However, some failing thrifts are resolved prior to being placed into conservatorship through the accelerated resolution program (ARP), which OTS operates jointly with RTC. We reviewed the three resolutions to determine whether RTC’s resolution process, as modified by these policy changes, provided for compliance with FDICIA’s least-cost requirements. Principal Findings

		RTC Has Improved Its Resolution Process

RTC changed its corporate policies to require that uninsured depositors share in thrift losses if necessary to achieve least costly resolutions and to curtail its practice of selling performing assets during conservatorship operations. These changes brought RTC into compliance with FDICIA’s uninsured depositor requirements and enabled RTC to better conform with the act’s requirement that it evaluate other resolution methods before selling assets. In addition, RTC’s implementation of a policy to extend a preference to minority bidders when making resolution decisions appeared consistent with FDICIA’s least-cost requirements. It also changed the timing of its liquidation cost estimates. We also found that RTC explored market interest in the thrift, selected the resolution alternative it determined to be the least costly, and adequately documented its marketing rationale and the bases for its resolution decision. It also selected the resolution alternative it determined to be the least costly. It changed its treatment of uninsured depositors and now complies with related FDICIA requirements; it changed the timing of its sales of high-quality assets from thrifts in conservatorship and the timing of its liquidation cost estimates, thereby better providing for its conformance with the act’s requirements; and it improved various aspects of its resolution documentation, as we had recommended.
Why GAO Did This Study

Pursuant to a legislative requirement, GAO reviewed the Resolution Trust Corporation's (RTC) compliance with a statutory requirement to: (1) resolve failed thrifts in the least costly manner; and (2) calculate and document its evaluation of alternative resolutions of failed thrifts.

What GAO Found

GAO found that: (1) RTC has improved its resolution process and curtailed its practice to sell performing loans during conservatorship in order to comply with the least cost requirement; (2) RTC policy to extend a preference to minority bidders when making resolution decisions appears consistent with the least cost requirement; (3) for the three resolutions it reviewed, RTC chose the resolution alternative it determined to be the least costly and, in response to GAO recommendations, adequately documented its marketing strategies and the bases for its resolution decisions; (4) where relevant, RTC has implemented changes to its corporate policies regarding the treatment of uninsured depositors and the timing of asset sales during conservatorships, which brought RTC into compliance with other statutory requirements as well as the least cost requirement; (5) RTC has changed the timing of its liquidation cost estimates so that it makes its initial estimate when a failed thrift is placed in conservatorship; (6) among other things, RTC initial liquidation cost estimates determine the amount of estimated losses uninsured depositors must absorb; and (7) RTC efforts to resolve failing thrifts through its accelerated resolution program have brought RTC into better conformance with the least-cost statutory requirement.