Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, May 25, 1990 TAG: 9005250518
SECTION: EDITORIAL PAGE: A12 EDITION: METRO
SOURCE:
DATELINE: LENGTH: Medium
As part of the fiscal jiggery-pokery familiar to the public, the bill for this salvage operation has been placed "off-budget" and is being financed by sale of government bonds. That, of course, adds the expense of interest, so the ultimate cost could run as high as $300 billion (according to the administration figure) or $500 billion (according to the GAO).
Taxpayers have been remarkably quiescent about all this, as they have been regarding the federal budget deficits. One reason for the lack of general indignation is that for several years, Congress and the White House have conspired to hide the effect of all this debt. They have declined to raise taxes, instead passing these obligations on to future generations.
That kind of dodge may not prevent this generation from paying a price beyond the $1,000 or so per capita for rescuing the loosely regulated S&Ls from their profligacy. Like servicing the ever-growing national debt, bailing out the thrifts also slows growth of the national economy.
Money spent on the bailout and debt service takes funds from areas of public spending that could improve education and health care, for example, or repair the nation's collapsing bridges and potholed highways.
To borrow, Uncle Sam has to compete with others for available capital, which drives up interest costs. That's an important item for investors, especially in real estate: The bailout could be diverting money from home building, which is in a slump.
A side effect of the bailout is that federal regulators are getting tougher with financial institutions that remain in good shape. A couple of weeks ago, Dominion Bankshares announced that it had increased its loan-loss reserve to $143 million, which caused its books for 1990's first quarter to tip into the red by $14 million.
That didn't reflect a change in Dominion's condition as much as it did the altered (and depressed) climate for lenders of all kinds. They have to be more careful nowadays about the notes they already hold and the loans they'll make in the future.
That puts a damper on development. Some observers say that the drag from all this debt could pull the economy into recession. Former Roanoker Bert Ely, now a Washington, D.C., consultant, thinks that if Congress had faced up to the S&L fiasco as early as 1984, the bailout could have been financed for $40 billion.
One indicator of the nation's fiscal carelessness in recent years is that in the present context, $40 billion seems like a relatively small sum.
by CNB