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An Error Keeps S&L; Bailout Agency Going : Thrifts: A mistake allows the Resolution Trust Corp. to borrow $18.8 billion, but without more money a shutdown still looms next year.

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From Associated Press

Bush Administration officials decided Thursday to stave off a shutdown of the savings and loan bailout by taking advantage of a drafting error in last year’s law.

The mistake will let the Resolution Trust Corp. borrow up to $18.8 billion more than Congress apparently intended.

The short-term borrowing, to be repaid through the sale of loans, real estate and other assets once owned by failed S&Ls;, frees the agency to continue some cleanup activities into early next year.

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The agency can now pay acquirers to take over 18 large, insolvent thrifts whose rescue had been indefinitely postponed.

David C. Cooke, executive director of the agency, complained in a memo that congressional inaction still would cause a two-month delay of those 18 deals, originally scheduled for completion before Dec. 31. Also, the agency will have to delay rescues it planned for the January-March period.

The delays in shutting down money-losing thrifts will cost taxpayers $250 million to $300 million, he said. If the Administration had decided against taking advantage of the error in last year’s law, further delays would have cost taxpayers an additional $350 million to $400 million, Cooke said.

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The trust corporation’s oversight board, which is chaired by Treasury Secretary Nicholas F. Brady, reached its decision in a private telephone conference call after the House early Sunday morning refused to grant the Administration’s request for more money.

Brady had said the trust corporation needed $40 billion more to cover S&L; losses, on top of the $50 billion authorized by last year’s law.

It also needed additional authority to borrow short-term until S&L; assets are sold, he said.

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Rep. Henry B. Gonzalez, (D-Texas), chairman of the House Banking Committee, wrote Brady that he did not believe Congress, which is adjourned until January, would object if the Administration used the error to temporarily borrow $18.8 billion.

But congressional inaction on Brady’s $40 billion request still leaves the Administration facing a halt in the bailout early next year.

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