FDIC Banking Review The Resolution Trust Corporation and Congress, 1989-1993 PART II: 1991-1993 by Lee Davison*
Part I of this article appeared in the previous issue of the
Banking Review, and explored the period immediately following the opening of
the Resolution Trust Corporation (RTC) in August 1989 through 1990. Part II
completes the legislative history of the RTC.
The Resolution Trust Corporation
Funding Act of 1991
Congress's inability to pass a funding bill in the previous
session did not mean that the RTC's funding requirements had diminished in any
way. Without additional loss funds and the attendant working capital, the
agency would essentially cease operations before the end of the first quarter
of 1991. But the political dynamic surrounding the RTC remained difficult.
The administration's position was straightforward: the losses within insolvent
institutions had already occurred, and delays in funding those losses would
only increase costs. In the eyes of many in Congress, however, including even
those of the president's own party, giving the RTC more taxpayer money was
extremely unpalatable. Although a failure to do so would abrogate the promise
to insured depositors, some members of Congress, particularly some House
Democrats, adamantly opposed any new funding at all. Others wanted to tie
further funding to changes in the organization or operations of the RTC, or to
changes in unrelated government policy. Still others sought to weight the
burden of paying for S&L losses to certain regions or taxpayers. Some of
these suggestions had little chance of being enacted, but they encumbered an
already contentious bill, making passage even more uncertain.
Treasury Secretary Brady said the RTC would require $30 billion
in loss funds and approximately $47 billion in working capital for fiscal 1991,
provided that new loss funding was forthcoming by March 1. If no new funds
were appropriated by that date, the RTC would have expended all available loss
funds and would be forced to stop closing and selling institutions by the end
of February.1 He mentioned, moreover, an RTC estimate that delay
for just one more quarter could result in $750-$850 million in added costs. He
suggested that Congress consider an open-ended appropriation that would remove
the need for any further votes on funding and would remove the possibility of
delays and the extra costs accompanying them. Brady admitted, as well, that
the total cost was impossible to estimate exactly but said the administration
still believed that the required loss funds would most likely be toward the
higher end of the $90-$130 billion range forecast (in 1989 present-value
terms.)2 In other words, perhaps another $50 billion after fiscal
1991 would eventually be required. Brady sought to balance this unwelcome but
not unexpected news with a discussion of the RTC's accomplishments and the new
measures the agency was undertaking to improve its operations.
No one in Congress was particularly anxious to give the RTC
unlimited funds. Both Democrats and Republicans in the Senate were critical of
the RTC's (slow) speed in disposing of assets and were therefore less inclined
to support unlimited funding. Yet neither of the two ranking members of the
Banking Committee wanted to withhold all funds. The ranking minority member, Sen.
Jake Garn, said he believed in short leashes but not in “choking the animal to
death.” Questioning how the RTC did its work was entirely appropriate, he
said, but not giving it sufficient funding to carry on its work was
“incomprehensible” because a lack of sufficient funding only allowed the
problem to continue to grow.3 The chairman, Sen. Riegle, noting
that many legislators had concerns about how well the RTC was performing,
asserted that long-term financing was not viable until Congress could consider
possible reform of the RTC's structure and operations. He said he would move
forward only on interim funding to meet the RTC's needs.4 At the
same time, however, he promised that his committee's first priority would be to
ensure that the RTC did not run out of money.
The Senate Banking Committee quickly moved to approve a bill
authorizing $30 billion in additional loss funds, the amount requested by Brady
for fiscal year 1991. Despite continued criticism of the RTC, fears over the
additional costs associated with further delay won out.5 In
addition to the new funding, the bill required the RTC to provide detailed
audited financial statements periodically. One other significant provision
dealt with protecting RTC employees from liability stemming from the
corporation's securitization program.6 From the RTC's point of
view, Seidman remarked that the Senate had passed the bill “essentially the way
we asked them to pass it.”7
As might have been expected, even limited funding did not find
such clear sailing in the House. Relations between House Banking Committee
Chairman Gonzalez and Treasury Secretary Brady had become increasingly cool,
and as House members had demonstrated during the autumn, they were much less
willing to support RTC funding. Gonzalez sent a letter to Brady protesting
both the size and the indefinite nature of the funding request and said he
expected the Oversight Board to submit an analysis explaining the need for $77
billion in loss funds and working capital for fiscal 1991.8 When
Brady came before the committee, he faced a much less cooperative group than
the one he had faced in the Senate. Few of the House committee's members
seemed moved by the argument that the losses had already been incurred and that
delays would only increase costs. Influential Democrats gave notice that they
would have to be convinced of the need for more funding; others suggested they
would attach amendments that would clearly be unacceptable to the
administration; and yet others sought action on other fronts before they would
contemplate voting for new funding.9
Gonzalez refused to move forward without an opinion from the GAO
about the RTC's performance. Comptroller General Charles A. Bowsher had many
criticisms of the RTC's operations, especially its asset sales, but also stated
that it was too soon to judge how well the agency was performing. He believed
that other areas needed improvement, including information systems and
contracting oversight, but on funding the GAO adopted a middle road: it recommended
that the RTC be funded annually because unlimited funding would “effectively
eliminate controls,” but shorter-term financing was inefficient and likely to
increase costs. When asked what grade he would give the RTC for its
performance, he replied, “Incomplete,” and said that to be fair, the RTC had
inherited an enormous mess and was a huge organization created from scratch.
Many problems existed, he said, but the RTC was attempting to address them. In
any case, the $30 billion request for the RTC should be approved.10
The process in the House Banking Committee, however, was
fractious, with Democrats seeking to attach various contentious amendments to
the bill (H.R. 1103).11 Reps. Joseph Kennedy and James Slattery
proposed a $20 billion appropriation, adding that anything above that amount
would have to be paid for through tax increases. The amendment was adopted
(28-21), with the support of Gonzalez. Among other amendments, the committee
also adopted (27-16) a much more controversial plan that would have required
states where the failure of state-chartered thrifts generated high RTC costs to
pay 25 percent of the costs associated with failed thrifts in that state;
otherwise, the state's state-chartered thrifts would not be allowed to retain
federal deposit insurance.12
The bill as amended, however, failed to make it out of the
committee, by a vote of 19-31, with all committee Republicans voting against
it. A Republican attempt to substitute a clean funding bill also failed,
22-27, with most Democrats opposing it. Afterward Gonzalez blamed the
administration for refusing to compromise on a shorter-term funding plan, and
stated that the RTC bill was “mugged by administration lobbyists determined to
block any effort to reform the RTC.”13 Republican Rep. Frank Riggs
described the Democratic bill as a “legislative Christmas tree” but “all the
ornaments brought the tree crashing down. . . . the Democrats decided to have a
legislative party, and yet they wanted the Republicans, the Treasury Secretary,
and the RTC to clean up their mess. Well we all refuse.”14
Meanwhile, the Senate process moved forward, with Riegle
supporting that chamber's bill, which simply provided for $30 billion in
additional loss funding and required that the RTC provide detailed financial
operating plans, schedules of projected insolvencies, and audit and financial
statements within six months of the end of the fiscal year. Riegle sought to
mollify those pushing for RTC reform and restructuring by announcing that he
would hold hearings on those issues in April.15 Several Democrats
nevertheless sought to introduce amendments dealing with management
restructuring and lower funding amounts,16 but Riegle succeeded in
having these tabled.17 Republicans, with little dissent, supported
the Senate's relatively clean funding bill, as the administration wished. The
Senate bill passed comfortably, 69-30, with the support of more than 80 percent
of Republicans and almost 60 percent of Democrats.18
The House Banking Committee found it impossible to reach a
consensus and chose to allow the matter to be decided on the House floor,
though under a rule that limited both debate and amendments.19 The
rule did provide for votes on three competing versions of RTC funding, in
addition to a straightforward $30 billion funding bill.20 One of
the alternatives was a proposal by Chalmers Wylie—essentially the clean bill
backed by the Bush administration, but including a set of limited management
reforms and reports as an enticement to doubting Democrats.21 One
was the Kennedy-Slattery proposal, which was a “pay-as-you-go” bill,
authorizing RTC spending but demanding that after the first $20 billion, all
future RTC funding be “deficit-neutral.” The third alternative was a Gonzalez
proposal, which appropriated the $30 billion but attached more substantive
The points of view embodied in these three proposals had already
been debated in committee, and the arguments attached to them were well-known.
All three substitute bills failed to pass, and the votes illustrate how deeply
held the partisan positions still were.23 The defeat of the three
alternatives left the House with the original clean bill, simply providing the
RTC with $30 billion in additional funding. House Republicans voted for it by
a three-to-one margin (120-42), but the Democratic leadership was unable to
persuade its members to support more funding and Democrats voted against the
bill by a two-to-one margin (81-177), killing it.24
It seemed that the process in the House might once again end in
deadlock, but this time there was no $18.8 billion loophole to fall back on;25
the RTC's operations had already been affected by the uncertainty, and new
resolutions were impossible without funding. Having voted down four versions
of the bill, the House voted overwhelmingly the next day to consider the
Senate's bill and amend it as a way to move forward, through a compromise
offered by Gonzalez and agreed to by the administration. The compromise
combined some of the provisions in the Wylie and Gonzalez bills voted down the
day before: it required reports on spending and minority contracting, mandated
some management reforms, and included affordable housing provisions. The House
voted 213-197 to amend the Senate bill according to the compromise language,
still with limited Democratic support.26
When the House considered passage of the bill itself, Gonzalez
told members that “to fail to approve funds now is to invite disaster.”
Failure to act could have meant a real loss of public confidence in the deposit
insurance system. The bill passed even more narrowly, 192-181. Speaker of the
House Thomas Foley took the unusual step of casting a vote for the bill (the
Speaker seldom votes) to indicate to Democrats that the House leadership stood
behind the compromise and the funding.27 Since the House had made
changes to the Senate bill, a conference was required. Given the difficulties
involved in getting the bill through the House, and since the administration
had endorsed the compromise, the Senate agreed to the House additions on issues
such as minority contracting and affordable housing.
The law as enacted in March provided for $30 billion in funding
for the RTC and included a provision addressing the RTC's fear that its
officials might be held personally liable in connection with its securitization
program. The law also sought to get more information to Congress in a timely
fashion, and was a combination of House and Senate ideas: the RTC's audited
financial reports had to be transmitted to Congress within six months of the
end of a fiscal year, and quarterly financial operating plans were required.
Any delay in submitting either kind of information would result in both the
Oversight Board and the RTC being called before Congress to account for the delay.
Management reform was also required, but vaguely. The RTC was to take steps to
manage conservatorships more effectively and was to set a goal that no
institution remain in conservatorship for more than nine months. The law also
called for better information systems in general, and for better information
systems for securities portfolios and real estate owned in particular. The RTC
was to develop better asset valuation processes and was to standardize due
diligence programs on certain mortgages. The contracting process was to be
improved through the creation of a comprehensive contracting manual, clearer
directives, and standardization of contracting documents and training
procedures. A report on how the RTC had responded to these goals for management
reform was required by September 30, 1991.
On affordable housing, the RTC was now allowed to sell eligible
single-family properties to qualified entities without regard to minimum
purchase price, a provision that Gonzalez had supported. The law also required
that the RTC, in its semiannual report, provide information on all its actions
to implement the minority outreach program mandated by FIRREA. This was
certainly much less specific than the percentage goals Gonzalez had pushed in
the House, although the conference committee did urge the RTC to make every
effort to make contracting available to minorities and women.28 On
social issues overall, however, the final version of the bill resembled the
Wylie approach far more than the Gonzalez approach.
Since the fall of 1990, essentially two battles had been waged:
whether to provide the RTC with more funds (something that Congress had no real
choice but to do), and under what conditions to provide it. Since taxpayer
funding was required, Congress had a very real obligation to ensure that the
RTC used those funds well. But “reform” of the RTC was often enmeshed in
political and ideological quarrels that were not always directly related to the
RTC's central purpose. By March 1991, with the repercussions of shutting down
the RTC imminent, Congress managed to find a solution that funded the RTC
through September 1991 but that clearly dissatisfied those who wanted changes
in how the RTC was managed and operated. After the vote, Gonzalez stated that
many, himself included, wanted more reform, and he promised that “we will be
back again on the next round of funding to ensure that RTC does get its act
together.”29 Given that estimates suggested that the RTC's funding
would last only through September, the next round was obviously close at hand.
The Resolution Trust Company Refinancing, Restructuring and
Improvement Act of 1991(RTCRRIA)
Indeed, Congress had little choice but to return to the RTC
almost immediately. During the second half of 1991 two issues needed to be
resolved—continued funding and structural and operational reform. The
administration wanted sufficient loss funds to end any need to return to
Congress for further appropriations and thought nothing significant was to be
gained from a major restructuring of the agency. Many congressional Democrats
(and some Republicans) were displeased enough with the RTC's performance that
they were determined to withhold funding unless the agency was substantially
restructured and many of its operations were reformed. They charged that the
RTC as constituted simply was not working and that change was necessary.
