WASHINGTON - Two economists have concluded that about 2,000 U.S. banks are on the brink of collapse and that bailing them out today would cost the government up to $95 billion.

The estimate, in a study published by the Washington Post Co., is double regulators' most pessimistic forecast to date and goes against the grain of recent reports of record profits in commercial banking.

Pricing bank assets at today's depressed market values prompted the study's authors, banking professor Edward Hill of Cleveland State University and Roger Vaughan, an economic consultant, to make their grim forecast.

Bailout |Almost Inevitable'

Losses at the sick banks are potentially so huge that the healthy 98% of the banking industry could not pay for a bailout without putting the whole industry at risk, the study said.

"Some kind of a taxpayer bailout is almost inevitable," Mr. Vaughan said at a press briefing. The study, "Banking on the Brink," drew on data from more than 12,000 banking companies and was published in the Washington Post's Briefing Book series.

Last year, Congress tried to avert a taxpayer bailout by tightening bank regulations and making $70 billion of loans available to the Federal Deposit Insurance Corp. over 15 years.

Crisis After Crisis Predicted

The two researchers called this approach wrong-headed, saying it failed to tackle the deposit insurance system's distortion of the banking business.

Cash keeps flowing into dying banks because depositors know their money is insured and they will get it back regardless of how abysmally the bank is run or how risky its operations, the economists said.

"A restaurant that consistently serves bad food loses customers. Not so with banking," said Mr. Vaughan. "Until market discipline is introduced into pricing of deposit insurance, the system will lurch from one crisis to another."

But politicians and regulators lack the resolve to tackle this problem head on, said Mr. Hill. The issues are too complicated for most members of Congress to grasp, he said, and the benefits for their constituents too nebulous.

"There are no clear winners," the professor added. "This is a situation where everyone is complicit." He said that banks with the biggest problems are in politically important states such as New York, Connecticut, Florida, and Virginia.

14 'Crippled Giants'

He and Mr. Vaughan estimated that 14 banks with assets of more than $10 billion each would have severe capital shortages if equity and loan-loss reserves were brought up to 8% of market-valued assets.

These include Citicorp, the nation's biggest banking company, with a $15 billion to $19.5 billion equity shortfall, based on the study's market-value estimate. Chase Manhattan Corp. would be $5 billion to $7.4 billion short.

For the study, Mr. Vaughan and Mr. Hill discounted the value of bad loans and real estate owned by 80%, and they discounted by 60% restructured loans and those 90 days behind in payments.

Other "crippled giants" the study said it found by revaluing assets this way were: Wells Fargo & Co., Midlantic Corp., MNC Financial Inc., Shawmut National Corp. Marine Midland Banks Inc., UJB Financial Corp., and Michigan National Corp.

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