WASHINGTON — CONGRESS ended a bitter, two-day parliamentary standoff early Saturday by adopting a $159 billion rescue of the savings and loan industry, handing President Bush a victory on his first major legislative initiative. The bill, described as the most important financial law enacted since the Depression, provides money to close or merge an estimated 500 insolvent thrift institutions and to pay government obligations incurred in the rescue of 223 S&Ls last year.
The administration estimates the cost, including interest payments on bonds issued to finance the bailout, at $159 billion through 1999. At least half the money will be spent in Texas, where a combination of lax regulatory oversight and an economic downturn sent the industry's losses soaring.
The bill overhauls the regulatory bureaucracy, imposes stringent financial and accounting standards on S&Ls, and quadruples the maximum jail term for defrauding a financial institution.
The shutdown of sick thrifts paying high interest rates likely will lower rates to all savers because healthy S&Ls and banks have raised theirs to compete for deposits, economists believe.
When the government moves to sell an estimated $300 billion in real estate inherited from failed S&Ls, the glut of properties could depress prices in already fragile markets. Many lawmakers, sensitive to the public perception that they in effect are giving taxpayer dollars to crooks and con artists, said the bailout was the only way to protect millions of depositors whose accounts are federally insured up to $100,000.