Banking Review2006 VOLUME 18, NO. 3
The Resolution Trust Corporation and Congress, 1989–1993
PART II: 1991–1993
by Lee Davison
Part I of this study of the post-FIRREA legislative history of the Resolution Trust Corporation
(RTC) appeared in the previous issue of the Banking Review. It focused on the period
immediately after the RTC’s creation in August 1989 through 1990, examining congressional
discussion and debate about the RTC’s management, operations, and working capital funding.
Part II, which focuses on the period 1991–1993, examines the passage of three statutes that
affected the RTC’s loss funding, management structure, and operations and completes the
legislative history of the RTC.
The views expressed are those of the authors and do not necessarily reflect official positions of the Federal Deposit Insurance
Corporation. Articles may be reprinted or abstracted if the FDIC Banking Review and author(s) are credited. Please provide the
FDIC’s Division of Insurance and Research with a copy of any publications containing reprinted material.
Chairman Sheila C. Bair
Director, Division of Insurance Arthur J. Murton
and Research
Deputy Director Donald Inscoe
Managing Editor Jack Reidhill
Editorial Committee Christine E. Blair
Valentine V. Craig
Rose M. Kushmeider
Publication Manager Geri Bonebrake
The Resolution Trust Corporation and Congress, 1989–1993
PART II: 1991–1993
by Lee Davison
Part I of this study of the post-FIRREA legislative history of the Resolution Trust Corporation
(RTC) appeared in the previous issue of the Banking Review. It focused on the period
immediately after the RTC’s creation in August 1989 through 1990, examining congressional
discussion and debate about the RTC’s management, operations, and working capital funding.
Part II, which focuses on the period 1991–1993, examines the passage of three statutes that
affected the RTC’s loss funding, management structure, and operations and completes the
legislative history of the RTC.
The views expressed are those of the authors and do not necessarily reflect official positions of the Federal Deposit Insurance
Corporation. Articles may be reprinted or abstracted if the FDIC Banking Review and author(s) are credited. Please provide the
FDIC’s Division of Insurance and Research with a copy of any publications containing reprinted material.
Chairman Sheila C. Bair
Director, Division of Insurance Arthur J. Murton
and Research
Deputy Director Donald Inscoe
Managing Editor Jack Reidhill
Editorial Committee Christine E. Blair
Valentine V. Craig
Rose M. Kushmeider
Publication Manager Geri Bonebrake
The Resolution Trust Corporation and
Congress, 1989–1993
PART II: 1991–1993
by Lee Davison*
Part I of this article appeared in the previous issue of
the Banking Review, and explored the period immedi
ately following the opening of the Resolution Trust
Corporation (RTC) in August 1989 through 1990.
Part II completes the legislative history of the RTC.
The Resolution Trust Corporation
Funding Act of 1991
Congress’s inability to pass a funding bill in the
previous session did not mean that the RTC’s
funding requirements had diminished in any way.
Without additional loss funds and the attendant
working capital, the agency would essentially cease
operations before the end of the first quarter of
1991. But the political dynamic surrounding the
RTC remained difficult. The administration’s
position was straightforward: the losses within
insolvent institutions had already occurred, and
delays in funding those losses would only increase
costs. In the eyes of many in Congress, however,
including even those of the president’s own party,
giving the RTC more taxpayer money was
extremely unpalatable. Although a failure to do so
would abrogate the promise to insured depositors,
some members of Congress, particularly some
House Democrats, adamantly opposed any new
funding at all. Others wanted to tie further fund
ing to changes in the organization or operations of
the RTC, or to changes in unrelated government
policy. Still others sought to weight the burden of
paying for S&L losses to certain regions or taxpay
ers. Some of these suggestions had little chance of
being enacted, but they encumbered an already
contentious bill, making passage even more uncer
tain.
Treasury Secretary Brady said the RTC would
require $30 billion in loss funds and approximately
$47 billion in working capital for fiscal 1991, pro
vided that new loss funding was forthcoming by
March 1. If no new funds were appropriated by
that date, the RTC would have expended all avail
able loss funds and would be forced to stop closing
and selling institutions by the end of February.1
He mentioned, moreover, an RTC estimate that
* The author is a historian in the FDIC’s Division of Insurance and Research.
The author would like to thank Tim Critchfield, Timothy Curry, Alice Goodman,
Matthew Green, Jack Reidhill and Lynn Shibut for their helpful comments and
suggestions. Any errors are, of course, the responsibility of the author.
1 U.S. Senate Committee on Banking, Housing, and Urban Affairs, Hearing on
the Semiannual Report (January 23, 1991), 19; 41–42. See also BNA’s
Banking Report 56 (January 28, 1991), 146.
FDIC BANKING REVIEW 1 2006, VOLUME 18, NO. 3
Congress, 1989–1993
PART II: 1991–1993
by Lee Davison*
Part I of this article appeared in the previous issue of
the Banking Review, and explored the period immedi
ately following the opening of the Resolution Trust
Corporation (RTC) in August 1989 through 1990.
Part II completes the legislative history of the RTC.
The Resolution Trust Corporation
Funding Act of 1991
Congress’s inability to pass a funding bill in the
previous session did not mean that the RTC’s
funding requirements had diminished in any way.
Without additional loss funds and the attendant
working capital, the agency would essentially cease
operations before the end of the first quarter of
1991. But the political dynamic surrounding the
RTC remained difficult. The administration’s
position was straightforward: the losses within
insolvent institutions had already occurred, and
delays in funding those losses would only increase
costs. In the eyes of many in Congress, however,
including even those of the president’s own party,
giving the RTC more taxpayer money was
extremely unpalatable. Although a failure to do so
would abrogate the promise to insured depositors,
some members of Congress, particularly some
House Democrats, adamantly opposed any new
funding at all. Others wanted to tie further fund
ing to changes in the organization or operations of
the RTC, or to changes in unrelated government
policy. Still others sought to weight the burden of
paying for S&L losses to certain regions or taxpay
ers. Some of these suggestions had little chance of
being enacted, but they encumbered an already
contentious bill, making passage even more uncer
tain.
Treasury Secretary Brady said the RTC would
require $30 billion in loss funds and approximately
$47 billion in working capital for fiscal 1991, pro
vided that new loss funding was forthcoming by
March 1. If no new funds were appropriated by
that date, the RTC would have expended all avail
able loss funds and would be forced to stop closing
and selling institutions by the end of February.1
He mentioned, moreover, an RTC estimate that
* The author is a historian in the FDIC’s Division of Insurance and Research.
The author would like to thank Tim Critchfield, Timothy Curry, Alice Goodman,
Matthew Green, Jack Reidhill and Lynn Shibut for their helpful comments and
suggestions. Any errors are, of course, the responsibility of the author.
1 U.S. Senate Committee on Banking, Housing, and Urban Affairs, Hearing on
the Semiannual Report (January 23, 1991), 19; 41–42. See also BNA’s
Banking Report 56 (January 28, 1991), 146.
FDIC BANKING REVIEW 1 2006, VOLUME 18, NO. 3