Estimated Costs of FSLIC's 1988 and 1989 Assistance Agreements Subject to Change
AFMD-90-81: Published: Sep 13, 1990. Publicly Released: Sep 13, 1990.
- Full Report:
Pursuant to a legislative requirement, GAO reported on the cost of the Federal Savings and Loan Insurance Corporation's (FSLIC) bank assistance agreements from January 1, 1988 through August 9, 1989.
GAO found that: (1) FSLIC estimated the cost of 96 assistance agreements to be $61.9 billion, which was $5.1 billion less than the Federal Deposit Insurance Corporation's (FDIC) estimate of $67 billion; (2) FSLIC did not include one large agreement's cost estimate when determining the total cost estimate; (3) FDIC estimated that payments to be made after March 31, 1990 represented a current cost of $39.1 billion when computed on a present-value basis; (4) such related uncertainties as regional real estate markets, future interest-rate levels, and the success of FDIC-covered asset management and disposition strategies will significantly affect the actual assistance payments; (5) to protect future yield maintenance payments, FDIC should estimate the actual future yield of covered assets; (6) FSLIC and FDIC could not guarantee their estimates of assistance agreement payments, since they could not forecast certain conditions over the term of the agreement; (7) FSLIC incurred costs other than assistance payments as a result of such agreements, including reduced federal tax revenues, monitoring fees, legal fees, and audit fees; and (8) in 1989, FSLIC estimated that the agreements' tax implications would provide $8.5 billion in tax benefits, but also estimated that it would use about $4.3 billion to reduce assistance payments.