WASHINGTON - Two top banking regulators warned Congress Thursday that the savings and loan industry's insurance fund, scheduled to begin operations in 15 months, is already in danger of running out of money.

The official told the House Banking Committee that Congress must appropriate additional funds for the thrift cleanup, or the insurance fund could be forced to borrow from the Federal Deposit Insurance Corp.'s $30 billion line of credit at the Treasury Department.

"Congress on both sides of the aisle needs a wake-up call on funding," said an angry T. Timothy Ryan, director of the Office of Thrift Supervision. "We need the money and it is costing taxpayers astronomical sums. It is just not fair to them."

Certainty of Insurance Losses

"It is a pretty good estimate that the SAIF is going to need more money than it has," added William Taylor, chairman of the Federal Deposit Insurance Corp.

"The thrift industry overhang, caused by the lack of funding for the RTC, gives us concern," Mr. Taylor said. "The only certainty regarding future thrift failures is that there will be insurance losses to the SAIF."

The testimony did not surprise committee Rep. Henry B. Gonzales, D-Tex., the banking panel chairman, who blames the Bush administration for not only underestimating the number of S&L failures in 1989, but failing to allocate enough for SAIF in its fiscal 1993 budget.

|Conceivable that the Well Will Run Dry

"With both horses [bank and thrift insurance funds] drinking from the same well, it is conceivable that the well will run dry and the taxpayers will be called upon to give the insurance funds yet another cash infusion," Mr. Gonzalez said.

On April 1, Congress declined to pass a bill that would have given the Resolution Trust Corp. $42 billion to clean up failing S&Ls.

The FDIC has a keen interest in seeing that the S&L industry gets the money because it will start resolving failed SAIF-insured thrifts beginning Oct. 1, 1993.

Robert D. Reischauer, director of the Congressional Budget Office, said recently that 500 to 700 S&L failures could occur in the next five years.

On Thursday, Mr. Ryan said 130 S&Ls are likely to fail over the next two years. He said 77 institutions with $60 billion in assets are troubled with low capital and poor earnings, and could become critically undercapitalized in the next year or two.

"Can the savings and loan industry handle losses of that magnitude?" asked Rep. Chalmers Wylie, R-Ohio.

"Not on an assessment basis," Mr. Taylor said, which means that fees from insured institutions would be insufficient.

Funding Supplements Through the Year 2000

SAIF is expected to receive $2.6 billion annually in S&L assessment revenue from 1993 through 1997.

But the fund must pay $800 million a year to the Financing Corp., a unit set up in 1987 to recapitalize the insolvent Federal Savings and Loan Insurance Corp. That leaves the new fund with an annual net of $1.8 billion.

Mr. Taylor said it will take the fund eight years sure deposits.

In addition to tapping into the Federal Financing Bank, SAIF will be able to receive annual supplements from Treasury intended to ensure revenue of $2 billion from assessments in fiscal years 1993 through 2000, Mr. Taylor said.

He also said Treasury will provide net worth supplements, to ensure that the fund maintains a minimum net worth.

Rep. Wylie and Rep. Alex McMillan, R.-N.C., introduced a bill Thursday that would not permit the RTC to delay closing S&Ls in receivership or conservatorship because of lack of funds. The bill would require the RTC to issue IOUs to affected depositors.

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