Failed Thrifts:

The Resolution Trust Corporation's Working Capital Needs

T-GGD-90-7: Published: Oct 31, 1989. Publicly Released: Oct 31, 1989.

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GAO discussed financing for the Resolution Trust Corporation (RTC), focusing on: (1) RTC need for working capital and alternative approaches to raising it; and (2) proposed legislation that would limit the borrowing authority of RTC and other federal agencies. GAO noted that: (1) RTC needs working capital to resolve failed thrift institutions because the cost of resolution will greatly exceed the value of thrift assets; (2) without working capital the pace of RTC resolutions will be dictated by the speed with which RTC can liquify its acquired assets; (3) the least costly form of financing for RTC would be direct Treasury borrowing, which would also fully reflect the impact of RTC activities on the federal budget deficit; (4) creating an off-budget entity to hold assets as collateral for RTC borrowing would be far more costly and would violate the integrity of the budget process; and (5) proposed legislation to limit the borrowing authority of RTC and other agencies would severely hamper RTC ability to fulfill its difficult mission.

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