BANKING & FINANCE - Oct. 6, 1992

Bank Bailout Predicted: Despite record profit this year, the banking system is still in trouble and almost certainly will require a taxpayer bailout, two economists said in a new study. Roger J. Vaughan, a Santa Fe, N.M., consultant, and Edward W. Hill, a professor at Cleveland State University, estimate that 1,150 banks with $1 trillion in assets, out of 12,000 with $3.4 trillion, “are now insolvent--and would be shuttered if their books revealed the true value of their assets.” If regulators immediately close weak banks, the cost to the Federal Deposit Insurance Corp. would range from $45 billion to $59 billion, they said. If, however, as they expect, the closure of weak banks is delayed, the cost to the FDIC will range from $75 billion to $95 billion, they said.