In a surprising and irresponsible move, the U.S. House of Representatives this week rejected legislation to continue the savings and loan bailout for another six months. The action hardly makes sense because the S&L bailout agency already has spent $88 billion since 1989 to repay losses to 20 million depositors in 640 failed institutions. Unfortunately, there is still a long way to go.
Democrats tried to blame Republicans for the problem, but that hardly seems accurate since Democrats hold a large majority in the House and the stunning 298-125 vote included large margins in both parties.The defeated bill would have given the Resolution Trust Corp., or RTC, enough money to operate through September, the end of the current federal fiscal year.
The vote is especially inexplicable because no new funds were involved. Congress approved $25 billion for the RTC last November, but that authority expired this week with $17 billion still unspent. The House bill would have merely allowed the rest of the money to be used.
One argument against the bill was that it didn't include $2.5 billion to compensate owners of 53 S&Ls that lost a federal accounting break when Congress passed the original S&L bailout. The idea is controversial. Compensating the depositors is one thing, but for at least some in Congress, the idea of paying S&L owners and managers is repugnant.
Yet that disagreement hardly explains the lopsided vote against continuing the bailout. Another problem is that both parties sought to attach various reforms to the bailout program. But this last-second extension is hardly the time or place to start tinkering with the whole bailout process.
The real reason may have more to do with politics in an election year and a House battered by the check scandal. Since the S&L bailout is unpopular with voters, the House may be trying to score popularity points.
However, the bailout must continue in order to honor deposit insurance for those whose savings were caught in an S&L collapse. Coming up with the money may be unpleasant, but there is little choice.
The Senate, not under the same election-year pressures, already has approved use of the unspent $17 billion and added another $25 billion to the fund. The administration prefers the Senate bill.
The House should reverse itself as soon as possible because delay only makes the problem more expensive. Every day's delay in the S&L cleanup costs taxpayers an estimated $2.8 million on top of an already staggering total. If representatives keep temporizing, the added expense will be another dereliction laid at the House door.