The House of Representatives failed earlier this year to provide the money needed by the Resolution Trust Corp. to continue its work beyond April 1.

The RTC was formed in 1989 not only to clean up the savings and loan mess but to honor the federal government's commitment to savings and loan depositors that their insured deposits would be protected.

But the House refused even to let the RTC spend the $17 billion that it already had on hand on April 1, when its funding authority expired.

A Depositor Reaction

The next day, the national business news carried a report of a run on a $550 million-asset midwestern bank.

According to the report, the run was prompted by depositors' fears that deposit insurance could no longer be trusted.

Why shouldn't depositors feel that way? While the government has never failed to live up to its commitment to protect insured depositors, the on-again, off-again treatment of the RTC by the Congress must give depositors genuine cause for concern.

This lack of Congressional leadership and sensitivity to basic economics will certainly lead to a lack of confidence in deposit insurance and cynicism by taxpayers about the way Congress spends tax dollars.

Without money, the RTC cannot pay depositors and thus cannot resolve insolvent, money-losing savings and loans. By the RTC's estimate, each day of delay in funding its operations since April 1 will add $2.5 million to the taxpayers' cost for the savings and loan disaster.

Yes, that's $2.5 million a day. By the first week of June, with the meter still running, the delay had cost more than $150 million, which could have been spent on other badly needed programs.

For perspective, the $150 million would provide about 25% of the first round of money Congress appropriated for devastated Los Angeles neighborhoods.

More of the Same

If this were the first time Congress had dealt with the government's deposit insurance commitment in this manner, it would be bad enough.

However, the same sort of Congressional failure to act had happened at least twice before, and each time the U.S. taxpayer took it in the neck.

The first time was 1987, when Congress refused to provide what now seems the paltry sum of $15 billion to recapitalize the Federal Savings and Loan Insurance Corp. (then the deposit insurance fund for savings and loans) so that insolvent savings and loans could be closed.

It took more than a year while Congress argued about whether the money was even needed and some members actually leaned on savings and loan regulators to ease up in their supervision.

Finally, $10.8 billion was made available but it was meted out in installments over three years, which reduced its effectiveness. While waiting for Congress, savings and loan regulators were powerless to resolve insolvent thrifts because there was no money to pay depositors.

An Earlier Breakdown

Consequently, the institutions remained open and funded their operating losses with high-cost insured deposits that eventually had to be made good. The year or so that Congress refused to act thus raised the cost to the taxpayers by billions.

That experience should have taught everyone a lesson. Not so. After the RTC was about a year old, it was clear that the taxpayers were in for heavy losses.

At that point, a primary focus should have been how to hold down the cost to taxpayers.

Instead, when the RTC ran out of funds in late 1990 and there was no question that more would have to be appropriated, once again Congress refused to act and the business of the RTC was suspended until it could get money to operate.

It took until March 1991 before Congress finally took the step that had been ineviatable for months. The RTC estimates that this suspension of its efforts cost the taxpayers "several hundred millions of dollars."

Down the Drain

It is a national tragedy that the hundreds of billions of tax dollars that could have been spent on pressing domestic problems such as the national debt, education, health, housing and the like will instead be devoted to the rescue of the thrift deposit insurance fund. Congress' repeated refusal to act has made that tragedy all the more expensive.

So for purely political reasons, and with an abundance of finger-pointing, the Congress this time has wasted $150 million, and the number is still going up.

It is this inability of our law-makers to confront a problem and take decisive action that is driving constituent demands for term limitation and for the rash of incumbents' defeats.

Mr. Clarke, former comptroller of the currency, is now a partner in the Washington office of Bracewell & Patterson, a Houston law firm.

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