Word: bailouts
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...cannot afford to go too slow in selling off the real estate, because the Government needs the proceeds to pay off S & L depositors and carry out the bailout, which is expected to cost more than $150 billion in the next ten years. Moreover, the Government has never proved to be an entrepreneurial manager of property, so the real estate it owns is likely to keep diminishing in value. Says thrift consultant William Ferguson: "Bad assets don't usually get better, they get worse. Buildings and sites deteriorate...
Most of the property being acquired in the S & L bailout is concentrated in the Southwest, where the bulk of insolvent thrifts overextended themselves during the oil-boom days of the late 1970s and came to grief in the oil crash of the mid-1980s. The thrifts began repossessing property when borrowers could no longer meet payments, often because homeowners lost their jobs or business owners suffered from plunging sales as the energy-based economy declined. In many cases the loans should never have been made. Observes James Noteware, national director of real estate for the accounting firm of Laventhol...
...withdrawing their money at an inconvenient moment. The Federal Home Loan Bank Board, which regulates S & Ls, said last week that in January thrifts suffered a record monthly net-deposit outflow of $10.7 billion (total remaining S & L deposits: $964 billion). Because Bush's proposed $200 billion bailout package is to be financed in part from the thrifts' federal insurance premiums, which are based on the size of their deposits, the withdrawals could reduce that source of Government income and increase the share borne by taxpayers. One reason for the heavy S & L outflow is that consumers have been moving...
Seldom has a President felt obliged after only seven weeks in office to deny publicly that his Administration suffers from "drift" and "malaise." But that is precisely what George Bush did at a press conference last week, reciting a list of accomplishments ranging from the savings and loans bailout to proposals for curbing air pollution. "I think we're on track," the President insisted, adding somewhat wistfully, "A lot is happening. Not all of it is good, but a lot is happening...
...bright side of the Tower fiasco may be that it woke up the White House. "It has got Bush's attention focused," says an Administration official. An outside adviser says, "They've got a major bailout operation under way right now." On Tuesday night chief of staff John Sununu, ever confident and combative, sought advice from an informal group of outsiders that he occasionally convenes: a dozen former Bush campaign officials and political consultants who gathered for dinner in the Roosevelt Room and discussed how to recover from the debacle...