Hopes for Fix Of Thrifts Fund Fade Amid Fight Over Budget

The Savings Association Insurance Fund rescue was stripped from a short-term funding bill Tuesday and has faint hopes of passing today when Congress votes on a broader budget measure.

The thrift industry's hopes for enactment were crushed on Tuesday when the House Rules Committee did not attach the bailout to a stopgap government spending bill.

By refusing to pair the two bills, the Rules Committee dealt a surprise blow to House Speaker Newt Gingrich, who pinned the plan to a one-day spending bill late Tuesday afternoon. (The one-day measure was necessary to keep the government funded while lawmakers wrapped up a budget bill that will run through September.)

Raising objections to the thrift fund fix were Rules Committee members Martin Frost, D-Tex., and Deborah Pryce, R-Ohio, who convinced fellow committee members to remove the plan from the spending bill.

The rescue still has a chance of tagging along with the 1997 budget, which Congress is working on now.

"Our presumption is that this is going to be hanging out there for rest of this Congress," said American Bankers Association chief lobbyist Edward L. Yingling. "It could come up again at any time."

Thrift industry lobbyists were disappointed with this week's turn of events and blamed both the Clinton administration and House leaders for failing to line up support.

"What emerged was a disconnect between leaders and troops in the field," said Paul A. Schosberg, president of America's Community Bankers, the thrift trade group. "You must have communication from people at the top to people in the trenches."

House Banking Committee Chairman Jim Leach, who urged the Rules Committee to pass the plan, blamed the White House for not lining up Democratic votes.

"The administration strongly pushed it, but forgot to tell its members," he said in an interview.

But intense lobbying by bankers also played a major role in killing the plan.

Banks have bitterly criticized the bailout plan because it would force them to pick up $600 million in annual interest payments on Financing Corp. bonds used to fund the first thrift industry rescue in the late 1980s. The plan also forces thrifts to pay a one-time special assessment to capitalize the thrift insurance fund.

Just last week the Ohio Bankers Association held a political fund-raiser which raised $75,000 for Rep. Pryce and fellow Ohio Republicans, Reps. Frank Cremeans and Bob Ney.

Sources said Rules Committee Chairman Gerald B.H. Solomon, R-N.Y., complained the thrift fund fix was too controversial to be added at the last minute.

A small number of congressmen had already expressed opposition to the plan. Texas Republican Sam Johnson, in an April 16 letter to Rep. Gingrich signed by 25 other members, said the thrift fund fix places an unfair burden on banks.

Federal Deposit Insurance Corp. Chairman Ricki Helfer was disappointed that the thrift fund fix wasn't approved.

"The FDIC continues to believe that it is in the best interest of the financial system to assure the safety and soundness" of the thrift fund, she said in a statement. "I continue to hope that Congress will act on the pending legislation."

The administration Wednesday pushed lawmakers to include the thrift fund rescue on the larger budget bill. Thrift lobbyists held out hope that the 1996 appropriation package would not be ready today, forcing Congress to pass another one-day stopgap bill.

"The major emphasis right now is putting this back on track by finding the right vehicle and getting message across more clearly," Mr. Schosberg said.

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