A year after signing a thrift cleanup bill that he proclaimed "comes to grips with the problems facing our saving and loan industry," President Bush is still struggling to grab hold of the nation's most costly financial scandal.

Today, it is the S&L crisis that has the president in its grip, a tenacious hold that has turned the thrift issue -- target of the Bush administration's first domestic policy initiative -- into its most intractable domestic economic and political problem.

What was a savings and loan debacle a year ago has grown into a banking and real estate crisis that was threatening to trigger a recession even before Iraq's invasion of Kuwait sent oil prices soaring, fanning inflation and jarring consumer confidence.

The surge in oil prices is pushing the housing industry into a recession, the National Association of Home Builders warned last week. That development will further exacerbate the thrift industry's woes by drying up demand for profitable new loans and driving more old loans into delinquency and foreclosure.

The cooling of real estate markets across the country has already pushed more banks and thrifts into trouble, made their problems worse and made it more costly for the government to dispose of all the real estate it has inherited from failed financial institutions.

A year after the taxpayers were forced to bail out the bankrupt savings and loan insurance fund, a second, far larger insurance fund -- the Federal Deposit Insurance Corp. -- is facing unexpected losses from bank failures. Congress and the administration are becoming increasingly worried about the billions of dollars of other loans and investments the government has promised to guarantee.

Keeping the government's promise to protect S&L depositors has proven much more costly than was projected when the president signed the Financial Institutions Reform, Recovery and Enforcement Act a year ago.

The cleanup campaign is on the verge of running out of money and the administration has been forced to ask Congress for what amounts to a blank check to keep paying the bills.

The job that was projected last August to cost $159 billion over 10 years now is estimated to cost $300 billion to $500 billion over that period (including the interest bill that the government will pay in borrowing cleanup funds). Whatever the ultimate cost, the $59.6 billion spent in the last 12 months has sent the federal budget deficit soaring and was the main reason the president had to abandon his "read my lips" campaign promise to oppose any tax increase.

Despite the budget-busting expenditures, the biggest part of the thrift cleanup is still ahead of the Resolution Trust Corp., the agency created a year ago to manage the operation. In the last 12 months, 211 insolvent thrifts have been restructured by the RTC, but another 350 failed thrifts are still being run by the government and are continuing to suffer huge losses -- $3.1 billion in the last three months.

Only half the 2,500 privately run thrifts are classified as "profitable and well-capitalized" and thus likely to survive. The government has targeted 310 savings and loans as sure to fail and has officially classified 311 as "troubled" institutions whose future is uncertain. Another 620 thrifts do not meet the new capital standards established by the thrift bill to weed out shaky institutions.

Likewise, the RTC has made considerable progress in disposing of the repossessed real estate, mortgages and securities acquired from failed thrifts but has even further to go. The agency has sold $73 billion worth of assets but still has a $165 billion inventory, including $3.7 billion in junk bonds and about $20 billion in real estate that is proving difficult to sell in a depressed market.

Enter Neil Bush The economic implications alone would be enough to make the S&L issue a major political liability for the White House, but there is also the problem of the president's son. Neil Bush has stumbled into the spotlight playing the role of a none-too-attentive director of Denver's Silverado Banking, Savings and Loan, whose failure is costing the taxpayers better than $1 billion.

Nobody blames young Bush for the failure of Silverado, but that is not much consolation for the White House. Many Republicans resent Neil Bush's failure to recognize that his father would pay a heavy political price for the few thousand dollars Neil earned for sitting on Silverado's board and the loans he got from customers who stuck Silverado with hundreds of millions of bad loans. Democrats delight in seeing the president's son facing the disciplinary charges that the administration's thrift regulators have decided to bring against everyone associated with every major failure.

Ironically, the decision to bring charges of failing to live up to his legal duties as a board member against Neil Bush reflects what is probably the administration's greatest savings and loan success -- restoring the credibility of federal thrift regulators.

The old Federal Home Loan Bank Board was regarded as such a tool of the industry that it was abolished by the S&L reform bill and the job of overseer was given to a new Office of Thrift Supervision, an arm of the Treasury Department. The bankrupt Federal Savings and Loan Insurance Corp. was merged into the FDIC, putting FDIC Chairman L. William Seidman -- a widely respected banking regulator -- in charge of directing the RTC's cleanup and protecting S&L deposits.

Pursuing Perpetrators Clearly conscious of the political and economic hazards of the S&L situation, a number of high-level officials called in the media over the past few days to convey the message that the administration is moving decisively on the S&L front.

The point was made repeatedly in those briefings that the government plans to use all the legal tools it has to go after the people responsible for the failure of financial institutions.

U.S. Attorney General Richard L. Thornburgh said the Justice Department has given top priority to criminal investigations of 100 thrift failures and, in cases where there is wrongdoing but not criminal activity, intends to file civil lawsuits to recover damages.

A third legal tactic was utilized when OTS Director Timothy Ryan moved on Thursday to seize the assets of Lincoln Savings and Loan's former owner Charles H. Keating Jr. OTS used its regulatory authority to demand that Keating and his associates repay $40 million in salaries, bonuses and stock profits they collected allegedly as a result of violations of thrift regulations.

The stepped-up campaign against alleged S&L crooks reflects mounting public demands for retribution, but it is largely a political maneuver, say private experts such as Alexandria-based consultant Bert Ely.

Ely has calculated that fraud was responsible for no more than 5 percent of the thrift industry's losses. "Locking up the crooks is a smoke screen for the public policy failure that caused the thrift crisis," he said last week.

Part of what caused the problem was lax regulation, reply administration officials like Treasury Undersecretary John Robson, the administration's lead official on thrift issues. Protecting the industry from abuse and protecting depositors are the most important accomplishments of the past year, said Robson.

Robson emphasized that S&L stockholders are not being bailed out and the depositors being paid off are not fat cats but middle-income savers with an average of $10,000 in their accounts.

Insurance Targeted Whether the deposit insurance system needs to be changed in the wake of the S&L crisis is the biggest issue still facing the administration, which is scheduled to make recommendations on that issue to Congress this fall.

Failure to deal with that issue is the most serious flaw in the year-old thrift reform legislation, a group of banking experts from Washington think tanks said last week in a critique of the bill. Scholars from the conservative Cato Institute and Competitive Enterprise Institute and the liberal Brookings Institution agreed that the government could reduce the cost to the taxpayers of bank failures by reforming the deposit insurance system set up during the Great Depression.

The other great flaw in the thrift legislation is its failure to deal with the future of the savings and loan industry, said James Barth, former chief economist for the Federal Home Loan Bank Board who is now the Lowder Eminent Scholar in Finance at Auburn University.

Barth predicted the thrift industry will continue to shrink and will remain in precarious financial condition precisely because of some provisions of the bill that was supposed to cure its ailments.

The act raised the deposit insurance premiums paid by S&Ls at a time when most of the industry was already having trouble operating profitably, he noted, and it required them to concentrate their investments in home mortgages at a time when fluctuating interest rates have made it difficult for mortgage lenders to make money.

And while the bill required owners of savings and loans to put up more of their own money, it still did not make them put up enough, Barth said. As a result, he warned, thrifts can still use federally insured deposits to make risky investments, knowing the taxpayers will lose more than they do if the investments go sour.