European Stars and Stripes (Newspaper) - February 10, 1991, Darmstadt, Hesse                                Sunday february 10, 1991 the stars and stripes Page 13 commentary Walter Mear Saddam is the villain in latest budget drama a Federal budget is a Book full of numbers without a plot but the new one does have a villain Saddam Hussein. U the budget that president Bush just sent to Congress holds the iraqi dictator largely responsible for the its. Recession. That economic slump and the Cost of the War to drive Iraq out of conquered Kuwait Are the two great uncertainties in the Bush spending plan. A a. Administration assumptions that the recession will be a mild Short lived one and that War appropriations can be held to a minimum ran into democratic scepticism a if you believe those assumptions in be got a dream vacation in Baghdad id like to sell you a rep. Bill Richardson d-n.m., told the House. A year and a War ago the peace dividend was the catch phrase at budget time a everybody wanted a piece of the Bonus. There is none. Actually it vanished before operation desert storm into a deficit reduction Deal that would have forbidden Trade offs Between defense cuts and Domestic spending even if there had been Money available. Under the revised rules spending is divided into categories a defense International and Domestic a and savings in one can to be used to offset increases in another. That holds until 1993, and it Means that advocate of increased spending on Domestic programs Are going to have to choose which items to boost competing with one another if they can to agree. In order to make their Deal the budget negotiators agreed that they  count the Cost of the persian Gulf crisis against the defense share of the budget. A it fhe budget forecasts a deficit of $318,1 billion during the current government year which ends sept. 30. Next years forecast is $280.9 billion a More than 10 times As much As the administration predicted in the last budget. Furthermore those numbers Are based a in a Brief mild recession with a return to economic growth in the second half of Quot cosh i Hope we Pont Hwe a recession 1991, and on an Early end to the persian Gulf War. The. Administration has avoided forecasting a time Frame for the War saying it will be waged until Saddam surrenders Kuwait. The budget seeks spending authority of $30 billion for the War and provides $15 billion in actual outlays. But the administration says those Are Only interim figures with the real numbers due later when costs and offsetting Allied contributions can be foreseen. The separate War appropriation Bill is to be sent to Congress late this month. Congressional estimates of the Cost of the War run to about $1 billion a Day. The congressional budget office has projected $s6 billion for a three month conflict. The administration says other nations have pledged More than $51 billion in contributions but those Are promises not Cash. And not All of them Are direct payments that would defray . War expenditures. The War appropriation wont really be an Issue with More than 500.000 american troops in the War zone. Congress will vote what the Pentagon deems acc Essary. The differences will be Over its Impact on other spending needs on the Economy As a whole and on How to pay for it some of the economic ills that Strain the current budget were coming with or without War the 1990 deficit reduction Deal Between the White House and Congress was oversold by both patties despite the pruning it requires record deficits were in Prospect this year. The Outlook is worse than expected a situation that budget director Richard g. Darman blamed largely on $105.5 billion in extra outlays for the savings and loan crisis and an $87 billion decrease in tax Revenue because of the economic slump. Enter the villain. Darman said the economic downturn was caused a perhaps most significantly by the crisis that followed Saddam a invasion of Kuwait on aug. 2. Oil prices went up at first lenders put a a risk Premium into Long term interest rates and Consumers and investors held Back Darman said in the budget. A the resulting economic slowdown has taken its toll a he said. A and the problem of the fiscal deficit has thus been compounded by the effects of the crisis in the  / that links the Point on which polls give Bush his highest Job approval ratings the War with the problem on which he ranks lowest handling of the Economy the Challenge to the administration will be to win in the Gulf and then deliver on the budget Promise of economic resurgence. Associated press. Leonard silk debate starts the Battle has begun Over the administrations proposals for the most drastic overhaul of the nations backing system since the depression. President Bush a aim is to restore Confidence in the banking system and make americans Banks world leaders again. As the Treasury stresses of the 30 biggest Banks in the world ranked by deposits nine were american in 1969, w Ith the top three the Bank of America Chase and first National City which became Citibank in 1989, Only one of the top 30 was american with Citibank in 27th place. The administration aim is admirable but there Are risks. A it says one of its main goals is to a make Banks stronger and safer by strengthening the role of capital a not by a raising capital standards but with a plan to attract capital to the banking industry.�?�. One element would be to permit Industrial companies to buy Banks. But critics say that would transform the Economy and society into a far More concentrated Structure dominated by big corporations. Henry Kaufman  Henry Kaufman amp coh an investment advisory firm regards this proposal As  in an interview he said it would Confer too much Power on a corporate and financial elite with close ties to the government transforming the United states from an economic democracy to a a corporate  other critics of the plan say the a too big to fail doctrine which would be retained would increase the concentration of financial Power by throwing the weight a of government behind big Banks and would contradict die administrations professed support of Market determined solutions. / Robert Glauber Treasury undersecretary and former Harvard professor who had most to do with the drafting on Bush s bold a Quot a a. A. A a a a. A a quota of the plan rejects charges that it would favor the big Over the Small. He said in an interview that there would not be a big push by Industrial corporations into banking. Few he said Are so flush with Cash that they would want to put billions into Bank investments and acquisitions. A and relatively few Banks would look attractive now Given the Competition from other financial service companies and a non Bank Banks a their Low and often overstated profits Low Stock values Large numbers of nonperforming Loans and the necessity of being subjected to government regulation. One almost wonders Why the administration even wants to propose acquisition of Banks by Industrial com panics. On both  of capital and a too big to fail issues Glauber said the administrations aim was to reduce failures by big and Small Banks alike and to improve Banks profitability by widening their opportunities to compete in other lines of business and across state Bor a dvrs. But a despite the administrations Market orientation a he said it would have to act to prevent failures of big Banks that would threaten the economic system. Central Banks in All countries act to prevent a systemic  the Issue is always which Banks to save and Here the administration provides for joint decision making Between the Federal Reserve and the Treasury. A Secretary Brady does no to believe bigger is better a Glauber said. A the believes in Strong Community and regional Banks and our plan will help regional Banks to grow and expand across state  yet Many smaller Banks fear that the plan would open their territory to big Money Center Banks and they will fight it in Congress. Banking ideas should the Glass Steagall act be repealed As the administration proposes and commercial Banks allowed to do investment banking and sell insurance Albert Qai lord Hart professor emeritus of economics at Columbia University a noted banking scholar told his seminar last a week a the idea that Banks can be put in Good shape by letting them Horn in on the overcrowded businesses of investment banking and insurance is. Crazy. Whenever Banks go into a new line where experience As commercial Bankers is not the key to Success they come a  As evidence he cited a the Florida real estate disaster when Banks went into real estate investment trusts a the losses including the failure at Continental Illinois when Banks engaged in syndication of Loans based on Oil and related real estate in the Southwest the evaporation which still plagues us of a Sovereign Loans in the third world. A the further mess created by the Banks involvement in corporate takeovers in the 198 so he said a is just beginning to become dear to outsiders but will prove at least As expensive As those just  a a a a a like Hart Gail Fosler chief economist of the conference Board fears that diversification by Banks into other businesses will weaken their ability to perform their a remarkable function As instruments of monetary  she stressed the danger of Banks being driven. Further into riskier credit markets creating  the Federal Reserve to a Over Liquefy a and ultimately create More  a. In Congress this year the banking Issue will be the most urgent after the War in the persian Gulf and it is an Ssue even More crucial to the nations economic strength. New York times