Sen. Jake Garn, R-Utah, says Congress could still avoid a massive taxpayer bailout of the nation's troubled savings and loans - but it must act soon to do so.

"If we don't act quickly, the problem will become so big that all the talk about a big taxpayer bailout will become a self-fulfilling prophecy," Garn said in a Deseret News interview.Garn is the ranking minority member of the Senate Banking Committee and was its chairman when the Republicans were the Senate majority party from 1981 to 1987. Democrats will have two new chairmen of House and Senate banking committees next year, and Garn hopes they will act quickly on the savings and loan problem.

Some analysts say up to $70 billion is needed to bail out the Federal Savings and Loan Insurance Corp., which insures deposits in savings and loans for up to $100,000 per account.

But Garn said the only way it could cost that much is if all the roughly 500 insolvent savings and loans in the nation were closed on the same day and the FSLIC had to pay off their insured depositors.

Garn said a bailout would cost much less if Congress would allow some non-traditional companies to buy troubled savings and loans, vigorously push assisted mergers of troubled savings and loans, work out the debts of some savings and loans over time much as companies do in a Chapter 11 bankruptcy, and provide enough financing to buy out the worst savings and loans to stop them from increasing the debt the FSLIC may have to pay.

The crisis arose when so many savings and loans became insolvent at the same time that the FSLIC could not afford to have them closed and pay off depositors. Analysts say the failures came because high interest rates in the early '80s dug into profits and because of the collapse of oil and Southwestern real estate prices.

Garn said the problem could have been solved or made much smaller with $15 billion worth of financing requested three years ago, but Congress was slow to react. Meanwhile, insolvent savings and loans remained opened and exacerbated the problem.

Garn said he wishes "alarmists" would quit talking about a $70 billion bailout "because if they keep doing it, it will become a self-fulfilling prophecy."

He said, "If you close them all (the insolvent savings and loans) then it's a $70 billion problem. But you don't handle it that way. It's never going to happen that way any more than (with) the Third World debt that we've been massaging for years.

"I think you need to aggressively get on these assisted mergers and provide more recapitalization - not only through FSLIC notes and through the bonding authority we give it, but to make it more attractive for other types of businesses to put new capital in - other than just other thrifts," he said.

For example, Garn said he has an "amazing" number of inquiries from businesses that would like to buy troubled savings and loans but are prohibited from doing so by current law. One company, for example, owns a legal horse racing track - and therefore cannot own a savings and loan.

He said if such companies have money to invest, "that's a lot better than digging into taxpayers as long as you create fire walls " to ensure the savings and loans are run completely separately from other businesses owned by the parent corporation.

Garn also said he feels problems with many savings and loans could be worked out over a period of years.

"It's not too much different than when you have a business that is bankrupt and it takes out Chapter 11. You say, `OK, how do we manage your debts and how do we pay them out over a number of years.' So you spread that solution over a number of years, but you've got to give them cash flow to handle it incrementally as you go along.

"And that's what we haven't been doing for the last 21/2 years. First, we delayed starting that process, then we didn't given them enough money to do it rapidly. I think it's still possible to put that sort of a thing together," Garn said.

Leading examination of the savings and loan problem for the Democrats when Congress convenes next month will be two new chairmen of the House and Senate banking committees.

Sen. Donald W. Riegle, D-Mich., is replacing retiring Sen. William Proxmire, D-Wisc. Former House Banking Committee Chairman Fernand St. Germain, D-R.I., was defeated in the election and will likely be replaced by Rep. Henry Gonzalez, D-Texas.