Financial Audit:

Resolution Trust Corporation's 1989 Financial Statements

AFMD-91-57: Published: Apr 4, 1991. Publicly Released: Apr 4, 1991.

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GAO reviewed the Resolution Trust Corporation's (RTC) financial statements for August 9, 1989 through December 31, 1989, focusing on: (1) uncertainties related to RTC cost estimates for resolving institutions; and (2) RTC internal controls and compliance with laws and regulations.

GAO found that: (1) RTC was provided with $50 billion under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) to resolve failed savings institutions and to pay its administrative expenses; (2) RTC, through December 31, 1990, used $37 billion of the $43 billion available to pay the losses of 352 failed institutions; (3) in January 1991, RTC requested an additional $30 billion to continue resolution activities through fiscal year 1991; (4) RTC accrued a $95 billion liability for resolving 650 troubled institutions; (5) RTC estimated that it would require between $89 billion and $132 billion to resolve failed institutions; and (6) the financial statements presented fairly the RTC operations and changes in financial position and its cash flows for the year then ended, in conformity with generally accepted accounting principles. GAO believes that: (1) there are many uncertainties that made it difficult to estimate the costs of resolving the banks; and (2) although RTC requested permanent funding authority, congressional provision of funds through the annual budget and appropriations process would help to retain important oversight controls.

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