Political strategies played a role in the reform discussion, and
the funding debate (which became a reenactment of past partisan action) would
end in yet another unsatisfactory last-minute compromise. Deciding on a
restructuring plan was difficult, and with a proliferating number of proposals
and a multiplicity of actors with differing points of view, the path it took
was convoluted. Despite the administration's opposition to any restructuring,
by June RTC Chairman Seidman clearly began to embrace restructuring in some
form. In September, as the certainty grew that no funding would be approved
without it, the administration announced its own legislation for
restructuring. Several in Congress also offered bills to reform the RTC.
Although the legislative agenda was complicated by the need for
Congress to pass a major banking law (the Federal Deposit Insurance Corporation
Improvement Act) during the same session, just before Congress recessed in
November it passed a set of reform and restructuring proposals, along with
limited funding provisions. As described above, the bifurcated structure set
up under FIRREA was far from ideal, and the RTC Refinancing, Restructuring and
Improvement Act of 1991 significantly shifted responsibility for RTC
operations. It is debatable, however, whether these shifts made much real
difference in the speed and effectiveness with which the RTC carried out its
mission. Ironically, as criticism of the agency was persisting into late 1991
and forming part of the debate about the law that eventually passed, observers
could see that the RTC, despite its faults and problems, was actually making
significant progress toward achieving its goals.
During the spring and summer of 1991, there was no shortage of
ammunition for the RTC's detractors. In April, the GAO announced that
uncertainties in the RTC's cost estimates could mean both higher costs and
lower asset recoveries. The GAO report also labeled the agency's internal
controls deficient. In June, the GAO stated that it could not complete its
1990 audit of the agency because financial statements had been unavailable
As the legislative process geared up for a new funding bill,
congressional Democrats lost no time setting out their positions. Frank
Annunzio recommended eliminating the RTC altogether in favor of a private
sector program.31 Bruce Vento, in a report of the RTC task force,
recommended recreating the RTC as an independent agency with its own board, and
claimed this was meant to streamline the process, not just lead to a
“reshuffling of the organizational deck.”32 The momentum clearly
lay with linking management change to any new loss funding.
The administration was not a willing partner in these plans, but
Seidman, who had openly expressed his reservations about the structure since
the debate over FIRREA, indicated he was considering management change. He did
not at this point publicly endorse such change, for he said it could be
disruptive, but he did reiterate his belief that the current structure was
“awkward” and “not ideal.” He said the RTC itself should confront the issues
because any change generated by Congress would be highly politicized and could lead
to “a train wreck.” It was reported that the RTC was leaning toward supporting
a structure with a single leader and board of directors.33
Still, in public during May Seidman maintained that it would be a
mistake to undertake restructuring, especially since communication between the
RTC and Oversight Board had significantly improved.34 The
administration, trying to stave off large-scale structural changes, announced
the creation of a working group headed by Robson and Alfred DelliBovi (from the
Department of Housing and Urban Development [HUD]) to identify and correct
management problems at the RTC.35 Criticism, however, continued.
In mid-June, William Rivoir, the Arizona superintendent of banks, told an RTC
regional advisory board that the RTC was harming local real estate markets and
that its operations were “illegal, immoral, wasteful, and downright stupid.”
He argued that the only a complete overhaul could fix the RTC's problems. 36
The fact that the regional chief in the RTC's Kansas City office spent $26,000
on art for the office did nothing to foster positive perceptions of the agency.37
The first legislation on restructuring since Sen. Kerrey's bill
in February was introduced by Rep. Vento in June. Arguing that the RTC lacked
leadership, he presented a bill (H.R. 2682) that abolished the Oversight Board,
separated the RTC from the FDIC, converted the RTC into an independent agency,
and established the position of RTC CEO.38 The next day Philip
Searle, chairman of the RTC Advisory Board, testified before Congress and
called for experienced real estate professionals to head the RTC, noting that
using “career bureaucrats,” particularly for asset disposition, was
inappropriate. The Home Builders Association also argued for a private sector
real estate professional to head the agency.39
By this time, despite the administration's desire to maintain the
current structure, the congressional debate had shifted: the question was not
whether but how to change the structure.40 When Seidman testified
before the Senate in June asking for $80 billion in additional loss funding for
the RTC, he also decided to put forward two possible management reforms. Both
proposed reforms would dramatically lessen the FDIC's part in the S&L
cleanup: the FDIC would no longer serve as manager of the RTC. One reform
would have maintained the current dual board structure, but with an expanded
Oversight Board in charge only of basic policy, such as funding; operations
would be the responsibility of a new RTC CEO, acting in concert with a small
RTC board. Seidman's other reform was a more radical departure from the
existing structure, calling for a corporate board, a CEO, and an executive
committee; the corporate board would be an expanded version of the Oversight
Board, with all the responsibilities of both the current Oversight Board and
the RTC board; the CEO (who would sit on the board) would control all agency
staff; and the executive committee would act on the board's behalf.41
RTC and FDIC Chairman Seidman argued that his proposals were
designed simply to streamline management; he also said that since the RTC had
grown up, it was time “to kick it out of the nest.” Some observers thought the
FDIC was trying to rid itself of the intense criticism as well as the onerous
job of running the RTC. Economist Robert Litan said it seemed as though the
FDIC were “parachuting out and watching the RTC drift out to sea,” a move he
called “a very rational strategy.” The FDIC denied that this was Seidman's
When Treasury Secretary Brady testified before the Senate several
days later, he asked for both $80 billion in loss funding and an increase in
working capital. The request for increased funding caused attention to focus
on management reform. Even though the Senate had always been (and was still)
more likely to approve funding increases than the House, it was becoming clear
that reform had to accompany funding. Brady argued against the kind of
overhaul proposed by Seidman and the kinds espoused by congressional critics of
the RTC. The administration's solution was to adopt one feature of reform—the
creation of a CEO—saying this would provide the RTC with needed direction, not
require legislation, and avoid disrupting the agency.43 The
division between Seidman and Brady was clear. The latter argued for minimal
change; Seidman said that either of his alternatives was preferable to the
present situation and that in any case the FDIC's position as manager of the
RTC should end.44
The House had always been more vociferous in its criticism of the
RTC, and this debate proved no exception. The need for $80 billion in
additional loss funds, a need acknowledged by the Senate Banking Committee,
gave rise to criticism in the House, with RTC critics like Annunzio calling the
RTC “a black hole” for taxpayer funds and suggesting that the agency be
disbanded in favor of a private sector solution to the problem of asset
disposition.45 Gonzalez stated that approval for more funds would
probably not be forthcoming without significant reform.
Beyond funding and management, House Democrats had another
concern—that the RTC was not executing the social policy elements of FIRREA
(the provisions concerning minority contracting and affordable housing). There
had been reports that few minority asset-management companies were receiving
contracts from the RTC. The agency argued that few minority firms were large
enough to handle many of the contracts, but unsuccessful minority bidders
disputed this contention. Jesse Jackson, head of the Rainbow Coalition, said
the RTC could break up contracts into smaller parcels, and in June Seidman
promised to do so.46 RTC critics also argued that the agency was
not implementing the affordable housing provisions of FIRREA. Groups such as
Citizens United for Economic Development complained that it was difficult to
get financing for RTC properties. During the spring of 1991, lawsuits in Texas
and Arizona charged that the RTC ignored FIRREA's affordable housing
requirements. The RTC replied that the requirements were hard to meet, but
Democrats in Congress charged that the Bush administration had chosen to
disregard those portions of the law.
The summer passed with further hearings and continued public
debate. The Oversight Board drafted a bill that, not surprisingly, retained
much of the current management structure. The Oversight Board would remain and
would have the power to decide on the appointment of a CEO, who would be added
to the Oversight Board. The FDIC board would continue to act as the RTC board,
with the CEO added to that board as well. The FDIC would continue to be the
exclusive manager of the RTC, but the CEO would have considerable authority to
run the agency. On funding, the Oversight Board's bill called for $80 billion
in loss funds and a $160 billion limit on working capital. It also extended
for an additional year the RTC's authority to resolve institutions, and in an
effort to placate critics, it provided for the appointment of an
executive-level officer to direct outreach programs to minorities and women.
Apparently Sen. Riegle also submitted a draft bill, one that seemingly adopted
much of Seidman's corporate board model as its basis: it abolished the
Oversight Board, created an expanded RTC board with a CEO who was responsible
for policy and operations, but placed funding responsibility with the Treasury.47
Other possible outcomes were the two Seidman plans, the Vento bill, and the
plans introduced in the previous session by Senators Kerrey and Wirth (see note
The divergence of opinion between Seidman (representing the
FDIC/RTC) and Treasury persisted.48 The Treasury's minimalist plan
was not likely to placate the RTC's critics, partly because Congress wanted far
more change than Treasury did and partly because Congress saw Seidman as the
more trustworthy guide. During August and early September, the RTC and FDIC
were drafting revised versions of the Oversight Board's bill as part of their
discussions with the administration about putting forward a bill with more
substantive changes. By early September, the administration had agreed, albeit
reluctantly, to a bill that removed the FDIC as exclusive manager, reduced the
Oversight Board's responsibility, established the CEO position by statute,
added the RTC CEO to the RTC board, and added both the FDIC Chairman and the
RTC CEO to the Oversight Board—all of which brought the bill much closer to
what Seidman had envisioned. Robson and Seidman reached an agreement that at
the hearing scheduled for September 12, Robson would maintain the position that
the Oversight Board did not believe such changes were “necessary or desirable”
but that if a majority in Congress insisted, the administration would agree to
the RTC/Treasury compromise restructuring plan. Seidman, for his part, would
state that he favored the restructuring plan (acknowledging the difference of
opinion with the Oversight Board) but that both had agreed to the compromise
Seidman and Robson testified about
the compromise they had reached. Robson's reluctance was clear: the
administration preferred to maintain the present structure but with the
addition of a CEO. “I really think that Congress is going to make one big
mistake if it folds the tent and recreates this thing in its own way because
you are going to have nothing but one hell of a lot of confusion and a lot of
disruption and you are not going to buy yourself anything from it.” Democratic
Rep. Douglas Barnard counseled Robson that Treasury ought to support the
compromise, telling him, “I'd rather offer something than take what Congress
was going to give you.”50 Robson's later comments showed that the
administration had taken this to heart: “If we're going to get hit by a truck,
what type . . . would we like to get hit with?”51 The compromise
proposal was introduced by Rep. Marge Roukema.52
Although the precise character of the restructuring remained
uncertain and competing versions still needed to be reconciled, the agreement
reached by the FDIC/RTC and the administration made that issue less
contentious; the agreement also made it far less likely that more sweeping
plans such as Vento's would gain widespread support. Indeed, the
administration now lobbied Congress in favor of the compromise restructuring,
hoping to persuade members that this was all the change needed. Robson and
Seidman met with numerous members of Congress, both supportive and not, during
late September and early October. House Banking Committee Democrats perhaps
needed the most attention, but conservative Republicans were also unhappy, some
of them believing that the RTC essentially amounted to a socialization of the
American economy. Rep. Newt Gingrich introduced a bill in October that
terminated the agency fully two years before the FIRREA termination date, at
year-end 1994.53 (Republican disaffection with the RTC would become
much more obvious in 1992.)
The administration moved forward on finding a CEO for the RTC,
announcing that Albert Casey, former head of American Airlines and former
Postmaster General, had been selected for the job. Since the administration
believed that no statutory authority was necessary to install him, Casey was
expected to be in the position in October.54 Smooth passage of the
legislation did not, however, ensue.
Congressional Democrats, while hoping to push for the more
significant structural changes as well, quickly signaled a return to the
funding issue. Reps. Annunzio, James Bacchus, and John W. Cox introduced a
bill tying RTC funding to assets sales (they also supported the Vento
restructuring plan).55 When this element of their bill was offered
as an amendment in subcommittee, it was defeated.56 Rep. Joseph
Kennedy attempted another previously unsuccessful tactic, proposing an
amendment that would give the RTC only $20 billion and, more importantly, would
make any further funding contingent on the president's submitting a plan to pay
for it. Kennedy's amendment was narrowly approved in subcommittee (18-17).
Republicans stated that since Kennedy's amendment did not specify how that
funding would be paid for, it violated the 1990 budget agreement and was
therefore “doomed.” One committee staff member noted that it was ironic that
Democratic “free spenders” had become fiscal conservatives when it came to
funding the RTC.57
The subcommittee considered a host of other amendments, mostly
from Democrats. The subcommittee approved an amendment introduced by Annunzio
designed to reimpose a meaningful working capital constraint as well as
amendments that required additional audit requirements, limitations on the
acceptance of brokered deposits, and changes to contracting processes. The one
significant restructuring change agreed to was the presidential appointment and
Senate confirmation of the new RTC CEO, as well as a further reduction in the
role of the Oversight Board.58 The more radical structural
proposals, such as making the RTC an executive agency and a wholly owned
government corporation, were rejected. A series of amendments designed to
address concerns about minority- and women-owned businesses' participation in
both the contracting and the acquiring of failed institutions were also added
to the bill, although Republicans successfully weakened the proposed
provisions, arguing that they were excessive and added more costs and burdens
to the RTC.59
On October 8, the subcommittee voted 20-16 (mostly on party
lines) to report H.R. 3435; Kennedy's pay-as-you-go provision, despite attempts
by Republican members to remove it, remained in the bill. Robson called the
bill both flawed and inadequate, saying it failed to provide sufficient
funding, created new bureaucratic obstacles, and violated the 1990 budget
agreement. He exhorted the full committee to address these problems and said
that if the funding provision remained, he would advise Bush to veto the bill.
