New S&L; Disposal Agency Accused of ‘Doing Nothing’
WASHINGTON — A key congressman charged Monday that the special agency created to dispose of failed savings and loan associations is “doing nothing†four months after Congress passed the S&L; cleanup bill. The Resolution Trust Corp. is lagging badly in its mission of dismantling and selling S&Ls;, said Rep. Bruce F. Vento (D-Minn.), chairman of a special House task force on RTC activities.
“Right now, they’re not moving,†the clearly frustrated Vento said in an interview.
He complained that the RTC has not issued any detailed rules or guidelines to help buyers who might want to purchase individual branches or other portions of failed institutions.
Instead, the RTC is concentrating on trying to sell whole S&Ls;, hoping that this will reduce the ultimate cost of the rescue for taxpayers. The RTC has been given an initial $50 billion to spend for disposing of failed S&Ls; and paying off their depositors, whose accounts are insured up to $100,000.
But Vento is fearful that the costs of the financial rescue will keep rising unless the RTC is more aggressive in finding ways to close the S&Ls; and sell their assets on a piecemeal basis, if necessary. “We’ve got at least 500 institutions†that must be sold, Vento said.
Separately, President Bush suggested Monday that the S&L; bailout bill may not have provided enough money.
The Associated Press quoted the President as saying: “It’s a whale of a mess, and we’ll see where we go. We’ve had this one refinancing. I am now told that that might not be enough.â€
Bush was speaking to a group of editorial writers in Washington.
The Resolution Trust Corp. has already seized 280 institutions, and at least 200 more have been identified as likely takeover candidates because of their financial weakness. The imposition of tough new capital standards and the vagaries of uncertain real estate markets could drive the final total of failed S&Ls; even higher.
The troubled institutions have billions of dollars in assets to be sold, including foreclosed office buildings, shopping centers, apartments, homes and other real estate. These assets “are not getting any better,†and it will be costly to maintain them, Vento said.
The Minnesota congressman heads a special task force of the House Banking Committee watching closely as the RTC carries out the mandate of Congress to reshape a troubled industry and protect the federal insurance fund for S&L; deposits.
“There is a lot of pent-up anger in Congress on the S&L; issue,†Vento said. “Members feel they have been misled so often.â€
In Vento’s view, the RTC has been excessively deliberate, hoping that it can find large, healthy institutions to offer bids on some of the defunct thrifts.
“Doing nothing is what I’m criticizing them for,†Vento said. “They have a job, a mission. They can’t do nothing.â€
An RTC spokesman defended the agency’s activities, noting that it had carried out 33 “resolutions†in its first two months, selling S&Ls; to private investors or closing the institutions and paying off depositors. “That effort was done with much more speed than is normally the case,†the spokesman, Stephen Katsanos, said.
But those transactions were easy ones, hastily carried out because Congress wanted the RTC to spend $20 billion during the fiscal year ending last Sept. 30. The surge of spending last year will help keep down the federal deficit during the current fiscal year.
The RTC has not completed any cases in the past two months because both Congress and prospective buyers wanted to avoid a rush after the initial burst of speed, Katsanos said. “We heard considerable concern from the Congress as well as from potential investors . . . that they would like us to stretch out the time between when an S&L; is announced as a candidate for resolution and when we accept bids,†he said. Investors asked for more time to prepare their applications to receive S&Ls; charters, he said.
There are 20 S&Ls; up for sale, and some deals should be announced this week, Katsanos said.
However, Vento said he had heard complaints from investors who hoped to buy portions of S&Ls; but had been unable to get help from the RTC.
Vento’s impatience with the slow pace extends to the Bush Administration, which has not yet named two public members to the five-member oversight board, which is the policy-making agency for the Resolution Trust Corp.
“Mr. President, the clock on the S&L; crisis continues to tick, and the price tag of the bail-out continues to rise,†Vento said in a letter he sent to Bush late last week. “I hope that you will meet the new challenges and move promptly to fill these important vacancies.â€
Congress wanted the “public representatives (to) have a real voice†in the activities of the oversight board, Vento said. The board’s other members are Treasury Secretary Nicholas F. Brady, Housing and Urban Development Secretary Jack Kemp, and Federal Reserve Board Chairman Alan Greenspan.
Without public participants, the oversight board could become “too much an insider’s game,†Vento said in the interview.
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