In a controversial move capping an eight-term House career, Rep. Bernie Sanders, I-Vt. — running in November to replace retiring U.S. Sen. Jim Jeffords, I-Vt. — has requested that the U.S. Government Accountability Office investigate bank-and-thrift use of various federal tax breaks and government aid, including the ongoing cost to the U.S. taxpayer of the late-80’s savings and loan industry bailout.
The GAO will begin its investigation as early as next month.
The collapse of the federally insured savings and loan insurance industry is estimated to have cost $150 billion, an amount being defrayed through a combination of “resolution” means, including liquidation of failed thrift assets, direct levies on the industry, regular assessments — direct and indirect — on all financial institutions, and general revenue deductions.
The ongoing cost to the American taxpayer is about $1.45 billion per year, according to a Federal Housing Finance Board official.
“Since the savings and loan crisis of the 1980s … the federal government has provided billions of dollars in aid and benefits to the banking and thrifts industries at a time when they continue to see quarter after quarter of record profits and consumers see more and higher bank fees,” Sanders wrote in his letter requesting the study. Sanders is ranking member of the House Financial Services Subcommittee on Financial Institutions and Consumer Credit.
The request by Sanders is sensitive because of the continuing clash between not-for-profit credit unions and the banking industry. Banks claims the federal tax exemption enjoyed by credit unions skews competition and costs taxpayers $1.3 billion a year.
“Mr. Sanders is very close to credit unions,” said Ike Jones, vice president and legislative counsel for America’s Community Bankers, which represents thrifts.
“We’re not afraid of what the GAO will say about the savings and loan industry,” said Jones, ” … Overall, the irony is that Mr. Sanders continues to support the only cooperative business in the country that doesn’t pay taxes on their earnings.”
Jones declined estimation of the total taxpayer cost of the bailout, but said that the government had an obligation to pay it.
