Vote by Subcommittee On Funding Thrift Effort May Delay RTC Money
WASHINGTON -- A House subcommittee yesterday voted to require that future thrift cleanup efforts be funded on a pay-as-you-go basis, which could delay final passage of legislation to provide another $80 billion for the Resolution Trust Corp.
The action came as the House Banking Committee's financial institutions subcommittee worked on legislation to provide more money to Resolution Trust, which was established to close insolvent savings and loans and to dispose of their assets.
The RTC over the past two years has been given $80 billion, but thrift cleanup officials say more money is needed to complete the task.
After lengthy and sometimes rancorous debate, the panel approved an amendment by Rep. Joseph Kennedy 2d, D-Mass., that would allow the Treasury Department to borrow only $20 billion. Under the Kennedy plan, the remaining $60 billion could be provided only if Congress and the President reached agreement on where the money will come from -- through a tax increase, cuts in existing programs, or a combination of taxes and budget cuts.
The Kennedy amendment would require leaders of the House and Senate to hammer out a funding plan with the President, which Congress would then have to approve.
Panel approval of the amendment came on a close 18-to-17 vote, reflecting the deep divisions that providing money for the savings and loan crisis has engendered.
Opponents, such as Rep. Doug Barnard, D-Ga., warned that making the $60 billion contingent upon finding the money elsewhere would add needless delays to the thrift cleanup and escalate the costs associated with the restoration program.
Rep. Peter Hoagland, D-Neb., noted that the House leadership earlier this year backed a 5-cents-a-gallon tax on gasoline sales to fund highway projects. But that plan crashed in flames despite the outspoken support of House Speaker Thomas S. Foley, D-Wash. He said the RTC funding bill could meet a similar fate.
Most of the panel's Republicans said they supported the notion of pay-as-you-go funding but said such a requirement for Resolution Trust funding would run counter to a budget accord approved by Congress. Under the agreement, hashed out between congressional leaders and the Bush administration, new programs can be funded only if proponents can find the money. But an exception was made for spending to make good on the government's commitment to back deposits at the nation's banks and thrifts.
The fate of the pay-as-you-go funding provision is unclear. The amendment is sure to get another look when the full House Banking Committee takes up the legislation. If the provision survives at the full committee, it likely will face a challenge on the House floor. A similar plan offered by Rep. Kennedy this spring was voted down on the House floor when Congress wrestled with a bill to provide Resolution Trust with $30 billion.
But Rep. Kennedy said borrowing the money is costly and irresponsible.
"Government by Gold Card is simply a bad idea," he said, adding that he believes it is "immoral to send the bill to our children."
Rep. Gerald Kleczka, D-Wis., concurred. "If we keep on bonding, bonding, bonding, we'll raise a dollar today and have to pay $3 tomorrow in interest."
Rep. Kennedy said his plan would save the government $145 billion in interest costs.
Approval of the Kennedy amendment sparked a small rebellion among the committee's Republicans. Rep. Chalmers Wylie, R-Ohio, saying he was "sorry that some members appear to be more interested in making a political statement than in solving the problems," offered to combine the 58 amendments remaining before the panel.
He said approval of the Kennedy amendment "just muddles up the process" and suggested that if the subcommittee members would approve the remaining amendments all at once, they could "save valuable time." Rep. Barney Frank, D-Mass., said he, too, opposed the Kennedy amendment.
"So I understand your frustration," he said to Rep. Wylie. "But, hey, life's tough."
The subcommittee rejected Rep. Wylie's motion on an 18-to-15 vote.
In other action, the subcommittee:
* Deferred action on an amendment that would fund the remainder of the thrift bailout through assessments on fund transfers made through electronic payment systems, such as the Fed wire;
* Approved an amendment that would limit Resolution Trust borrowings for working capital purposes to 85% of the estimated fair market value of assets the agency has received from failed thrifts, and;
* Defeated, on a 22-to-13 vote, an amendment that would tie the amount of funding provided Resolution Trust to the amount of assets it sells to the private sector.
The subcommittee is expected to continue work on the bill today and next Tuesday.