Chalmers Wylie predicted that the House Banking Committee would not remove the
provision and that a veto would follow. Kennedy argued he was simply
attempting to reduce the budget deficit.
No equivalent of the administration bill had been introduced in
the Senate, but as noted above, during the previous session long-standing
critics of the RTC's organization had introduced bills to restructure it, and
in late October, two Senate hearings on the issue took place.60
John Robson again defended the need for a separate Oversight Board, citing the
GAO's advice that the Oversight Board should be maintained and that any
restructuring should minimize disruption. Albert Casey, just installed as RTC
CEO, made his first appearance before Congress and advocated the
administration's position as well. Kerrey and Wirth maintained that more
substantial changes should be made. During the second hearing, senators heard
complaints from people in the real estate industry about dealing with the RTC,
and Riegle drew a parallel between perceived problems at the lower levels of
the agency and the problems he observed at the top. He suggested that the
structural problems at the RTC led to poor or inconsistent treatment of
prospective bidders for RTC property.61
In early November, Riegle introduced a Senate bill that called
for a much more significant restructuring than the administration wanted, one
that was similar to Seidman's corporate board model. The bill abolished the
Oversight Board, set up a single RTC Board of Directors to be chaired by a
presidentially appointed (and Senate-confirmed) RTC CEO (the other members
being the Treasury Secretary, Chairman of the FDIC, and two independent
members). This new, smaller board would have full responsibility for oversight
and management of the RTC but would delegate operating authority to the CEO.62
This bill never came up for a vote.
Although Riegle's bill was not acted on, the House Banking
Committee did move forward, on November 20 approving the bill with the
controversial funding provision, 27-25, again essentially along party lines.
As in subcommittee, Republicans sought to remove the funding provision by
offering a substitute that included everything but the pay-as-you-go provision,
therefore containing elements that many Republicans and the administration
would have rejected but also giving the RTC permanent and open-ended funding,
something few Democrats would support. The committee did approve a host of
amendments, mostly by voice vote. At this point, however, the prospects for
agreement appeared dim. Speaker Foley noted that the House would not adjourn
without providing some RTC funding, stating, “There is no way it can be left
totally to sometime next year”—but predicting the amount might well be less
than the administration had requested.63
RTC and administration officials commented that new funding was
essential and contended that many held an unjustifiably jaundiced view of the
agency and its accomplishments. Casey argued that the RTC was actually ahead
of schedule, having resolved large numbers of institutions since its inception
as well as having sold $200 billion in assets, including many hard-to-sell
assets. Critics, he said, should recognize that improvements had taken place,
and while he stood ready to work with Congress, the legislature had to stand
behind the government's pledge to depositors with the requested $80 billion.
Peter Monroe of the Oversight Board echoed the request for funds.64
Congress was, however, again finding it difficult to provide those
funds. In 1990 when legislators waited until the last minute but were unable
to act, they had the $18.8 billion loophole to keep the RTC going until more
funds were appropriated. This time they had no such way out; on October 10,
the RTC had withdrawn 14 larger thrifts and numerous small ones from the
resolution schedule. William Roelle stated that the RTC had sufficient money
to operate, but not enough to consummate any new deals.65
On November 27, perhaps with members realizing that not providing
any funding would be problematic, Congress approved a compromise that had been
put forward after the House rejected the bill approved by the Banking
Committee. The compromise provided $25 billion in new loss funds but mandated
that the money could be used only until April 1, 1992, forcing Congress to
return yet again to the RTC in its next session. The bill also included
changes in the RTC management structure, provisions on aiding minority- and
women-owned businesses, and provisions expanding affordable housing programs.
House members were sufficiently anxious to distance themselves from the
legislation that it was, unusually, passed by a voice vote. Senators had
intended to do the same, but Paul Wellstone forced a recorded vote; the bill
passed 44-33.66 President Bush, urging lawmakers to fully fund the
RTC on their return, signed the bill on December 12.67
As noted, RTCRRIA provided up to $25 billion in new loss funds to
be available through April 1, 1992. The changes in the working capital limit
that the administration had sought were not incorporated into the law.68
As the administration had requested, the time limit on the RTC's power to take
over insolvent thrifts was extended from August 9, 1992, to October 1, 1993.
The restructuring provisions, which would take effect February 1, 1992, were a
mix of the various ideas that had been discussed during the previous year. The
Oversight Board was renamed the Thrift Depositor Protection Oversight Board;
its membership was expanded to seven members with the addition of the CEO, the
FDIC Chairman, and the director of the Office of Thrift Supervision, and the
removal of the secretary of HUD; and its ability to insert itself into RTC
operations was curtailed. The position of CEO was created by the statute, and
the person filling the position had to be appointed by the president and
confirmed by the Senate. The FDIC was removed as the exclusive manager of the
RTC, the RTC's Board of Directors was abolished, and the job of running the RTC
was given to the CEO.
Insofar as social policy was concerned, several proposals
introduced by Democrats in the House were included in the law. For example,
the technical evaluation procedure for selecting contractors was changed in
such a way that minority- and women-owned businesses (MWOBs) would receive
preferential treatment. The law also sought to encourage the operation of
branch facilities by MWOBs: the RTC could make available branches of failed
thrifts located in predominantly minority neighborhoods to minority- or
women-owned depository institutions.69 In addition, several
affordable housing provisions stemming from those offered by Reps. Kennedy and
Barney Frank were included in the law. For example, residential properties
held by the RTC as conservator were made eligible for the RTC's affordable
housing program. Essentially Democrats had gotten management reform and
provisions on social issues (but not as much or as many as they wanted), and
the administration had gotten four months of continued RTC operations.
Republicans apparently also received assurances that an economic stimulus
package with tax cuts included would be considered in the next session.70
The limited funding provision, however, meant that Congress would again be
faced with requests for further funding in an election year—and the experience
of 1990 did not suggest passage of that funding would be easily accomplished.
Legislative Stalemate II: 1992
Having passed RTC legislation in
November, Congress would need to return to the subject almost immediately. The
April 1 deadline meant that the RTC had not really been provided with $25
billion, for the agency was able to resolve only a limited number of
institutions per quarter and could not use the entire sum by that date.
Indeed, Treasury Secretary Brady noted that the RTC would be able to spend only
about 40 percent of the money by the deadline.71
The debate over the RTC in early 1992 was not unlike the debate
that had gone on since the RTC's inception: taking their familiar places were
concerns about asset-disposition methods and their effects, the effectiveness
of the RTC's management, and, of course, the growing cost of the cleanup.
Certain facts on the ground, however, were changed, some points of contention
were new, and the political dynamic was somewhat different. Although no one in
Congress was happy about appropriating funds for the RTC, the new political
dynamic probably contributed most to the legislature's inability to pass to a
bill to provide new loss funds in 1992.
Some of the changed circumstances were, at least on the surface,
positive. The RTC's CEO, Albert Casey, had confirmation hearings in January,
had been well received, and was confirmed unanimously in February. The
creation of the position itself, along with Casey's promises to streamline the
management process by delegating significant authority to RTC field managers,
at least indicated that perceived problems connected with the RTC's way of
doing business were to be addressed.72 As Congress was considering
the new RTC funding bill in March, Casey announced that the RTC was nearing the
completion of its task and would begin to close offices and shed employees,
with plans to halve its field staff by the end of 1993. Although some
Democrats viewed this as an election-year political maneuver, the RTC had
actually made significant progress.73 By year-end 1991 it had taken
over 675 institutions and resolved 584 of them. Total assets held by the RTC,
though still high at $130.4 billion, had declined by about $30 billion during
1991 even while more than 120 institutions had been taken into conservatorship.74
(See figure 1.) Moreover, in response to the recession (which had ended
“officially” in March 1991),75 the Federal Reserve Board had been
steadily lowering interest rates (between January 1991 and January 1992 the fed
funds rate dropped from 6.91 percent to 4.03 percent).76 The drop
was helpful to troubled thrifts and to the RTC because it meant that those
thrifts that the RTC would be taking over would be in less dire condition, and
others that might have had to be taken over were likely to survive.77
Other developments were less auspicious, at least with regard to
how Congress would view requests for further funding. The GAO criticized the
RTC's ability to keep track of assets and oversee its contractors, and issued a
number of reports that, while citing improvements in the RTC's operations,
nevertheless suggested that problems remained. Indeed, the GAO recommended
that Congress not grant the administration's funding request in full but keep
the RTC on an annual funding schedule as a way to ensure accountability.78
And one particular example of RTC mismanagement in contractor oversight came to
the fore just as Congress began to consider new funding. In the wake of 1990's
Operation Clean Sweep, the RTC's swift resolution of more than a hundred
thrifts (many with very poor bookkeeping records), there was a discrepancy of
nearly $7 billion in assets between the ledger maintained at the RTC and the
ledgers in 92 different receiverships. The RTC's response to this was “Western
Storm,” a large contract issued to obtain an accurate accounting of assets.
The $24 million contract, however, had numerous problems. The GAO charged that
the RTC's western-region officials improperly issued the contract without
competition, then wrote it without proper budget and cost limits, and
circumvented the agency's own rules on allowable maximum contract amounts that
could be awarded without approval from Washington by breaking the contract up into
more than 90 task orders.79 Such missteps were hardly helpful to an
already flawed image.
In addition, a suggested policy change was particularly important
to the debate on funding in early 1992—a push, spearheaded by Rep. Bill
McCollum, to use RTC funds to buy back supervisory goodwill from troubled
thrifts.80 FIRREA had created stricter capital requirements for
thrifts; among these stricter requirements, the inclusion of supervisory
goodwill was to be phased out by 1995.81 McCollum believed that many
institutions, if only they were spared this difficulty, would survive rather
than require RTC takeover and so would save considerable taxpayer funds. Many
in Congress—particularly fellow Republican James Leach and Democrat Bruce
Vento—opposed this as a return to forbearance. Interestingly, just as McCollum
was pushing for this legislative change, the legal ramifications of FIRREA's
goodwill provisions were beginning to become apparent. In February, a U.S.
Claims Court issued a preliminary ruling against the government in Winstar
v. U.S. This litigation eventually reached the Supreme Court, and led to a
1996 ruling that the government in FIRREA had had no right to repudiate the
accounting variances that had been included in resolution contracts. As a
result, a number of institutions successfully sued the government for damages.
As of this writing, the overall cost of the goodwill litigation since 1997 has
reached approximately $1.4 billion (just under $1 billion has been paid in
settlements with plaintiffs; the remainder has gone toward litigation costs).
Whatever the merits of using RTC funds to buy back goodwill, McCollum's
suggested change provided another focus for Republicans who, for a variety of
reasons, had disliked the RTC. His proposal helped create an environment in
which significant numbers of House Republicans felt willing to reject the
position of their own administration. Their stance was undoubtedly fueled, as
well, by ongoing antipathy toward various aspects of the RTC's activities, a
general disdain for bureaucracy, and the imminence of an election.
The legislative process started with identical bills in each
house, introduced at the administration's request, that simply removed the
April 1, 1992, deadline on funds provided in RTCRRIA and gave the RTC an
additional $55 billion in loss funds. These were the amounts asked for by both
Casey and Brady in congressional testimony. Unsurprisingly, many members of
both houses had proposals for amendments. In the House it quickly became clear
that the GAO's recommendation to provide only sufficient funds for another
year, until April 1993, had strong support. Casey informed Rep. Annunzio that
removal of the April 1 deadline on use of the previously authorized funding,
plus an additional $25 billion, would be sufficient.82 This level
of funding, offered as an amendment by Rep. Joseph Kennedy, seems to have been
embraced without much dissension, and it passed the subcommittee on a voice
Of course, there were some in the House who thought more needed
to be done to reform the RTC or to accomplish other goals. Vento, for example,
wanted increased reporting and analysis of assets on hand and sold, as well as
a restoration of the borrowing limitation originally present under FIRREA. Bacchus
wanted to condition RTC funding on the receipt by Congress of the GAO audit for
fiscal year 1991; he also wanted to institute limits on legal fees. The RTC
opposed all of these. McCollum offered his supervisory goodwill amendment, as
well as an amendment on capital forbearance for thrifts. The RTC took no
position on the desirability of these two proposals but thought that RTC funds
should not be used for, or tied to, either proposal.84 Democratic
Rep. William Orton put forward an amendment containing a whole series of RTC
reform initiatives. In the end, all of these amendments and others were
withdrawn because any amendment not specifically having to do with funding was
ruled nongermane by Annunzio. This approach had been taken “to avoid the usual
bottlenecks over controversial restructuring amendments that have delayed the
funding process in the past” and also to give Casey at least some time running
the agency without “constant Congressional micromanagement.” It was noted that
many members, tired of the RTC issue, had willingly withdrawn their amendments.85
When the full House Banking Committee considered the bill, many
of the same amendments reappeared, but Gonzalez took a similarly hard line,
stating that both committee Democrats and the House leadership of both parties
wanted to pass a clean bill. Gonzalez himself wanted to offer reform proposals
but said he would refrain from doing so. McCollum, who again wanted to put
forward his goodwill amendment, was displeased at his inability to do so.
