, it wasn't the government's first attempt to deal with the crisis. It was preceded by the 1987 Competitive Equality Banking Act, which established the Financing Corp., or Fico as an off-budget vehicle for paying for some failed thrifts.
Fico sold $8.2 billion in bonds over a period of two years. To ensure repayment of the principal, the government tapped the Federal Home Loan Bank System's retained earnings for an initial $700 million.
Then it essentially mortgaged part of the thrift industry's deposit insurance premiums by diverting almost $800 million of them annually to pay the interest on the bonds.
The 1989 act put in place the first large-scale thrift cleanup mechanism by setting up two entities to spend money cleaning up thrifts.
First, it gave the RTC $50 billion in startup funds. Part of the money came from the Resolution Funding Corp., a quasi-private agency set up by the act which sold $30 billion in bonds.
To pay the principal, the government stripped an additional $1.2 billion from the home loan banks' retained earnings.
The home loan bank system also contributes $300 million annually to the interest payments on the bonds, but the taxpayers pick up the bulk of the interest costs - $2 billion a year.
Thus, while the industry is repaying the $30 billion of principal financed by
the 1989 law, most of the burden for the next 35 years falls on the taxpayers.
Second, the 1989 law set up the Federal Savings and Loan Insurance Corporation Resolution Fund as a successor to the former thrift insurance fund. The total taxpayer tab for the FSLIC fund is expected to be $44.5 billion.
FSLIC, with roughly $6 billion of industry assets, was folded into the FSLIC resolution fund, and the industry has kicked in an additional $2.5 billion through its insurance fund assessments.
In 1991 and 1992, $3.5 billion in additional thrift insurance assessments were channeled to the RTC, according to the Savings and Community Bankers.
Since 1989, there have been three additional taxpayer appropriations to the RTC totaling $73.3 billion - about half of which is unlikely to be spent.
