Obligations Limitation:

Resolution Trust Corporation's Compliance as of September 30, 1990

AFMD-91-63: Published: May 31, 1991. Publicly Released: Jul 1, 1991.

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Pursuant to a congressional request, GAO assessed the Resolution Trust Corporation's (RTC) third-quarter compliance with the maximum RTC obligation limit set forth by the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) of 1989, which provided a formula calculating maximum allowable obligations.

GAO found that: (1) none of the formula categories required by FIRREA were omitted from the RTC calculation; (2) since RTC changed its calculation method for its third-quarter compliance to eliminate Department of the Treasury funding, its adjusted obligation level was not comparable to the amounts calculated for the first- and second-quarter reports; (3) excluding Treasury funding from the formula eliminated the 15-percent cash reserve feature and resulted in a potentially misleading assessment of RTC ability to fund any future losses resulting from asset sales; (4) RTC financial accounts had errors and misclassifications, but none of them materially affected the adjusted obligation level; and (5) RTC addressed one of three recommendations GAO previously made and continues to work on the other two.

Matter for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: Congress did not amend FIRREA to fix or eliminate the formula in funding bills passed in March and December, 1991. RTC is requesting additional funding to carry it through to April 1993. Congress could amend FIRREA in conjunction with that request, but such action is not included in the funding bill.

    Matter: Congress should consider reestablishing a cash reserve feature by amending FIRREA to recognize all funding sources in the obligations limitation formula.

 

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