Nonetheless, the bill passed the committee easily, 30-17.86
The Senate Banking Committee, however, did not follow the
clean-bill path. The Senate funding provision was identical to that adopted in
the House, but in addition, the Senate bill (S.2482) contained a number of
other elements. These included repeal of RTCRRIA's capital forbearance for
certain types of loans; an extension of the time allowed for certain thrifts to
divest a particular sort of FIRREA-grandfathered real estate investment; an extension
of the statute of limitations (from three to five years) for suits against
insiders at failed thrifts and banks; the publication of examination reports of
failed banks and thrifts if taxpayer funds had been used in the resolution of
these institutions (a measure opposed by all the regulators); and a provision
to provide health care to employees of failed institutions for a certain period
after failure. The only initial provision that related directly to the RTC was
one that provided for the designation of an acting RTC CEO if the office became
vacant.87 The committee winnowed the 52 amendments scheduled to be
offered, debated only some, and adopted even fewer. Garn's attempt to strip
the bill down to a clean funding bill failed 10-11. Successful amendments
included one (from Sen. Connie Mack) to add Florida to the RTC's distressed
areas and one (from Sen. Terry Sanford) to set aside $1.85 billion for
open-thrift assistance.88 The latter likely would have proved
contentious, for it potentially could have aided thrift shareholders as opposed
to depositors (this provision was clearly similar in intent to McCollum's).89
In addition, Sanford proposed it at about the same time that regulators were
considering the use of an early resolution program that suggested open-thrift
The floor debate in the Senate took place just a week before the
April 1 deadline, with some members, such as Kent Conrad and Robert Kerrey,
indicating they opposed the bill because of their dissatisfaction with the
effectiveness of RTC operations and the agency's (lack of) accountability.
John Kerry attempted to resurrect an amendment that had been defeated in
committee that would have required RTC funding to be treated as spending for
purposes of budget enforcement. This measure was an attempt to force the use
of either budget cuts or new taxes to offset the RTC spending. With strong
Democratic support but the opposition of the Democratic leadership, the
amendment failed.91 In the end, perhaps the most persuasive argument
was the simplest—the government had to fulfill its promise to insured
depositors—and the bill passed, though not resoundingly, 52-42.92
Both Democrats and Republicans had similar voting splits: it was not all that
surprising that 25 out of 54 Democrats went against the bill, but the
opposition of 17 out of 40 Republicans suggested that Republican antipathy to
RTC funding was not confined to the House.93
On the same day, Gonzalez informed Speaker Foley that Republican
support in the House for funding continued to decrease and that without it,
passage of the bill would be difficult.94 As the April 1 deadline
approached, what would happen remained unclear. Democrats said they would not
support funding unless a majority of Republicans did as well, and many
(reportedly about two-thirds) of the Republicans, ambivalent about voting for
more funds, were lining up with McCollum, who was supported by minority whip
Gingrich.95 As a result of this impasse, the bill that had passed
the House Banking Committee was shelved and a very narrow substitute (H.R.
4707) was introduced in its place. This bill simply removed the April 1
deadline, allowing the RTC to use the funds that had been appropriated in
November. By now, however, the legislative process had significantly
deteriorated. The substitute bill had been introduced under a very narrow rule
that permitted no alterations, little debate, and only a single motion to send
the bill back to committee. Republicans, complaining about overbearing
tactics, tried unsuccessfully both to defeat the rule and to recommit the
bill. When the measure itself came up for a vote, it failed 125-298 because
when Democrats saw that Republicans would not support even this limited bill,
they too voted against it.96 The RTC was out of money. (Actually,
it wasn't quite out of money: the agency had set aside over $2 billion from
previous appropriations that had not expired on April 1, but this would not be
generally known until later that month.)97
In the immediate aftermath of the failed legislation, it appeared
that another attempt might be made to pass a bill. The administration said it
was open to any reasonable funding plan, and although Gonzalez wanted the
administration to push harder in support of RTC funding, he indicated that he
would try to pass a bill as soon as possible after the House Easter recess.98
And indeed, Gonzalez decided to try to resurrect a modified version of the
clean bill that had removed the April 1 deadline and provided additional
funding (the main change being to provide only an additional $25 billion for
use through April 1993) by having a hearing on the bill in the Rules
Committee. Moreover, Gonzalez asked for either an open rule or the
consideration of amendments at the hearing; either course would allow McCollum
to bring up his goodwill buyback plan (and would, of course, allow others to
put forward changes as well) and so would permit debate and a vote. It was
thought possible such a course might assuage the rancor that had attended House
proceedings thus far, and McCollum said he thought many Republicans would favor
a funding bill with his plan attached. Rules Committee staff, however, said
they could not predict when such a hearing would be held or when floor action
on the bill might occur.99
There appears, however, to have been little appetite for
returning to the issue of RTC funding.100 In July, President Bush
wrote Speaker Foley asking the House to pass additional funding. Gonzalez
noted that the bill was with the Rules Committee and that further action on it
depended on the leadership.101 Casey had announced in May that
because of the favorable interest-rate environment, the total estimated cost of
the cleanup had dropped by $30 billion and that the amount provided in the
Senate bill would end the RTC's requests for funding. At the same time, OTS
Director John Ryan stated that the number of thrifts likely to fail had dropped
significantly as well. These optimistic pronouncements were attacked by some
as little more than election-year propaganda. Robert Reischauer, head of the
CBO, said his office believed 600-700 additional thrifts would fail and that
the low interest-rate environment would be short-lived.102 He
reiterated this in July and suggested that the RTC be kept open for three years
beyond its planned closure.103 His predictions turned out to be far
too pessimistic, whereas Casey's and Ryan's came very much closer to being
In the existing climate, however, many in Congress were unwilling
to trust claims suggesting that the job was nearly complete and that a single
appropriation would suffice. Although during the late summer and early autumn
Casey occasionally called for Congress to provide funds, nothing further was
done. The RTC continued to take over thrifts, but by the third quarter of 1992
RTC resolution activity slowed almost to a halt. This situation persisted
until the latter part of 1993, when the RTC finally received new loss funds.
The failure to provide funding in 1992 had been caused by a
confluence of factors. Dissatisfaction with the RTC's operations—whether its
methods of asset disposition, its contracting oversight, or its provision of
affordable housing—was certainly present and provided reasons for legislators
to oppose funding, or at least funding without operational changes. But what
happened in 1992 stemmed also from politics—the politics of an election year,
the politics of congressional Republican disaffection with administration
policy, and the politics of a Democratic majority unwilling to pass unpopular
legislation without Republican support.
The RTC Completion Act of 1993
As Congress returned in 1993, the need for RTC funding remained
unchanged, as did congressional reluctance to provide that funding. Also
unchanged were the concerns of many in Congress about RTC management and
operations. And no debate over an RTC bill would have been complete without a
scandal or two: this time Western Storm was replaced by a contract with Price
Waterhouse that resulted in spectacular photocopying costs. The circumstances
surrounding the debate, however, differed in three significant ways: the amount
of money thought to be needed was much smaller, the amount of time remaining to
the RTC was much shorter, and control of the White House had shifted from the
Republican party to the Democratic party.
First, the continued improvement in
the economy and the very favorable interest-rate environment meant that the
number of likely failures kept diminishing and therefore the additional cost of
the cleanup was expected to be lower than had been estimated even six months
earlier. Second, time was running out on the RTC, which (according to RTCRRIA)
would have to stop taking over failed thrifts on September 30, although it
could continue to resolve the institutions it had already taken over and could
continue to sell assets until its scheduled closure at the end of 1996.
Accordingly, Congress needed to begin grappling with the RTC's shutdown. The
September deadline focused attention on the Savings Association Insurance Fund
(SAIF), which (under the FDIC's direction) would soon be responsible for taking
over and then resolving failed thrifts—but to be in a position to do this it,
too, would likely require appropriations. In the event, debate over the SAIF
had implications for the RTC and proved an obstacle to passage of RTC
Finally, with the election of Bill Clinton, the political dynamic
had shifted: a Democratic president was asking members of his own majority
party to approve RTC funding. This put many congressional Democrats in a
difficult position. Although the Democratic leadership had supported funding
during the previous administration and many of the rank and file had voted for
it, many had also been harsh critics of the RTC for three years and now found
it hard to make an about-face. In addition, a great many freshman Democrats
were unhappy about voting money for the RTC after having often criticized the
agency during the 1992 election campaign. They viewed the need for funding as
an unwelcome inheritance. On the other side of the aisle, many congressional
Republicans were no great champions of the RTC, had spurned funding in 1992,
and were even less likely to support funding now that a Democratic
administration was seeking it.
The year 1993 therefore witnessed yet another long legislative
struggle, with substantial changes made to what started out—in the familiar
way—as an attempt at a “clean bill.” This time, though, legislation was
enacted. It was the last major RTC statute and would end the RTC's funding
needs, make some preparations for the agency's closure, and shut down the
agency a year early. And true to form, in this legislation, too, Congress
would have a final say about how the RTC did business—in the realms of
accountability, management methods, and social policy, the same realms on which
Congress had legislated in FIRREA and Congress had discussed in all previous
debates surrounding the RTC.
In the early months of 1993, even before a funding request
reached Congress, a question that needed to be answered was what the presence
of a new administration would mean for the RTC and the legislative process.
Before the new administration took office, Lloyd Bentsen had signaled that, as
Treasury Secretary, he would try to obtain RTC funding quickly.104
Two issues, however, made obtaining funding more difficult. The first concerned
the RTC's problems with a 1992 Price Waterhouse contract to determine the value
of assets in preparation for the resolution and sale of assets at the failed
HomeFed Bank in San Diego, California. Under the contract, the RTC was charged
67 cents per page to copy 11 million documents. The RTC managers supervising
this contract did not question either why so many documents were copied or why
the cost per page was such a seemingly excessive amount. This copying helped
increase the initial contract costs from $5 million to approximately $25
million. Casey tried to defend at least some of the costs (although he
admitted with hindsight that the contract ought to have been renegotiated once
the need for so much copying was discovered), but the RTC's inspector general
was highly critical of the contract. The episode served to expose some of the
RTC's systemic problems in awarding and managing contracts, foremost among
which were insufficient oversight by senior management and inadequate internal
controls—and it provided new ammunition for RTC critics.105 The
second issue that came to light in February was the disclosure that many top
RTC officials had received bonuses totaling more than $1 million for 1992.
Many RTC executives' salaries were already higher than government salaries in
general, and although Casey defended the bonuses, they drew congressional
criticism as extravagant.106
These revelations did not help make a case for funding the RTC,
and it was soon after they came to light that Bentsen appeared before Congress
asking for $28 billion for the RTC and another $17 billion for the SAIF.107
The timing of the request was not propitious, and not only because of
the two particular revelations. Many inside and outside Congress remained
unhappy with the RTC's performance. Some developers and some in Congress
thought the RTC's practice of selling assets in bulk meant that small investors
were being denied the opportunity to bid on assets. (Partly in response, the
RTC in April would announce the use of smaller asset pools.)108
Some in Congress were concerned about reports that the RTC's use of MWOBs had
been lackluster.109 General worries about contract oversight
persisted. To deal with these and other concerns, Bentsen promised a series of
management reforms in the hope that Congress would refrain from further
statutory management requirements.110
The Senate Banking Committee acted quickly to approve the $45
billion funding request, despite the misgivings of newly elected members.
Their hesitancy did engender an amendment designed to ensure that the
management reforms promised by Bentsen would have been successfully
implemented. Among other things, this amendment provided that Bentsen certify
that the reforms were working at the point when the RTC had expended more than
$10 billion of the appropriated funding, and again at the $20 billion point.
However, senators of both parties said that the amendment was too weak and they
would propose tougher safeguards later.111
Despite hopes for a relatively quick process in the House, the
legislation languished long enough for the administration to be able, in late
April, to decrease by $3 billion the amount of funds it sought.112 In
May, when the House banking subcommittee finally approved a bill, with
newcomers to the House leery of voting for RTC funding, the amount for the
RTC's funding was cut to $18.3 billion (the share of the $25 billion in RTCRRIA
funds that was not used by the April 1992 deadline); SAIF funding was also
cut. Members took refuge in releasing the unused funds that had been
appropriated in 1991, thereby making it possible to say that they had not voted
any new RTC funds at all. The decrease in amount, irrespective of the motives
behind it, made sense: the GAO now estimated that the RTC would likely need
between $12 and $17 billion and possibly as little as $7 billion. The House
bill also ended the RTC's existence a year early, at year-end 1995, and added a
number of management reforms, some limitations on bonuses and compensation to
RTC employees, and provisions dealing with MWOBs.113
The full House Banking Committee
quickly passed the bill. It removed the April 1, 1992, deadline from RTCRRIA,
thus providing $18.3 billion to the RTC, and adopted the certification
requirements contained in the Senate bill. It also authorized $16 billion for
the SAIF (but required certifications from the Treasury Secretary for its use)
to be used as loss funding through 1998 or until the SAIF met its designated
reserve ratio of 1.25 percent. In addition, the House committee's bill
included a host of RTC management reforms, including requiring the RTC to
maintain a business plan and create the position of chief financial officer;
created a new audit committee at the Thrift Depositor Protection Oversight
Board; and mandated new contracting oversight procedures. The bill had a
series of provisions related to helping MWOBs, both as bidders on assets and as
contractors, but these provisions were weaker than those in the subcommittee
version. The bill also included a response to complaints about small investors
not being able to bid on RTC assets, and a response to perceived problems in
the prosecution of thrift officials who had caused losses at institutions. The
latter response included an extension of the statute of limitations on cases
against such individuals—a provision that complicated the legislative process
because the House Judiciary Committee would have to consider it before
passage. The House bill also placed limits on RTC compensation and bonuses.
