Thrift Industry:

The Management Consignment Program

GGD-87-115BR: Published: Sep 10, 1987. Publicly Released: Sep 10, 1987.

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In response to a congressional request, GAO reviewed the financial condition of thrift institutions in the Federal Savings and Loan Insurance Corporation's (FSLIC) Management Consignment Program (MCP), which provides short-term management contracts for troubled thrifts until they can be sold, merged, or closed, focusing on forms of assistance extended to such thrifts and their performance since entering the program.

GAO found that: (1) MCP thrifts increased capital through such means as income capital certificates, net worth certificates, and the reporting of deferred losses as assets; (2) of 45 MCP institutions studied, 43 were incurring losses when they entered the program, with an average return on assets of -9.78 percent, and $2.0 billion in total losses reported; (3) all 45 institutions were insolvent by the end of 1986, with a negative net worth of $3.49 billion; and (4) operating losses accounted for $1.3 billion of total MCP losses, while nonoperating losses accounted for the remainder. GAO concluded that, while it could not determine what the present financial condition of the MCP institutions would now be if they had not entered the program, their continuing losses indicated that, had they been closed at or near the time of entry into MCP, FSLIC resolution costs would have been lower than they would be if FSLIC were to close them now.

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