Resolution Trust Corporation:

Recoveries on Asset Sales

GGD-92-36FS: Published: Jan 8, 1992. Publicly Released: Jan 8, 1992.

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Pursuant to a congressional request, GAO reviewed the costs associated with resolving failed thrifts, focusing on: (1) a newspaper's conclusion that the Resolution Trust Corporation (RTC) will lose 40 cents per dollar on asset sales; (2) whether RTC has sufficient information on actual sales values; and (3) whether RTC will need additional funds due to the estimated recoveries.

GAO found that: (1) the newspaper article accurately concluded that the variance between the book value of failed thrifts' assets and their actual sales price could add billions of dollars to the cost of resolving the thrift industry crisis; (2) as of December 31, 1990, RTC used an overall estimated recovery value of about 65 cents per dollar to record estimated losses on receivership assets, but revised this value to about 60 cents in June of 1991 to reflect current market value cost estimates; (3) as of December 31, 1990, RTC recorded a total of about $100 billion as the estimated loss for all receiverships, conservatorships, and institutions that will probably require government assistance and are expected to be transferred to RTC; (4) although RTC lacks sufficient historical sales experience to evaluate the reasonableness of asset recovery estimates, it is developing five automated systems to provide pertinent sales valuation data; (5) RTC realized an average of 64 cents per dollar of real estate sold, residential property yielded 72 percent per dollar, and commercial property and land yielded 61 cents and 59 cents per dollar, respectively; and (6) the amount of additional funding RTC will require to cover the cost of resolving the thrift industry crisis depends on such factors as the outcome of economic uncertainties, assets' recovery values, and the number and timing of additional thrift failures.

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