Finally, the bill established an FDIC-RTC transition task force to plan for the
agency's shutdown and the takeover of its functions by the FDIC, and moved up
the date of that closure by a year, to year-end 1995.114
Just after the House Banking
Committee passed the bill, the full Senate comfortably passed its bill, 61-35.115
The Senate adopted the House's position on RTC funding, providing $18.3
billion. The Senate also provided $16 billion for the SAIF (although it
initially appropriated only $8.5 billion, with the rest authorized if
necessary). And the Senate added a series of provisions on management reforms,
MWOB contracting, and other issues, essentially duplicating the provisions in
the House bill.
In mid-June, when the House Judiciary Committee approved (with
some modifications) the extension of the statute of limitations, the RTC bill
seemed ready for passage.116 However, Democratic congressional
support for the bill was weak and Republican support almost nonexistent, so the
leadership chose to delay the vote. Congress continued to work through the
summer to find a way to pass the bill. A major stumbling block was not RTC but
SAIF funding:117 Republicans wanted to provide amounts lower than
$16 billion and wanted to be certain that the funds would be used only for
losses, not to capitalize the SAIF. Republicans also opposed some of the
provisions related to MWOB contracting and wanted to weaken them further.
Democrats, of course, wanted them retained. A stalemate similar to that of
1992 appeared very possible.
In September an agreement on funding appeared to have been
reached. The RTC funding remained unchanged, but the SAIF funding would be
reduced to $8 billion. To take pressure off the SAIF, the RTC would continue
resolving failed thrifts for an additional 18 months, until March 31, 1995 (as
opposed to September 30, 1993, the date set by RTCRRIA). In addition, the MWOB
provisions were adjusted so they would have no effect on the budget, in an
effort to mollify Republican opposition. On September 14, the bill was
narrowly approved, 214-208, with only 24 Republicans voting in favor. The
provisions dealing specifically with the RTC were relatively little changed from
those that had passed the committee in May.
As the House and Senate moved toward a conference, negotiations
on a final bill continued. The most substantive issues, however, were only
tangentially related to the RTC. Now that agreement had been reached on
funding for the RTC, on the extension of the period during which the agency
would resolve failed thrifts, on its early closure, and on management reforms,
the RTC was a problem close to being in the past. Concerns now centered on the
deposit insurance funds: how much money to provide to the SAIF and under what
conditions, as well as what effect the potential premium differentials between
the SAIF and the Bank Insurance Fund would have. Reaching agreement on the
SAIF took another month. One last RTC-related hurdle remained. Some Senate
Republicans, notably Alphonse D'Amato, opposed the MWOB provisions in the House
bill and therefore held up the appointment of Senate conferees. A November
compromise on these provisions, one that somewhat weakened the House version,
finally cleared the way for passage. On November 20, the Senate voted for the
bill 54-45, and two days later the House voted for it 235-191.118
The RTC Completion Act appropriated $18.3 billion for the RTC.119
None of the appropriated funds could benefit thrift shareholders. The first
$10 billion was available to the RTC, and the remainder would be available only
after certification by the Treasury Secretary that statutory management reforms
had been implemented.120 The required management reforms included
the development of a comprehensive business plan for the remainder of the RTC's
existence, the creation of a small-investor program, the appointment of a chief
financial officer, a strengthening of contract oversight, the creation of a new
audit committee, and the maintenance of effective information systems and
internal controls. The GAO was to evaluate how well the RTC complied with the
required reforms. In an effort to allow the RTC to continue to pursue thrift
officials who had contributed to the S&L debacle, the statute of
limitations on RTC civil lawsuits was extended from three to five years (unless
state law permitted a longer period). If the period of the extension had
passed, actions could be revived for serious fraud that had resulted in unjust
enrichment or substantial loss to an institution. The law also had provisions
that limited bonuses and compensation to RTC employees and that included RTC
employees and contractors under whistleblower protection laws. Under the statute,
the RTC would close down a year early, on December 31, 1995, but to take
pressure off the SAIF, the RTC would not cease taking over insolvent
institutions until sometime between January 1 and July 1, 1995.121
The law also contained a number of “social policy” provisions.
One set was designed to increase opportunities for minorities and women, and it
required the creation of a division devoted to these programs headed by a vice
president who would sit on the RTC's executive committee. The law also required
contractors who received large contracts to subcontract with MWOBs unless such
subcontractors were unavailable and unless such subcontracting significantly
increased costs or impeded performance. In addition to these kinds of
provisions, affordable housing programs at both the RTC and the FDIC were
Lastly, to address the transition that would occur at the end of
1995, the law extended to the FDIC certain regulations and restrictions that
had been developed at the RTC. These included regulations on conflicts of
interest and ethics, and restrictions on the ability of individuals to buy
FDIC-controlled assets if those individuals had contributed, through fraud or
other means, to the losses of failed institutions. In addition, an asset-disposition
division was to be created at the FDIC. The law also created an FDIC-RTC
Transition Task Force to ensure the orderly transfer of systems and personnel
to the FDIC.
As was to be expected, congressional
oversight of the RTC continued until the agency closed in 1995, but the
legislative story ends with passage of the 1993 Completion Act—the last
significant legislative activity involving the RTC. At that point the RTC's
work was winding down. Although the 1993 law provided $18.3 billion in additional
funds, the agency requested only $4.6 billion and did not even use all of that.122
After the third quarter of 1993 no new thrifts were taken into conservatorship,
and, with the new funding that allowed the agency to resolve institutions
already in conservatorship, the number of RTC conservatorships dropped from 68
at year-end 1993 to just 2 a year later. The story of asset disposition is
comparable: during the period when the RTC had no funding it nonetheless
reduced its asset inventory by more than $50 billion, and at year-end 1994 it
held just $25 billion in assets. When the agency closed at year-end 1995, only
$7.7 billion in assets was left to be transferred to FDIC management. Over its
entire lifetime, the RTC disposed of $458.5 billion.123 Thus,
despite all the criticism—some warranted, some not—the RTC accomplished its
goals and disappeared a full year earlier than FIRREA had mandated in 1989.124
The RTC's relationship with Congress was dominated by two issues:
funding and management. The experience with funding clearly demonstrates that
for an agency with the functions of the RTC, adequate funding—both for working
capital and for losses—is extremely important. A mechanism for raising working
capital should probably have been specified in FIRREA, obviating the need for a
six-month political debate. As for loss funding, the viewpoints of both those
in the executive branch who were seeking funding and those in Congress who
opposed it were not hard to understand—primarily because at the beginning and
continuing almost until the end, the size of the losses in the thrift industry
was a large and moving target. The estimates changed substantially, depending
on the date and the source. Appropriating the full amount in 1989 would have
been impossible not only politically but also practically. And even after
1989, when the need for more funds was inescapable although the amount was not
yet fully known, the disinclination of congressional critics to provide
unlimited funds to the RTC was not unreasonable (though politics played as much
of a role as did prudence). However, some might describe the House's inability
to pass a bill providing funds to the RTC in 1990 and 1992 as at least a
temporary abdication of its responsibility to honor the federal government's
promise to insured depositors. To be sure, the money was eventually
appropriated, but these delays had real costs.125 Nor would the
GAO's suggestion that Congress fund the RTC annually have been likely to help
remedy the problem, given the political reality. Earlier adoption of the 1993
approach—authorizing appropriations but requiring certification as funding
needs increased—might have made the process easier both for the RTC and for
those in Congress who had to vote for funding. However, this approach would
not have removed the attendant problems of appropriating such funding at a time
of severe deficits or of relieving the RTC of the opprobrium in which it was
held. No matter what approach had been taken, finding the political will to
fund the RTC during this period would have been difficult.
Congressional unwillingness to provide funding was frequently
intertwined with the second element of the legislative environment, the
constant scrutiny of RTC management and operations. Critics often claimed that
problems at the RTC made it difficult to support additional RTC
appropriations. During the first two years, criticism of the RTC's operations
was most often seen through the prism of perceived problems in the management
structure created by FIRREA—a structure viewed as cumbersome and as preventing
the agency from responding to the huge task confronting it.
Certainly conflict between the RTC and the Oversight Board was
present, particularly in 1989-1990. Had the structural change enacted at the
end of 1991 been in place from the outset, the result might well have been a
better functioning agency. But delayed until 1991, the changes were of
debatable significance. By then the strife between the RTC and the Oversight
Board had substantially lessened; the RTC had resolved more than three-quarters
of the thrifts it would take over; and although large amounts of increasingly
hard-to-sell assets were still under RTC control, their levels were dropping.
Moreover, the new management structure had no effect on the trends in methods
of asset disposition; and apart from a new CEO, most of the senior personnel
running the agency remained in place. Still, the initial difficulties and the
debate over management structure do point to an inherent problem that was
perhaps given too little attention when the RTC was created: tension was almost
inevitable with the creation of a government corporation designed to have a
good deal of autonomy while also using taxpayer dollars.
Aside from the management structure, Congress was constantly
reviewing RTC operations and policies. Although politics often intruded into
judgments about the agency, congressional oversight was necessary; and although
some of the statutory requirements imposed on the RTC could be viewed as
micromanagement, they probably contributed to positive changes in RTC
operations. Yes, the agency got better at its job for reasons that had nothing
to do with Congress: the RTC's managers and personnel gained knowledge about
how best to approach the thrift cleanup. Nevertheless, the constant
congressional examination, despite possible negative effects, forced the agency
to operate in a manner that would withstand scrutiny.
In addition, the social initiatives mandated by FIRREA and
subsequent legislation —specifically, contracting out to MWOBs and providing
affordable housing—certainly affected the RTC. By the end of the agency's
existence, for example, about 35 percent of its contracts had gone to MWOBs.
And in response to congressional concerns that most such contracting had been
with nonminority women, in 1994 and 1995 the agency greatly increased the
proportion of its contracting with minority-owned businesses. In total,
however, minority-owned businesses received only about 12 percent of the approximately
160,000 contracts awarded by the agency.126 Under the RTC's
Affordable Housing Disposition Program, the agency sold more than 23,000
single-family properties for a total of $632 million and more than 800
multifamily properties (with more than 80,000 units) for almost $900 million.127
These totals were clearly only a small fraction of the properties sold by the
RTC. Overall, therefore, congressional social policy initiatives were in some
measure accomplished, required the RTC to create programs that otherwise would
not have existed, and added some costs to the cleanup. But in the context of
the RTC's work, the effects on the agency occurred at the margins.
The legislative environment surrounding the RTC was obviously a
difficult one. Although the costs generated by insolvent thrifts had already
been incurred, there was little appetite to pay them, and the ever-increasing
addition of more costs made the legislative process even more problematic. In
addition, the RTC provided a convenient target—and there was often much to
criticize, although the agency had an immense task and little time to either
prepare for or accomplish it. Legislators often noted that they frequently
received complaints about the RTC from constituents, and their reluctance to
provide additional funding was partly a response to that criticism.
Nevertheless, in the end Congress managed to appropriate the funds required and
to provide necessary oversight over the process. At the same time, the RTC,
sometimes chafing under that oversight and the delays in funding, did what it
was intended to do. When the RTC opened for business, some observers predicted
that their grandchildren would be buying assets from the agency. Perhaps a
measure of the RTC's success is that little more than a decade after it closed,
this agency that provoked so much debate is now largely forgotten.
Although some of the materials in the following bibliography are cited only in
Part I of this article (see FDIC Banking
Review 18, No. 2 ), the full bibliography is provided here for the
RTC. Board Meeting Transcripts. 19891991.
RTC. Legislative History Files. (LEGH 68). 19901992.
RTC. Transition Briefing Books. 19911993.
RTC. CEO Management Information. 19931994.
Congressional Record 19891993.
Bills and Resolutions
U.S. House. H.R.
3469. Federal Agency Debt Management
Act. 101st Cong., 1st sess., October 13,
4127. Resolution Trust Corporation
Reform Act of 1990. 101st Cong., 2nd
sess., February 27, 1990.
5603. Resolution Trust Corporation Loss
Reduction and Funding Act of 1992. 102d
Cong., 2d sess., July 9, 1992.
5629. Resolution Trust Corporation Asset
Recovery Act of 1992. 102d Cong., 2d sess., July 21, 1992.
