Letter to Congressional Leaders on Savings and Loan Financing Legislation

Dear XXXXX:

I am writing to secure the assistance of the House leadership in resolving the current crisis in the savings and loan industry. At present, several hundred insolvent savings and loans cannot be permanently restructured or closed without passage of new legislation. As Secretary Brady has indicated, each day's delay adds more than $10 million to the cost of this enormous problem. Delay also jeopardizes the confidence in our financial system that expeditious enactment of this legislation was intended to sustain.

On February 6, I asked the Congress "to join me in a determined effort to resolve this threat to the American financial system permanently, and to do so without delay." During my address to a Joint Session of Congress on February 9, I asked that this vital legislation be enacted within 45 days. Shortly thereafter my Administration forwarded comprehensive legislation to Congress to implement this program.

The Senate moved rapidly and, on April 19, 1989, passed legislation very similar to our proposal. In the House, the legislation has been thoroughly debated in the full Banking Committee, the Financial Institutions Subcommittee, and the Ways and Means Committee. Now is the time for the House to act, yet this vital measure still has not been scheduled for floor consideration. At the estimated rate of ongoing losses, more than $330 million in additional taxpayer costs have been incurred since Senate passage.

I ask your cooperation to secure the following actions:

First, the legislation should be reported promptly to the House floor under a rule that expedites passage. Further delay in final House passage of this bill would be both costly and unnecessary.

Second, I ask the leadership of the House to hold absolutely firm against any attempt to weaken those vital elements of the legislation which protect the American taxpayer from additional costs. Such elements include higher capital requirements, sound accounting principles, and strengthened civil and criminal penalties against wrongdoing in insured institutions.

Third, I ask that the interests of American savers and taxpayers be held paramount. Special interest amendments that could weaken the safety and soundness of our financial system, or provisions that impose additional costs for otherwise worthy purposes such as housing subsidies, do not belong in this bill and should be deleted.

Finally, I urge Congress to resist efforts to reformulate the financing program adopted by both the House and Senate Banking Committees. Such efforts can only delay final passage of the legislation and could have undesirable economic consequences. This urgently needed legislation should not become the vehicle for undermining the spending discipline established by the Gramm-Rudman-Hollings law, which proved beneficial in the recent successful budget discussions between Congress and my Administration. This discipline will be essential to achieving our mutual budget deficit reduction goals in the future.

To date, Congress and the Executive Branch have worked cooperatively to protect our financial markets from instability and to avoid unnecessary costs. Indeed, bipartisan majorities in both the Senate and House have defeated determined special interest lobbying against the tough capital standards needed to protect American taxpayers from a repeat of this tragedy. I look forward to working with Congress in passing responsible legislation to resolve the current savings and loan crisis and to insure that this situation will not be repeated.

Sincerely,

George Bush