Thrift Crisis Costs US Less Than Some Forecast

IT is not often that a federal agency shuts down.

But one that will close its doors later this year is the Resolution Trust Corporation (RTC), created in 1989 to dispose of the assets from a rash of failed United States savings-and-loan associations or mutual savings banks.

It has not been a popular agency. The public was upset about the use of taxpayer money to finance what was often termed a ''bailout'' -- though it mostly bailed out the depositors in failed institutions. And Congress was unhappy with the management of the RTC.

''There's no doubt when you start an agency ... mistakes will be made,'' says chief executive officer John Ryan. ''And we've made some beauts.''

But Paul Nadler, a professor of finance at Rutgers Graduate School of Management in Newark, N.J., gives the agency ''a decent mark.'' The complexity of selling depreciated assets was complicated by requirements to help minorities, women, and small business, he adds. ''They have had a tough job.''

The RTC itself was upset with Congress for failing to keep the agency sufficiently funded to do its job in a timely fashion.

Because of the economic recovery, the delays may have saved money as the value of RTC assets began to rise, Professor Nadler reckons.

The thrift crisis was famous for numerous scandals. In one that got major media attention, Neil Bush, son of President Bush, was involved with a Denver S&L that failed. Another thrift failure with a high political profile is the Whitewater affair, touching on President Clinton.

Steve Katsanos, RTC's director of corporate communications in Washington, describes the thrift crisis as ''a very sad chapter in our financial history. I hope we've learned from it.''

Congress originally gave the RTC $50 billion to cover losses from failed thrifts. But as the scope of the problem became clear and the economy went into a recession (driving down the value of failed thrifts' assets and making them more difficult to sell), the RTC needed more money.

The number of thrifts the RTC had to deal with grew from 500 when it was formed to 745. Getting appropriations for the RTC became more difficult as congressional oversight hearings turned into ''grandstanding,'' says a congressional budget analyst, and a forum for inquisitions about Whitewater.

Now that headlines have died down and the RTC received its final cash infusion last spring, the agency is beginning to deal with some real nuts-and-bolts issues regarding winding up its affairs -- like who will answer the phones. Mr. Katsanos had voice mail installed. ''There's no clerical support some days.''

From a peak of about 9,000 employees nationwide in 1992, RTC's staff is now down to about 5,100 and dwindling every month. Most employees leaving were hired on a temporary basis. ''Everyone could not become a permanent federal employee,'' Katsanos says. ''We knew there was going to be a peak and a decline.''

About 1,400 employees, including Mr. Ryan and Katsanos, have ''return rights'' to jobs at the Federal Deposit Insurance Corporation. ''It's going to be a very difficult transition because the FDIC workload has declined significantly'' as the number of commercial-bank failures has dwindled, Katsanos says.

''It's going to be very much like a game of musical chairs.''

For many RTC employees, the six-year-long job of making good on the government's promise to protect depositor accounts has been a thankless one. ''We've received one letter from a depositor in all those years,'' Katsanos says.

But the RTC's job was never meant to be warm and fuzzy: ''You're suing [people], you're foreclosing, you're putting them out of work.... If you're looking for thanks its going to be a very frustrating job,'' he adds.

Since 1989, RTC has ''resolved'' (merged into healthier financial institutions or closed and disposed of the assets) 745 financial institutions, mostly in Texas, California, Louisiana, Illinois, and Florida. More than $385 billion in assets was involved. In the beginning, the job was daunting, to say the least. The RTC had to find a way to quickly sell huge amounts of assets and get a decent return on their book value. Because a large portion of the assets was real estate, it also had to avoid wrecking local real estate markets.

The solution was auctions -- to sell everything from bank furniture to bad car loans. Despite early complaints that the RTC wasn't making enough money on these auctions, the RTC has so far gotten an average 88 cents on the dollar on the disposal of thrift assets. An estimated $10 billion of remaining assets (partly hard-to-sell undeveloped real estate) will be transferred to the FDIC at the end of this year.

The RTC projects that, by that time, the total cleanup job will have cost about $90 billion, much lower than some predictions, which ran many billions higher. RTC's costs are the difference between the amount paid to depositors, plus the expense of staffing, litigation, facilities, and auctions, minus the return on asset sales.

''Perhaps asset management will be their legacy,'' says the congressional analyst. ''It was a massive job they were expected to do immediately ... and they had none of the systems in place to do that.'' Now, RTC is being looked at as a model for downsizing and for selling assets, as suggested for the Federal Housing Authority in a recent bill, the analyst says.

In the agency's final months, RTC officials maintain that, despite all the politicking, the not-so-fun job the RTC was charged with doing has been done well. Ryan says: ''We ought to chisel on the front of the building: '25 million deposit accounts have been honored.' ''