Taxpayers to pay for thrift industry bailout. One out of every six savings-and-loan institutions is going bankrupt. Estimates of the cost to save these S&Ls are in the billions.

In Texas, the joke goes, when you buy a toaster, they give you a bank for free. Such gallows humor apparently reflects more truth than even the pessimists believed.

For years, everyone knew the banking industry - or, more accurately, the savings-and-loan industry, which specializes in real estate loans - has been in serious trouble. What many people didn't fully realize was the lengths to which the federal government would go to get the troubled thrift institutions off its hands.

That issue came dramatically into public debate this month, as Congress openly questioned the methods that federal regulators used to sell off some major problem thrifts in recent weeks. Now it appears that a taxpayer bailout for the industry - whether in the form of legislation or ``creative financing'' - seems inevitable, banking analysts and congressional sources say.

``We're long past the point where the industry can pay the tab,'' says Bert Ely, a savings analyst in Alexandria, Va. ``Every incremental dollar cost is going to be borne by the American taxpayer.''

That view was given credence last week by Sen. William Proxmire (D) of Wisconsin, the outgoing chairman of the Senate Banking Committee and a longtime opponent of a taxpayer-financed bailout. On Thursday Senator Proxmire reversed himself and called for the federal government to put at least $20 billion toward bailing out the industry.

Almost 500 thrifts, or 1 out of every 6, are insolvent. Estimates of how much it will cost to close or merge all the bankrupt thrifts range from $50 billion to $100 billion. But the Federal Savings and Loan Insurance Corporation (FSLIC), which insures depositors' money in thrifts and pays for closing or merging the institutions, is nearly bankrupt. Moreover, FSLIC is unlikely to be able to raise enough money to get the industry back on its feet, analysts say.

This situation has led to what some call a hidden taxpayer bailout over the last few weeks - a bailout that may cost $8 billion more than has already been estimated, congressional investigators say.

In recent weeks, FSLIC has persuaded private investors to take over three major troubled thrifts. To attract investors, FSLIC agreed to financing arrangements that minimized the risk for the investors but made it more likely the government will pick up the tab later on.

In a report this month, the congressional General Accounting Office (GAO) estimated that the financing agreements will eventually cost the government, and thus the taxpayer, more than $18 billion - far more than the $10.8 billion that FSLIC estimates.

Now Congress is trying to figure out the least painful way to solve the thrift crisis. There is a cornucopia of proposals: a bailout, with tighter regulations to curb the industry's loose lending practices; forcing healthy thrifts, and possibly banks, to pitch in more money; and separating out the unhealthy thrifts and closing them, so they are no longer a drain on the healthy institutions.

Timing is crucial. Many believe that the first 100 days of a new administration, the honeymoon period, are a good time to pass politically prickly legislation.

Most people trace the origin of the thrift crisis to the early 1980s, when high interest rates and competition caused the profit margins of thrifts to evaporate. To attract more people to the ailing industry, Congress in 1982 loosened regulations on thrifts, letting them into a whole array of new areas, including junk bond financing and buying into the projects they financed.

That attracted a new breed of banker: high rollers who used thrifts as vehicles to make risky investments. When oil prices and the real estate market collapsed in the Southwest, those risky investments went down the drain. According to a study to be released next month by the House Government Operations Committee, fraud in the form of negligence or misconduct by thrift managers and owners was identified in 80 percent of the thrifts that failed between 1984 and mid-1985.

Meanwhile, the regulators overseeing the thrifts were few and far between. According to the House report, there were only 1,073 examiners and supervisory staff overseeing the 3,000-plus thrifts nationwide. The number has since been doubled, but not before considerable fraud was committed, prosecutors say.

Currently, the Justice Department is conducting a massive investigation into the saving-and-loan industry out of Dallas. The investigation, which is keeping 14 prosecutors and more than 50 federal agents and tax investigators busy, has been going on for a year and is expected to continue for another three years, according to the Justice Department. A dozen people have been convicted or plead guilty to criminal misconduct so far.