1992 Thrift Resolutions: RTC Policies and Practices Did Not Fully Comply
With Least-Cost Provisions (Chapter Report, 06/17/94, GAO/GGD-94-110).

From 1980 through 1992, more than 1,300 savings and loans failed. To
stem losses and foster depositor discipline, Congress required the
Resolution Trust Corporation (RTC) to resolve failed thrifts at the
least possible cost to RTC. RTC must follow specific rules in
calculating the cost of resolution alternatives and document its
evaluation of those costs. In reviewing RTC's 1992 compliance with the
least-cost provisions, GAO found that three of RTC's corporate policies
raised compliance questions. These policies (1) did not ensure that
uninsured depositors could absorb their share of thrift losses if
necessary to achieve least costly resolutions; (2) require RTC to
estimate the cost of liquidating thrifts in conservatorship as of the
conservatorship state date; or (3) require RTC to evaluate other
available resolution methods before downsizing. RTC defended these
policies, citing the backlog of thrifts awaiting resolution in 1992 and
the lack of funding for resolutions for much of that year. In any case,
RTC changed its policies on uninsured depositors in September 1993, a
move that should allow RTC to better comply with the least-cost
provisions. With its recently appropriate funding and few additional
thrifts expected to fail in 1994 or 1995, RTC should be able to further
modify its corporate policies to ensure full compliance with the law.
For resolution decisions made in 1992, RTC had adequate procedures for
calculating, evaluating, and documenting the cost of resolution
alternatives. These procedures, however, were not always adhered to,
particularly the documentation of evaluations and assumptions. Further,
RTC did not always document the rationale for the marketing strategy it
chose.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GGD-94-110
     TITLE:  1992 Thrift Resolutions: RTC Policies and Practices Did Not 
             Fully Comply With Least-Cost Provisions
      DATE:  06/17/94
   SUBJECT:  Bank failures
             Savings and loan associations
             Financial management
             Noncompliance
             Mathematical analysis
             Documentation
             Banking law
             Property disposal
             Marketing
             Insured commercial banks
IDENTIFIER:  RTC Asset Review Evaluation System
             Savings Association Insurance Fund
             RTC Accelerated Resolution Program
             SAIF
             
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