U.S. Senate. S.
2155. Resolution Trust Corporation
Reorganization Act. 101st Cong., 2d
sess., February 21, 1990.
3112. Savings and Loan Simplification
Act of 1990. 101st Cong., 2d sess.,
September 26, 1990.
3222. Resolution Trust Corporation
Funding Act. 101st Cong., 2d sess.,
October 28, 1990.
. S. 389. Resolution Trust Corporation Reorganization
Act. 102d Cong., 1st sess., February 7,
1943. Resolution Trust Corporation
Reform Act of 1991. 102d Cong., 1st
sess., November 7, 1991.
. S. 419. Resolution Trust Corporation Funding Act of
1991. 102d Cong., 1st sess., February
. S. 572. Savings and Loan Simplification Act of
1991. 102d Cong., 1st sess., March 6,
Hearings and Reports
Providing for the Consideration of H.R. 1315. Report (to accompany H. Res. 105), 102d
Cong., 1st sess., H. Rpt. 102-13, March 7, 1991.
Trust Corporation Funding Act of 1991, Conference Report. 102d Cong., 1st sess., H. Rpt. 102-7, March
Trust Corporation Completion Act.
Report. 103d Cong., 1st sess., H. Rpt. 103-103, Part 2, June 15, 1993.
U.S. House Committee on Banking, Finance and Urban
Affairs. Oversight Hearings on the
Resolution Trust Corporation. 101st
Cong., 2d sess., Ser. No. 101-69, January 2325, 1990.
Report and Appearance by the Oversight Board of the Resolution Trust
Corporation. 101st Cong., 2d sess., Ser.
No. 101-33, June 14, 1990.
. Funding the
Resolution Trust Corporation: Hearing.
101st Cong., 2d sess., Ser. No. 101-160, July 30, 1990.
Trust Corporation Funding Act of 1990: Report.
101st Cong., 2d sess., H. Rpt. 101-974, October 27, 1990.
Appearance of the Resolution Trust Corporation Oversight Board: Hearing. 102d Cong., 1st sess., Ser. No. 102-2,
January 31, 1991.
Accounting Office Report Card on RTC Operations: Hearing. 102d Cong, 1st sess., Ser. No. 102-5,
February 20, 1991.
Semiannual Report for Period Ending April 30, 1991: Hearing. 102d Cong., 1st sess., Ser. No. 102-54, July
Appearance of the Thrift Depositor Protection Board: Hearing. 102d Cong., 2d sess., Ser. 102-140, July 29,
Appearance of the Thrift Depositor Protection Oversight Board: Hearing. 103d Cong., 1st sess., Ser. No. 103-18, March
U.S. House Committee on Banking, Finance and Urban
Affairs, Subcommittee on Financial Institutions Supervision, Regulation and
Insurance. Resolution Trust Corporation
Refinancing and Restructuring Issues: Hearing.
102d Cong., 1st sess., Ser. No. 102-70, September 12 and 17, 1991.
Trust Corporation Funding Act of 1992: H.R. 4241: Hearing. 102d Cong., 2d
sess., Ser. No.102-102, February 26, 1992.
U.S. House Committee on Banking, Finance and Urban
Affairs, Subcommittee on Financial Institutions Supervision, Regulation and
Deposit Insurance. Funding Needs of the
Resolution Trust Corporation and Savings Association Insurance Fund:
Hearing. 103d Cong., 1st sess., Ser. No.
103-19, March 17 and 18, 1993.
U.S. House Committee on Banking, Finance and Urban
Affairs, Subcommittee on Financial Institutions Supervision, Regulation and
Insurance, Resolution Trust Corporation Task Force. Status and Activities of the RTC and the
Oversight Board: Hearings. 101st Cong.,
1st sess., Ser. No. 101-55, October 4 and 19; November 6 and 13, 1989.
. Disposition of Assets by the Resolution Trust
Corporation: Hearing. 101st Cong., 2d
sess., Ser. No. 101-102. (March 27, 1990).
of Assets by the RTC: Hearing. 101st
Cong., 2d sess., Ser. No. 101-122. May 4, 1990.
. Alternative Financing Options for the Savings and
Loan Cleanup Costs: Hearing. 101st Cong., 2d sess., Ser. No. 101-174.
(September 26, 1990).
Consideration of the Implications of the RTC Control Problems for
Proposals to Restructure the Bail-out Machinery. 102d Cong., 1st sess., Ser.
No. 102-51, June 17, 1991.
U.S. House Committee on Banking, Finance and Urban
Affairs, Subcommittee on General Oversight and Investigations. Resolution Trust Corporations Asset
Disposition Policies: Hearing. 102d Cong., 1st sess., Ser. No. 102-68.
(September 6, 1991).
. The RTCs
Operation Western Storm: Hearing. 102d
Cong., 2d sess., Ser. No. 102-144, August 6, 1992.
U.S. House Committee on Banking, Finance and Urban
Affairs, Subcommittee on General Oversight, Investigations, and the Resolution
of Failed Financial Institutions.
Professional Liability and RTC Contracting with Lawyers: Hearing. 103d Cong., 1st sess., Ser. No. 103-22, March
U.S. House Committee on Ways and Means. Additional Financing Costs Associated with
Resolving Insolvent Savings and Loans Institutions: Hearing. 101st Cong., 2d sess., Ser. No. 101-125,
September 19, 1990.
U.S. House Committee on Ways and Means, Subcommittee on
Oversight. Role of Federal Borrowing and
Loan Guarantees in Resolving Insolvent Thrift Institutions: Hearing on H.R.
3469 to Amend Title 31, United States Code, to Prevent Newly Established
Federal Agencies from Increasing Debt through Unauthorized Borrowing. 101st Cong., 1st sess., Ser. No. 101-68,
October 31, 1989.
U.S. Senate Committee on Banking, Housing, and Urban
Affairs. Oversight Hearing on the
Resolution Trust Corporation. 101st
Cong., 1st sess., S. Hrg. 101-504, October 4, 1989.
Oversight Hearing on the Resolution Trust Corporation. 101st Cong, 2d sess., S. Hrg. 101-738,
January 31, 1990.
. Hearing on
the Semiannual Report of the Resolution Trust Corporation. 101st Cong., 2d sess., S. Hrg. 101-974, May
Trust Corporation Funding Act of 1990: Report.
101st Cong., 2d sess., S. Rpt. 102-13, October 19, 1990.
. Hearing on
the Semiannual Report of the Resolution Trust Corporation, 1991. 102d Cong., 1st sess., S. Hrg. 102-54,
January 23, 1991.
Restructuring the Resolution Trust Corporation and the Semiannual Report
on FIRREA Legislation: Hearing. 102d
Cong., 1st sess., S. Hrg. 102-465, June 11, 21, and 26, 1991.
the RTC: Hearing. 102d Cong., 1st sess.,
S. Hrg. 102-535, October 24, 1991.
of Albert V. Casey: Hearing. S. Hrg
102-668, 102d Cong., 2d sess., January 22, 1992.
. Hearing on
the Semiannual Report of the Resolution Trust Corporation1993. 103d Cong., 1st sess., S. Hrg. 103-58, March
Depositor Protection Act of 1993: Report.
103d Cong., 1st sess., S. Rpt. 103-36, April 1, 1993.
U.S. Senate Committee on Banking, Housing, and Urban
Affairs, Subcommittee on Consumer and Regulatory Affairs. Real Estate Disposition Activities of the
Resolution Trust Corporation: Hearing.
102d Cong., 1st sess., S. Hrg. 102-141, June 19, 1991.
Structure of the RTC: Hearing. 102d
Cong., 1st sess., S. Hrg. 102-513, October 23, 1991.
U.S. Senate Committee on Governmental Affairs,
Subcommittee on Regulation and Government Information. Contracting Problems at
the Resolution Trust Corporation: HomeFed, Hearing. 103d Cong., 1st sess., S.
Hrg. 103-804. February 19, 1993.
Banker. 19891993. http://www.lexisnexis.com.
News. 19891993. http://www.lexisnexis.com.
Times. 19891993. http://www.lexisnexis.com.
Journal. 19891993. http://www.factiva.com.
Post. 19891993. http://www.lexisnexis.com.
Abstract: August 1989/September 1995.
William. Full Faith and Credit: The Great S&L Debacle and Other Washington
Sagas. Times Books. 1993.
Protection Oversight Board and Resolution Trust Corporation. Annual Report of the Thrift Depositor
Protection Oversight Board and the Resolution Trust Corporation for the
Calendar Year 1995. 1996.
U.S. General Accounting Office. Obligations Limitation: Resolution Trust
Corporations Compliance as of March 31, 1990.
Limitation: Resolution Trust Corporations Compliance as of June 30, 1990. GAO/AFMD-91-41. 1990.
Limitation: Resolution Trust Corporations Compliance as of September 30,
1990. GAO/AFMD-91-63. 1991.
Limitation: Resolution Trust Corporations Compliance as of December 31,
1990. GAO/AFMD-92-4. 1991.
Limitation: Resolution Trust Corporations Compliance as of March 31,
1991. GAO/AFMD-92-39. 1992.
* The author is a historian in the FDICs
Division of Insurance and Research. The author would like to thank Tim
Critchfield, Timothy Curry, Alice Goodman, Matthew Green, Jack Reidhill and
Lynn Shibut for their helpful comments and suggestions. Any errors are, of
course, the responsibility of the author.
1 U.S. Senate Committee on Banking, Housing, and
Urban Affairs, Hearing on the Semiannual Report (January 23, 1991), 19;
4142. See also BNAs Banking Report 56 (January 28, 1991), 146.
2 U.S. Senate Committee on Banking, Housing, and
Urban Affairs, Hearing on the Semiannual Report (January 23, 1991),
4 Robert M. Garsson, Riegle Backs Stopgap RTC
Funding; Rejects Bradys Request for Permanent Legislation, American Banker
(January 24, 1991).
5 Panel Approves Funds for Bailout, New York
Times (February 5, 1991).
6 See S. 419 (February 14, 1991); and BNAs
Banking Report 56 (February 11, 1991), 243. Under the Securities Act of
1933, RTC and Oversight Board employees could be held personally liable for
actions under the program (which was designed to increase asset sales). The
RTC was very concerned about this issue and came to the conclusion that the
only solution was through legislation. The agency drafted a narrow provision, explaining
that the intent of the provision was merely to clarify existing law and not
create new law, and met with members of both Banking Committees to discuss it.
After the Senate bill passed in committee, the RTC staff was essentially
satisfied with the immunity provision the bill contained (RTC Board of
Directors Meeting, January 2 and February 5, 1991).
9 Gonzalez suggested that much of this so-called
working capital will ultimately become losses as assets deteriorate. He also
noted that many people complained about dealing with the RTC and that its asset
sales were painfully slow (U.S. House Committee on Banking, Finance and Urban
Affairs, Semi-Annual Appearance [January 31, 1991], 7879). Gonzalezs
predictions were not realized; working capital advances to the RTC were fully
repaid in 1998. FDIC, RTC Repaid Money Borrowed to Rescue Thrifts, Wall
Street Journal (December 18, 1998).
10 U.S. House Committee on Banking, Finance and
Urban Affairs, General Accounting Office Report Card (February 20,
1991). See also BNAs Banking Report 56 (February 25, 1991), 35354.
Bowsher suggested that the time was ripe for a separation of the RTC from the
FDIC (meaning that the system of dual boards of directors should be abolished,
with the Oversight Board retained). However, he said separation should be done
carefully, since so many FDIC personnel were working for the RTC. Many House
members, including Gonzalez and Schumer, were in favor of separation. David
Cooke supported the move as long as the RTC became responsible for liquidating
all assets controlled by the government (Barbara A. Rehm, RTC Spinoff from
FDIC Is Proposed, American Banker [February 21, 1991]).
11 For the amendments, see BNAs Banking
Report 56 (March 4, 1991), 41415.
12 Other Democratic amendments failed; one
offered by Rep. Annunzio would have created performance-based funding, where
the Treasury appropriations could have only matched asset recoveries. This was
soundly defeated 5-43. A similar amendment, introduced by Rep. James Bachus,
would have provided $15 billion in funding, with the other $15 billion based on
asset sales; it failed on a 9-39 vote.
13 Robert M. Garsson, Panels Vote Threatens
S&L Bailout, Reform Bill, American Banker (February 28, 1991).
14 Congressional Record H. 1171 (February
15 Congressional Record S. 2296ff.
(February 26, 1991).
16 Robert Kerrey, who had been critical of the RTCs structure since
before its inception and had introduced a bill to restructure the RTC in
February, announced he would offer an amendment on the Oversight Boards
structure despite Riegles promise. Kerreys bill (S. 389, introduced on
February 7, 1991) would have abolished the Oversight Board and replaced it with
a new board of governors for the RTC with nine members (five presidentially
appointed citizens plus the Secretary of Treasury, Chairman of the Federal
Reserve Board, Secretary of HUD, and Chairman of the FDIC); the current RTC
board would be abolished. The new board was to be an agency of the U.S. governmentthus, a separate entity from the RTC. Another bill, S. 572, introduced by
Sen. Tim Wirth, also abolished the Oversight Board but would have created an
expanded RTC board of directors (four presidential appointees plus a
restructured FDIC board [with the OTS director removed, and the Comptroller of
the Currency a nonvoting member]).
