US Governors Voice Their Dissatisfaction Over Distribution Of S&L Bailout Cost
AN angry regional dispute has broken out over Washington's multibillion-dollar bailout of America's savings and loan industry. From Vermont to Iowa, governors are complaining loudly about huge sums of federal money being diverted to Texas and a few other states where large numbers of S&Ls have collapsed.
Gov. Terry Branstad (R) of Iowa bitterly protests the impact on his state of higher federal taxes to pay for the bailout. The governor says he ``resents having to pay the bill for the high rollers in other states who were trying to line their own pockets and help their buddies.''
Gov. Madeleine Kunin (D) of Vermont calls the federal bailout ``one of the largest transfers of income and wealth in American history.'' Governor Kunin's small state could be taxed an additional $250 million over the next 30 years by Uncle Sam to help S&Ls in the Southwestern United States.
Anger about the S&L crisis, which could eventually cost US taxpayers $500 billion, bubbled up as voters have realized that just a few states will reap most of the benefits. Gov. Gaston Caperton (D) of West Virginia notes that Texas depositers will get about half the money from the bailout, with most of the rest going to just a few Sunbelt states.
At the 82nd annual meeting of the National Governors' Association here this week, a resolution is gaining support that calls for the appointment of an independent commission. It would have at least three purposes: To determine the causes of the crisis; to find ways to prevent its happening again; and to make the bailout fair to all sections of the country, including states like Hawaii and Iowa where the savings industry is financially sound.
Several governors, including Mr. Branstad, Kunin, and George Sinner (D) of North Dakota, are particularly upset that billions of dollars of property owned by S&Ls are being sold off at ``fire sale'' prices to pay for part of the bailout.
They say the public should retain an equity interest in case those properties soar in value within the next few years. Otherwise, the public will foot the entire bill for the bailout, while a few speculators pick up all the profits.
Governor Sinner notes that during the farm credit crisis in the 1980s, a key provision allowed the public, which also paid for that debacle, to benefit if farm values appreciated. That's what is needed now, he argues.
The most outspoken governor on this issue is Iowa's Branstad, who compares the billions going to the Southwest with the tight-fisted policies toward his state during the farm depression in the Midwest a few years ago.
``I went through the agriculture crisis in the mid-'80s, and our financial institutions in Iowa are finally healing,'' Branstad says. ``I had millions of people in my state that suffered greatly, [but] we didn't get a lot of sympathy.''
Branstad recalls meeting with budget director David Stockman in the White House in 1985 when thousands of Iowa family farmers were in trouble. The governor says he was met with ``arrogance.''
``I heard [Stockman] say, `Your people shouldn't have bought that land on contract.' ''
But Branstad says: ``A lot of 'em didn't buy on contract. We were being killed by high interest rates and an overvalued dollar - something we had no control over. Now we're being asked to pay the bill for [S&L] people who made stupid decisions because they thought they could make a bunch of money.''
Meanwhile, Kunin is circulating a letter among the governors that calls on President Bush to ``develop a plan for recovering taxpayer dollars'' used in the bailout. The letter calls for greater accountability by federal regulators, and full disclosure of ``all clauses of the deals made to unload the sick thrifts.''
Kunin, who hopes to get most of the 45 governors here to sign the letter, notes that the bailout is ``one of the largest peacetime expenditures'' ever undertaken, yet ``the regional impacts ... have been almost totally ignored.''
Meanwhile, after hours of talks behind closed doors, governors hammered out an agreement with the White House over an annual ``report card'' on America's schools.
The first report card, examining the progress of education in all 50 states, will be issued in September 1991. Grading will be under the supervision of a ``national education goals panel'' composed of four officials from the federal executive branch, six governors, and four congressional leaders. The congressional representatives, however, will have no votes.
The report card could be politically explosive - particularly in states that flunk. But the governors are demanding that the states and Washington be fully accountable for progress, or failure, in education reform.