Brady, Democrats Square Off Over S&L; Funds : Bailout: Banking Committee senators grew hostile after the treasury secretary asked for an additional $80 billion for the cleanup.

Treasury Secretary Nicholas F. Brady was given a hostile grilling Wednesday from angry senators when he formally asked for another $80 billion installment to pay for the savings and loan cleanup.

Democratic members of the Senate Banking Committee were vociferous in their complaints about the growing cost, duration and confusion surrounding the shutdown of hundreds of insolvent S&Ls; and the sale of their assets.

“There is a growing crisis of confidence (and) what you’re hearing from us is a reflection of what we’re hearing across the country,” Sen. Paul Sarbanes (D-Md.) told Brady at a long and contentious meeting of the committee.

As the hearing took on an unusually partisan tone, one Democratic senator after another lambasted the performance of the Resolution Trust Corp., the agency handling the disposal of thrifts.

Brady listened patiently, but bristled angrily and demanded an apology when Sen. John F. Kerry (D-Mass.) wondered if the Administration might be keeping its estimates of the cost of the rescue artificially low with the 1992 presidential campaign in mind.

“We’re now one year away from another election,” Kerry said. “I hope that kind of question mark about the election entering into the strategy will not be presented to us.”

An angry Brady, his voice quavering, snapped back at Kerry, saying: “I resent, Sen. Kerry, your insinuation that we have played politics with this problem.

“We’re trying to make it work and do a good job,” Brady continued. “When you question my integrity, I believe an apology is in order.”

Kerry refused to apologize for his skepticism, saying it was “beyond belief” that the estimated cost of handling the S&L; crisis was pegged at $15 billion on Election Day in 1988, but jumped to $50 billion when the Bush Administration took power in January, 1989.

Brady said the RTC needs $80 billion to close insolvent S&Ls; and pay off depositors, whose accounts are insured up to $100,000. This would bring the total current cost of the bailout to $160 billion.

In addition, the RTC needs another $100 billion in temporary working capital, which would be recouped when the agency sells real estate and other assets belonging to the S&Ls; under government control.

Brady also asked for legislation to extend until Sept. 30, 1993, the RTC’s ability to take control of insolvent thrifts. The authority had been scheduled to expire Aug. 30, 1992, but Brady said it would take longer to clear up the backlog of troubled S&Ls.;

After 1993, the federal insurance fund would take responsibility for any future thrift failures. But Brady said this fund would have only $1.6 billion in reserves, and said it is too soon to tell whether the Treasury will need to pump money into the insurance fund.

“I truly believe we’ll get the job done” with an upper limit of $160 billion to close ailing thrifts, Brady said. But he offered a note of warning: “If the real estate industry sinks into an abysmal mess (the estimates) could get higher.”

Federal Reserve Board Chairman Alan Greenspan, who serves with Brady on the RTC Oversight Board, offered a similarly cautious view, saying the improvement in residential real estate markets has not extended to commercial properties. A massive glut of office buildings and shopping centers has depressed real estate prices and threatens the stability of hundreds of shaky S&Ls.;

Sen. Alan Dixon (D-Ill.) said, “I don’t believe we’ve got this thing running right,” and he called for appointment of a chief executive at the RTC with a national reputation in the real estate business as a financial and management expert.

“What you’re asking for is a designated, permanent scapegoat,” said Secretary of Housing and Urban Development Jack Kemp, another member of the RTC Oversight Board. “There is a collapse in the value of real estate. No designated czar or permanent witness can solve that problem.”

The sharp-edged exchanges between the Oversight Board members and the Democratic senators added a note of partisan wrangling usually absent from the Banking Committee’s public deliberations.

Sen. Donald Riegle (D-Mich.), the committee chairman, made a special point of quoting the 1988 congressional testimony of a Reagan Administration official who said that it would cost no more than $19 billion to handle ailing S&Ls.; Riegle also had on prominent display a chart showing the bailout cost rising to the current level of $160 billion.

Other Democrats followed Riegle’s lead, expressing impatience and irritation with the work of the RTC.

“It’s going to be very difficult for me to vote for more money,” Sen. Terry Sanford (D-N.C.) said. “I’m not persuaded by the appeal that unless we blindly put in more money, it will cost us more in the end.”