17 See Congressional Record S. 2610 (March
5, 1991). Both Kerreys amendment and an amendment by Tom Harkin that would
have reduced funding to only $15 billion were tabled, and in the wake of these
votes, several other amendments were withdrawn. Democrats opposed tabling
amendments more than did Republicans (more than 60 percent of Senate Democrats voted
against tabling Kerreys reform amendment). Broken down along party lines, the
votes went as follows: on the Riegle motion to table the Harkin amendment, 40-4
Republican, 31-24 Democrat; on the Riegle motion to table the Kerrey amendment,
42-2 Republican, 21-35 Democrat. See
19 See U.S. House, H. Res. 105 (March 7, 1991).
Some members thought the rule was too restrictive, and some Democrats believed
the administration was trying to push the appropriation through Congress
without any RTC reform, charging (accurately) that the rule removed provisions
previously adopted in committee. The leadership, trying to get beyond the
stalemate, supported the rule and it passed easily, 272-146. The proportion of
Democrats in favor was only slightly lower than the proportion of Republicans (Congressional
Record H. 1592 [March 12, 1991]). See also
20 For discussion of actions in the House, see Congressional
(March 12, 1991); James M. Pethokoukis, House Panel Passes Two RTC Bills;
Quick Action Seen on Bailout Funds, American Banker (March 8, 1991);
Stephen Labaton, House Vote Bars More S&L Aid, New York Times
(March 13, 1991); and Susan Schmidt, Divided House Refuses $30 Billion for
Thrift Cleanup, Washington Post (March 13, 1991). For the text of
three substitute bills, see U.S. House, Providing for the Consideration of
H.R. 1315 (March 7, 1991).
21 This proposal required the RTC to take action
to achieve eight specified management reform goals: standardize the agencys
procedures for auditing conservatorships; reduce the length of time
institutions were in conservatorship, with a goal of no more than nine months;
make specified improvements to the RTCs information resources management
program; develop a centralized system for managing the portfolio of securities
under its control; develop an effective system to track and inventory real
estate assets; develop a process to update, on a quarterly basis, the value of
assets under receivership; develop a program for examining one- to four-family
mortgages and for marketing such loans on a pooled basis; and regularly review
its organizational contracting structure and standardize its contracting
procedures. The RTC would be required, by the end of FY 1991, to report to
Congress on its progress toward achieving these goals and to establish a
timetable for achieving goals not yet completed.
22 Gonzalezs bill required the RTC to report
exactly how it used allocated funds and to use a least-cost resolution
approach. It also provided that the RTC could sell affordable housing from
conservatorships to qualified applicants, and required the RTC to create a separate
list of the properties that had natural, cultural, scientific, or recreational
value. A government agency or a qualified nonprofit organization would be
given a 90-day right of first refusal to purchase the property in order to
maintain its specific qualities. Finally, the bill established minority
contracting goals for the RTC, with contracting activity to be designated as
follows: 15 percent to minority-owned businesses and 10 percent to businesses
owned by women. Compliance with this goal would be encouraged but not
23 The administration would have likely opposed
the Kennedy-Slattery proposal because it would have resulted in either tax
increases or budget cuts. Almost all House Republicans voted against it, while
about two-thirds of Democrats voted in favor; still, the 82 Democrats voting
against it were more than enough to send it to defeat, 186-237.
http://clerk.house.gov/evs/1991/roll039.xml. The Wylie substitute was an
attempt to assuage Democrats who wanted to reform the RTC, but Democrats
believed it to be superficial. It too was defeated, with almost all
Republicans voting in favor and about 85 percent of Democrats against.
http://clerk.house.gov/evs/1991/roll040.xml. Finally, the House turned to the
Gonzalez substitute, with its greater emphasis on social issues. Republicans
voted wholeheartedly against it, but about 45 percent of Democrats did as well,
and it was defeated 121-303, its demise doubtless aided by the threat of a
presidential veto. http://clerk.house.gov/evs/1991/roll041.xml. See also
Stephen Labaton, $30 Billion Bailout Bill Is Passed, New York Times
(March 14, 1991).
33 It was reported that a draft plan would be
sent to the Oversight Board and Treasury but that statutory change would be
necessary to effect this change (Greg Hitt, Resolution Trust Corp. Initiates
Review That Could Lead to Changes in Agency, Wall Street Journal [April
34 BNAs Banking Report 56 (May 27, 1991),
1014ff. Indeed, in April the RTC had decided to revamp the structure of the
communications between the two entities by setting up a liaison group to
organize the flow of information as well as freeing RTC operations personnel to
concentrate on their duties. (RTC Board of Directors Meeting, April 16, 1991).
35 Bill Atkinson, 2 Named as Panel for
Correcting RTC Problems, American Banker (June 11, 1991). The RTC
Advisory Board (which had regular public meetings) had been created under
FIRREA to provide private sector expertise, particularly on matters having to
do with the disposition of real estate. FIRREA also created regional advisory
36 Stephen Labaton, Seidman Will Seek $80 Billion,
New York Times (June 19, 1991); BNAs Banking Report 56 (June 24, 1991),
37 Susan Schmidt, RTC Office Art Stirs a Storm
in Kansas, Washington Post (June 12, 1991).
38 BNAs Banking Report 56 (June 24,
1991), 1195. For Ventos views, see also U.S. House Committee on Banking,
Finance and Urban Affairs, Subcommittee on Financial Institutions Supervision,
Regulation and Insurance, Resolution Trust Corporation Task Force, Consideration
of the Implications
(June 17, 1991).
39 U.S. Senate Committee on Banking, Housing, and
Urban Affairs, Subcommittee on Consumer and Regulatory Affairs, Real Estate
Disposition Activities (June 19, 1991), 3ff., 150ff.; Leslie Wayne,
S&L Advisory Panel Asks a New Manager for Bailout, New York Times
(June 20, 1991); and BNAs Banking Report 56 (June 24, 1991), 1197.
40 Kevin G. Salwen, RTC to Seek $75 Billion More
in Thrift Bailout, Wall Street Journal (June 20, 1991).
41 U.S. Senate Committee on Banking, Housing, and
Urban Affairs, Restructuring the Resolution Trust Corporation (June 11,
21, and 26, 1991), 273ff.
42 Leslie Wayne, S&L Advisory Panel Asks a
New Manager for Bailout, New York Times (June 19, 1991); Bill Atkinson,
Seidman to Suggest Limiting FDICs Role in S&L Bailout, American
Banker (June 20, 1991); and BNAs Banking Report 56 (June 24, 1991),
1194. At the same time, it was rumored that Treasury, not happy about its
relations with the RTC, wanted David Cooke removed from his job in order to
realign management. This rumor engendered a brief flurry of accusations that
Cooke was being made a scapegoat, along with public statements that he was not.
(Leslie Wayne, Seidman Asks for Hiring of a Strong Bailout Chief, New
York Times [June 22, 1991]; and Susan Schmidt, Treasury, RTC Ties Strained
Over Report of Cooke Ouster, Washington Post [June 22, 1991]).
43 U.S. Senate Committee on Banking, Housing, and
Urban Affairs, Restructuring the Resolution Trust Corporation (June 11,
21, and 26, 1991), 41415.
47 RTC MSS LEGH-68 Restructuring Bills. Memo
from Kymberly Copa to Randall McFarlane, Oversight Boards Draft Bill to
Reorganize and Restructure the RTC (July 29, 1991).
48 In suggested amendments to the Oversight Board
plan, the FDIC/RTC proposed that the FDIC be removed as exclusive manager, that
increased authority be delegated to the CEO, and that the Oversight Board have
less accountability for the RTCs performance (RTC MSS LEGH-68 Orig. Oversight
Bd. Restruct. Memo from Kymberly Copa to Randall McFarlane, Outline of
Suggested Changes to the Oversight Boards Bill to Restructure the RTC [August
49 RTC MSS LEGH 68. Treasurys Restructuring
Bill. Letter from John E. Robson, deputy Treasury secretary, to L. William
Seidman, chairman, FDIC, September 9, 1991. The day before the hearing,
Democratic Rep. Peter Hoagland introduced yet another bill along the lines of
Seidmans corporate board model. See H.R. 3303, introduced September 11, 1991.
50 U.S. House Committee on Banking, Finance and
Urban Affairs, Subcommittee on Financial Institutions Supervision, Regulation
and Insurance, Resolution Trust Corporation Refinancing (Sept. 12 and
17, 1991), 45.
51 BNAs Banking Report 57 (September 16,
1991), 413; and Leslie Wayne, Congress is Given Plan to Alter S&L Rescue,
New York Times (September 13, 1991).
52 H.R. 3356. The bill also contained the $80
billion loss funding, a new working capital limit of $160 billion, and the
provision to extend by one year the deadline by which the RTC could accept
institutions for resolution.
54 Susan Schmidt, Albert Casey Tapped to Head
RTC, Washington Post (September 24, 1991).
55 Bacchus introduced H.R. 3422 on September 26,
1991; among its provisions were those tying RTC funding to asset disposition,
making the RTC an executive agency when procurement issues were concerned,
limiting amounts paid for legal services, and barring certain former S&L
employees from RTC work.
56 During the previous session Annunzio had tried
but failed to enact this sort of constraint on the RTC.
58 U.S. Senate Committee on Banking, Housing and
Urban Affairs, Subcommittee on Consumer and Regulatory Affairs, Oversight
Structure (October 23, 1991), 65.
59 Even more controversial issues were
withdrawn. Vento had introduced an amendment along the lines of the
60 U.S. Senate Committee on Banking, Housing, and
Urban Affairs, Subcommittee on Consumer and Regulatory Affairs, Oversight
Structure (October 23, 1991); and U.S. Senate Committee on Banking,
Housing, and Urban Affairs, Refunding the RTC (October 24, 1991).
61 Ibid., 29. Seidman, who had recently left his
posts with the FDIC and RTC and could therefore be thought to have had no
political axe to grind, still maintained that the compromise he had worked out
with Treasury was the best method to restructure the agency (ibid., 4748).
62 S. 1943, the Resolution Trust Corporation
Reform Act of 1991, was introduced on November 7.
67 Bush Signs S&L Bill, New York Times
(December 13, 1991).
68 It is unclear why this did not occur. The
increase was unnecessary because, given the effect of the $18.8 billion
loophole, the RTC was not close to the limit set by the note cap formula in
FIRREA (this limitation worked out to be $125 billion). The administration
might have been suggesting the $160 billion figure because some congressional
Democrats were trying to rewrite the note cap formula, but with no such
language in the last-minute compromise bill, probably no one saw any need to
retain the working capital increase.
69 Most of these proposals had been introduced by
Kweise Mfume and then somewhat diluted by amendments offered by Wylie. Another
encouragement to make branch operations available to MWOBs was that
institutions that donated branches, or provided them on favorable terms, to MWOBs
would receive Community Reinvestment Act credit for this action.
70 Wall Street Journal (November
29, 1991). Some Republican members had introduced a bill appending the RTC
funding and structural changes to a previous bill that would have cut the capital
gains tax rate and made other tax changes. This tying together of RTC
financing and tax cuts appears to have been aimed at least partly at the
administration, since Democrats supported neither of the tax initiatives. See
71 Barbara A. Rehm, Brady Faults RTC Deadline, American
(January 9, 1992). In fact, the RTC actually used only $6.7 billion by the
deadline (RTC, Statistical Abstract: August 1989/September 1995 ,
72 U.S. Senate Committee on Banking, Housing, and
Urban Affairs, Nomination of Albert V. Casey (January 22, 1992), 16.
73 Susan Schmidt, RTC to Cut Work Force by Half,
Phase Down Operations, Washington Post (March 24, 1992). The
RTCs workforce did begin to shrink in 1992. Peak RTC employment was in April
1992, when the agency had 7,391 field staff. By year-end 1993, field staff had
declined not by half but by a third, to 4,942. During the same period, the
total number of RTC employees fell from 8,624 to 6,499 (RTC, CEO Management
Information [January 1994]).
74 RTC Statistical Abstract. Indeed, by
the time Congress was voting on RTC funding at the end of the first quarter,
the agency had taken over 711 institutions and resolved 640 of them.
76 By the end of 1992 the fed funds rate would
drop to about 3 percent, where it would remain until the beginning of 1994.
77 This was already reflected in thrift
profitability during 1991: in that year, for the first time since 1985, the
industry as a whole was profitable in every quarter (OTS Press Release 92-97
[March 10, 1992]). During 1992, improvement can also be seen in the OTSs
ratings of thrifts: As of January 31, 1992, the OTS placed 62 thrifts in Group
IV (it was assumed these would be taken over by the RTC), an additional 44 in
Group IIIc (probable RTC candidates), another 106 in Group IIIb (reasonably
possible RTC candidates), and a further 231 in Group IIIa (weak and poorly
capitalized, but less likely to require RTC takeover) (RTC, CEO Management
Information [February 18, 1992]). By December1992, Group IV had shrunk from
62 to just 19, Group IIIc from 44 to 42, and Group IIIb from 106 to just 26
institutions (and the number in Group IIIa had risen from 231 to 251
thrifts). The total size of the bottom three categories had dropped from 212
to only 87 (RTC, CEO Management Information [December 31, 1992]).
