A Business section article last Wednesday incorrectly described one element in a U.S. League of Savings Institutions document on economic problems of the Southwest. The document listed an oil-import fee as one possible way of stimulating the region's economy. (Published 3/9/88)

Four new federal agencies would be created with billions of taxpayer dollars to bail out the troubled savings and loan industry under a plan being considered by the largest S&L lobby group.

The U.S. League of Savings Institutions discussed the bailout plan at a private meeting yesterday. League spokesmen said that a 50-page staff report is a preliminary document that the lobby group has not officially endorsed and is using only as "a point of departure" in discussions of ways to solve the S&L crisis.

If adopted, the proposal would represent the greatest effort yet for a taxpayer bailout of the ailing S&L industry. Officials at the Treasury Department, who have suspected such a push was coming even though officials of the U.S. League have denied in the past that they would want taxpayer assistance, expressed anger yesterday at the proposal.

"The league should be marched off Capitol Hill in shackles for attempted theft from American taxpayers," said Charles O. Sethness, an assistant Treasury secretary.

Treasury officials said the proposal is another version of the league's position that the industry can grow out of its problems if the government lends a hand. But many lawmakers and Treasury officials say that attitude has prevented the government from acting sooner to curb abuses in the S&L industry.

The league has resisted Treasury plans to make healthy S&Ls pay to bail out the roughly one-third of the S&L industry that is in trouble. Regulators say that when losses for the S&L industry in 1987 are finally tallied, they could reach the record loss of $4.6 billion set in 1981. Treasury officials have estimated that as much as $60 billion would be needed to close or merge all of the nation's troubled thrifts.

The league plan, which was prepared by a top economist at the league and is titled "An Economic Revitalization Program for the Southwest," has three major proposals:

The creation of four government agencies that would issue "billions of dollars of new agency notes." The notes would be guaranteed by the U.S. Treasury and used to buy bad loans or other assets from troubled S&Ls.

The reinstatement of tax advantages for the real estate industry that were eliminated by the tax reform act of 1986.

An oil embargo "to help stimulate the economies of the oil-producing regions."

"Clearly this proposed Mini-Marshall Plan involves a massive federal effort," the report says, referring to the plan, named for Secretary of State George C. Marshall, to rebuild Europe after World War II.

Under the league's proposal, the S&Ls could count the new agency notes as assets to boost their bottom line and help them meet federal minimum requirements for classification as safe and sound institutions.

The plan also would require the Federal Reserve Board to accept the notes as collateral for cash advances to the struggling S&Ls.

The league has been working on the plan since last fall. In January, the Federal Home Loan Bank Board, the federal agency that regulates S&Ls, unveiled its own plan for resolving scores of problem S&L cases in Texas and throughout the Southwest. That bank board plan calls for merging smaller S&Ls into larger institutions that would be more attractive to potential buyers.

The economies of Texas and other oil-producing states have been in a recession since energy and real estate prices began falling in the early 1980s. Regulators say the region's economic woes exposed mismanagement, and often fraud, at many financial institutions in the area that ran into difficulty. Regulators have been struggling to cope with a rise in failed institutions without bankrupting the federal fund that insures deposits at S&Ls up to $100,000.

In the plan, the league says the regulators are mistaken and that economic hardship -- not mismanagement -- is the biggest factor in the problems of S&Ls in the Southwest.

In the report, the league blames Northerners and a media preoccupied with "spectacular failures and the fraud and abuse involved" for the lack of sympathy for the economic plight of the Southwest.

"Many people in the North remember that those in the Southwest enjoyed an unprecedented boom while they struggled," during the period of rising oil prices during the 1970s, the report says.

"This makes it hard for some people to empathize with the difficulties being encountered in the energy belt," it says. "This has given the general public the mistaken impression that the financial sector collapse now taking place in the energy belt is simply the result of mismanagement and abuse. This is simply not the case."

In a separate announcement, the second largest S&L lobby group, the National Council of Savings Institutions, is set to unveil a contingency plan today to merge the fund that insures deposits at banks -- the Federal Deposit Insurance Corp. -- with the fund that insures deposits at S&Ls -- the Federal Savings and Loan Insurance Corp.

The FDIC has roughly $18 billion in reserves. By contrast, the FSLIC ended 1986 more than $6 billion in the red and required a $10.6 billion federal infusion to stay afloat.