Gray Says S&L; Bailout Could Cost $1 Trillion

A former top thrift regulator predicted on Friday that the eventual cost of the savings and loan bailout could rise to $1 trillion unless swift action is taken in Washington to halt the hemorrhaging suffered by ailing institutions.

“We’re talking about a $500-billion problem as of today and I think it could well turn out to be a $1-trillion problem if we don’t get some kind of political will and courage in the Congress to stop the losses,” former Federal Home Loan Bank Board Chairman Edwin J. Gray told a press conference in Los Angeles.

To date, most experts have estimated that the bailout could cost $500 billion or more over the next 30 years, including the cost of paying off depositors and making interest payments on long-term debts.

Gray, addressing a Los Angeles World Affairs Council luncheon after the press conference, said Congress “must face up to its responsibilities . . . by closing down hopeless, nonsurvivable thrifts and paying off depositors. Each day, each week, each month that passes, given the continuing failure of Congress to meet its responsibilities to the taxpayers, the cost of the thrift debacle will grow inexorably.”