78 See U.S. House Committee on Banking, Finance
and Urban Affairs, Subcommittee on Financial Institutions Supervision,
Regulation and Insurance, Resolution Trust Corporation Funding Act of 1992
(February 26, 1992), 78, 54ff. See also Stephen Labaton, Congress Advised to
Limit Bailout Funds, New York Times (February 26, 1992).
79 Stephen Labaton, Congress Advised to Limit
Bailout Funds, New York Times (February 26, 1992); and U.S. Senate
Committee on Banking, Housing, and Urban Affairs, Nomination of Albert V.
Casey (January 22, 1992), 3, 17. For an extended discussion, see U.S.
House Committee on Banking, Finance and Urban Affairs, Subcommittee on General
Oversight and Investigations, The RTCs Operation Western Storm (August
80 McCollum was vice chair of the House
Republican Conference; thus, he was more consequential than just a
81 Earlier in the 1980s, faced with growing
numbers of insolvent thrifts but without any means of paying for their closure,
the government encouraged mergers as a way to deal with this intractable
problem. To make such transactions viable for acquiring institutions, the
government allowed the acquirers (for the purposes of meeting capital
requirements) to offset the liabilities they were assuming with a
counterbalancing paper asset called supervisory goodwill. Acquirers were
allowed as much as 40 years to write off supervisory goodwill. In addition,
other variances from generally accepted accounting principles (GAAP) were
allowed for all thrifts. FIRREAs provision therefore had serious negative
implications for many acquirers net worth, even their solvency, and led to
extensive litigation.. See Davison, Policy and Politics (2005), 18, n.2.
82 Albert Casey to Rep. Frank Annunzio (February
26, 1992) (RTC MSS LEGH 68, Folder on H.R. 4121 Subcommittee Markup).
83 Other approaches were proposed. Reps. Barnard
and Hoagland offered an amendment that would have lifted the April 1 deadline
and provided whatever funding was deemed necessary through April 1, 1994.
Gerald Kleczka offered an amendment that was fairly close to the administrations
position, differing only in that it forced the president to request the sums as
needed. The first was defeated, the second withdrawn. See list of amendments,
RTC MSS LEGH 68, Folder on H.R. 4121 Subcommittee Markup.
88 A summary of the bill as it came out of
committee can be found in Congressional Record (March 25, 1992),
S4204ff. Sanford originally sought $2.7 billion in open-assistance funds,
saying that regulators had a liquidation mentality and that some weak
institutions deserved a chance to recover (Bill Atkinson, Senate Banking Panel
Backs $25 billion in RTC Funding; Committee Rejects New-Powers Amendments, American
Banker [March 25, 1992]).
89 See Kenneth H. Bacon, Legislators Debate Bill
Funding S&Ls That Includes Weak, but Solvent Thrifts, Wall Street
Journal (March 30, 1992).
90 Another amendment offered by Sanford (this one
failed) would have prohibited the OTS from naming the RTC as conservator or
receiver until the OTS had determined that such a course was more
cost-effective than provision of open assistance. The RTC opposed this as
potentially inconsistent with the current statutory least-cost test (RTC MSS,
LEGH 68, Folder on S.2482 Senate Markup). On March 25, 1992, the Thrift
Depositor Protection Oversight Board heard testimony on the use of a program
for early resolutions/assisted mergers (ER/AM), which was supported by OTS Director
Ryan. Although use of this program was promoted as a way to reduce taxpayer
cost through early intervention, those who opposed it felt it harked back to
the discredited FSLIC policies of the 1980s. By late April the Oversight Board
decided to postpone any decision to use the program, at least partly because
there was still hope that Congress would pass a new funding bill and ER/AM
might be used as a reason by some in Congress to vote against such a bill.
91 Congressional Record (March 25, 1992),
S434142. The vote on a point of order under the budget act was 45-48 against
the amendment. Forty-two of 53 Democrats voting supported Kerrys amendment;
Republicans were almost united in their opposition, voting 3-37 against it.
92 The parties had similar splits in their
voting, with Democrats voting 29-25 to support the bill, and Republicans voting
23-17 (Congressional Record [March 25, 1992], S4353). The bill as
passed can be found in the Record after the vote. It was identical to
the one passed in committee, but with the addition of a set of managers
amendments presented by Riegle and Garn. These were uncontroversial; many of
them related to financial institutions but were not specifically relevant to
the RTC. See ibid., S4349ff.
94 Bill Atkinson, Senate Banking Panel Backs $25
billion in RTC Funding; Committee Rejects New-Powers Amendments, American
Banker (March 25, 1992).
95 Keith Bradsher, House S&L Proposal Has No
New Financing, New York Times (April 1, 1992).
96 Congressional Record (April 1, 1992),
H220829. For the vote, see http://clerk.house.gov/evs/1992/roll069.xml.
97 See, for example, Stephen Labaton, Bailout
Agency Squirrels Away over $2 Billion, New York Times (April 26,
1992). Although there was clearly nothing improper in what the RTC had done,
some members of Congress were angered by the disclosure, for RTC officials had
maintained that the agency would be out of funds without a new appropriation.
The RTC said the amount was not large; it had been held for a specific expected
S&L sale and for emergencies in the event of a depositor run at a thrift in
conservatorship (Susan Schmidt, RTC Admits to $2 Billion in Its Coffers; Funds
Not Secret, Washington Post [April 28, 1992]).
98 On April 3, Gonzalez introduced a bill on his
own (H.R. 4765) that removed the April 1 deadline, provided an additional $25
billion, and included some of the Senate provisions as well as provisions for
some RTC reforms (concerning contracting). It also had a mechanism for a
special assessment on SAIF institutions to provide RTC funding, a policy that
would have generated considerable controversy. Such an approach to funding was
unlikely to go far, and no action was taken on the bill after its
introduction. See Bill Proposes to Aid Bailout by Tapping Healthy S&Ls, New
York Times (April 4, 1992).
99 See BNAs Banking Report 58: May 4,
1992, p.781, and May 11, 1992, pp.829, 83435. A number of RTC-related bills
were introduced following the failure to provide funds. In April, Rep. Bill
Jontz introduced an RTC reform bill (H.R. 4924) that sought to deal with the
effect of the RTC on real estate markets, encourage the preservation of
environmentally sensitive land, provide for the publication of examination
reports of failed institutions, extend the statute of limitation on tort
actions, and turn the RTC into a wholly owned government corporation. It
provided for funding by the creation of citizen restitution bonds. In July,
three bills were introduced. Leachs (H.R. 5629) extended the statute of
limitations on RTC tort actions from three years to five. Alex McMillan and
Wylies (H.R. 5544)in an attempt to allow the RTC to continue its
resolutionsprohibited the RTC from refraining to close an institution because
of lack of funds and authorized the agency to issue notes to insured depositors
in lieu of cash. McCollums (H.R. 5603) removed the April 1 deadline, provided
$25 billion in funding, and, not surprisingly, included its authors
supervisory goodwill buyback plan. None of these bills went anywhere.
100 In June it was reported that despite
negotiations between McCollum and Democrats, there appeared no room for
compromise and if action were not taken within six weeks, the issue of RTC
funding would likely be postponed until after the election (BNAs Banking
Report 58 [June 1, 1992], 95556).
101 U.S. House Committee on Banking, Finance and
Urban Affairs, Semiannual Appearance of the Thrift Depositor Protection
Board(July 29, 1992), 46.
102 Susan Schmidt, Rosy Forecasts about Cleanup
of S&Ls Come under Attack, Washington Post (May 18, 1992).
103 Joel Glenn Brenner, CBO Chief: Thrift Crisis
Isnt Over; Reischauer Says 700 More S&Ls May Fail, Washington Post
(June 18, 1992).
104 Robert M. Garsson, Bentsen to Press for RTC
Funding, American Banker (January 13, 1993).
105 Unbeknownst to RTC management, the documents
were being copied in response to a Justice Department subpoena for all of
HomeFeds documents. In February 1993, the RTC renegotiated the contract with
Price Waterhouse (PW). Although not legally required to do so, PW voluntarily
agreed to a fee reduction of about 20 percent for any billings over $5
milliona reduction that ultimately resulted in a savings to the RTC of over $4
million. This discussion is based on S. Duran Field, The RTCS Contracting for
Asset Management and Disposition, unpublished FDIC paper (2003). See also U.S.
Senate Committee on Governmental Affairs, Subcommittee on Regulation and
Government Information, Contracting Problems (February 19, 1993).
106 Susan Schmidt, RTC Paid 136 Top Officials
More Than $1 Million in Bonuses in 92, Washington Post (February 24,
1993). The contracting problems and bonuses made Caseys desire to remain at
the RTC difficult to achieve, apart from his having been appointed by the
previous Republican administration. It soon became clear that the new
administration wanted him to leave, and in February he announced his
resignation. He left on March 15. Deputy Treasury Secretary Roger Altman was
named interim CEO (BNAs Banking Report 60 [March 15]: 347). Later in
1993 the administration nominated Stanley Tate to replace Altman, but when the
Senate delayed in acting on his nomination, Tate angrily withdrew before the
end of 1993. See Albert R. Karr, Tate Withdraws as Nominee to Head RTC,
Criticizes Sen. Riegle for Inaction (Wall Street Journal [December 1,
1993]). John Ryan eventually held the post of acting CEO during 1994 and 1995.
107 See U.S. House Committee on Banking, Finance
and Urban Affairs, Semiannual Appearance of the Thrift Depositor Protection
Oversight Board (March 16, 1993), 9ff.; and U.S. Senate Committee on
Banking, Housing and Urban Affairs, Hearing on the Semiannual Report
(March 17, 1993), 5152. This total of $45 billion was about $5 billion less
than the CBO was then estimating for the likely cost. See U.S. House Committee
on Banking, Housing and Urban Affairs, Subcommittee on Financial Institutions
Supervision, Regulation and Deposit Insurance, Funding Needs (March 17
and 18, 1993).
108 BNAs Banking Report 60 (April 12,
1993), 509. The policy changes significantly lowered the RTCs asset sales
goals for 1993: instead of $70 billion in book value sales and principal
collections, the RTC (as of June) set a goal of $56 billion (RTC Department of
Planning and Analysis, Briefing Book Overview [July 1993], 24).
109 See, for example, Richard B. Schmitt, RTC
Lags Behind in Effort to Give Out Legal Work to Minorities and Women, Wall
Street Journal (March 23, 1993). See also U.S. House Committee on Banking,
Finance and Urban Affairs, Subcommittee on General Oversight, Investigations,
and the Resolution of Failed Financial Institutions, Professional Liability
(March 30, 1993).
110 U.S. Senate Committee on Banking, Housing,
and Urban Affairs, Hearing on the Semiannual Report (March 17, 1993),
111 Some 19 amendments that had been drafted were
not considered in committee but were expected to surface later in the debate.
Concerns about the bill were evident from the statements that six Democrats
appended to the Senate report. See U.S. Senate Committee on Banking, Housing,
and Urban Affairs Thrift Depositor Protection Act of 1993 (April 1, 1993),
112 The favorable economy (particularly the
benign interest-rate environment) was cited as the reason for the decrease.
119 See Public Law 103-204, which was signed into
law on December 17, 1993.
120 Although $8 billion was authorized for the
SAIF, no money was appropriated for the deposit insurance fund.
121 In December 1994, Bentsen decided that the
date would be June 30, 1995.
122 When the agencys acting CEO, John Ryan,
predicted in May 1994 that the RTC would likely require only $5 billion more,
some Republicans sought (but failed) to cut the $18.3 billion appropriation to
that amount. Robyn Meredith, White House Blocks Moves to Trim RTC Funding, American
Banker (June 13, 1994). The total amount provided to the RTC was $91.3
billion, but at closure it had used only $87.9 billion. Thrift Depositor
Protection Oversight Board and Resolution Trust Corporation, Annual Report .
. . for the Calendar Year 1995 (1996), Part I, 44. The final amount used
by the RTC continued to drop after its closure as the FDIC sold off RTC assets
and achieved better-than-expected recovery rates. It turned out that, although
it was not apparent in 1993, the RTC needed none of the funding provided by the
123 Thrift Depositor Protection Oversight Board
and Resolution Trust Corporation, Annual Report . . . for the Calendar Year
1995 (1996), Part I, 44.
124 This exit, of course, was feasible only
because a permanent entity (the FDIC) was available to take over the remaining
RTC assets and manage its receiverships.
125 However, the oft-cited figures of so many
millions of dollars per day as costs of the delays were probably inaccurate and
might have been overstatements, particularly during the funding hiatus of
19921993, when conditions in thrifts were markedly better than they had been
126 Thrift Depositor Protection Oversight Board
and Resolution Trust Corporation, Annual Report . . . for the Calendar Year
1995 (1996), Part II, 61. Minority-owned businesses did receive almost 17
percent of estimated fees.