Word: bailouts
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...aging economic expansion and the new Administration. A serious rise in prices would force the Federal Reserve to fight back by pushing interest rates higher, which runs the risk of choking the economy, boosting the federal budget deficit, and ballooning the cost of President Bush's savings and loan bailout...
...spurt in interest rates could make even that projection seem unduly optimistic. The higher rates would boost the Government's cost of borrowing for the bailout, as well as worsen S & L losses by raising the interest that ) the thrifts must pay depositors. To calm fears of a possible run on deposits, Greenspan said last week that the Fed will provide cash to any insolvent S & Ls that need it to meet withdrawals...
...primary objective of such a sweeping rescue was to restore the confidence of thrift depositors, some of whom have withdrawn their savings in fear of the system's insolvency. In fact, the Administration secretly feared a long-shot possibility that the drama of its bailout might spark a run on S & L deposits. To prepare for that dire prospect, senior White House officials and Federal Reserve Board Chairman Alan Greenspan met in the Roosevelt Room of the White House the night before Bush's plan was made public. Greenspan agreed that the Fed would stand ready to pump billions...
...depositors stayed calm, even though some chafed at the idea of the cost of the bailout. "Honestly, it's the stupidest thing I've heard," said Leroy Scrues, a Detroit retiree. "Why should the public be paying for these rich peoples' mistakes?" Yet legislators and savers were relieved that Bush repudiated a proposal that his Administration had floated two weeks earlier: to levy a fee -- 25 cents for each $100 of deposits -- on all insured accounts. That ploy was widely seen as a tax in everything but name. The short-lived proposal was so distasteful that it made Bush...
BUSINESS: Bush puts forth a bailout plan for savings and loans...