The problem with the Bush S&L bailout plan is that everyone comes out a loser-the Treasury, the taxpayer, the saver, the S&L industry. I propose:
– All insolvent S&Ls should immediately be seized and operated by the government with a view to their sale, merger or liquidation.
– Healthy S&Ls should be returned to their original purpose of providing home mortgage funds, with a timely phaseout of their conflicting investments.
– Congress should authorize a 12-month, 6 1/2-percent, tax-free S&L certificate of deposit; the rate to be reviewed annually to reflect market conditions.
– S&Ls would annually pay 1/2 percent on all such tax-free deposits, to be added to current FSLIC insurance premiums for bailout bonds/costs, with the program lasting for the duration of the crisis.
Healthy S&Ls would thus have an influx of deposits at fixed, competitive rates with a 1/2 percent set-aside for bailout costs.
This approach would also make funds available for housing and encourage savings through an insured, uncomplicated, tax-free vehicle especially designed for the smaller, unsophisticated saver.
