The Trick Is to Turn Magic Into Money

The federal government is trying to make hundreds of billions of dollars in assets disappear--assets that are the legacy of the nation’s savings and loan debacle. But it has never faced as strange a dilemma as it does now in trying to rid itself of one of the world’s great libraries of magic.

Inherited from a defunct Century City thrift once headed by an amateur magician, the library includes thousands of posters and handbills, 16th-Century books of magic and private letters of such well-known magicians as Harry Houdini. The collection now awaits its fate on the fifth floor of a high-rise, where for protection it is locked in four dark rooms kept at 70 degrees.

Events during the past month have left government officials with a difficult choice: sell the collection to recover money for taxpayers or employ a bureaucratic sleight of hand that would give the collection to Library of Congress officials, who have no money to buy it but who fear that selling the collection may endanger its value to scholars.

This isn’t the kind of predicament anyone ever imagined last year when Congress formed the federal Resolution Trust Corp. to mop up the savings-and-loan mess.

At that time, the RTC’s policy was clearly stated: Sell as quickly as possible the billions of dollars in bad loans, foreclosed real estate, junk bonds and other assets collected by failed savings and loans using taxpayer-insured deposits. No one said anything then about what to do with posters advertising an 80-foot fall from a building by “The Great Desperado,” 135-year-old handbills advertising “Professor Savre, The Great Modern Magician” or personal letters from Houdini with the words “King of Handcuffs” on the letterhead.

“It is an unusual asset--to say the least--for a savings and loan to have. If this were an apartment building, it would be an easy decision,” sighs John F. Penrose, the RTC executive overseeing the closing of the thrift, First Network Savings. Penrose says the agency is undecided on what it will do.

The library is called the Mulholland Library of Conjuring and the Allied Arts after John Mulholland, an early 20th-Century magician whose personal collections make up much of the library. It had a curator until earlier this year, and an arts advisory board that listed such well-known celebrities as comedian-actor Steve Martin, producer-director Tony Bill and playwright and filmmaker David Mamet.

The collection was assembled by Carl M. Rheuban, a magic devotee who ran First Network until it was seized by regulators in January and closed last month at a cost to taxpayers of $139 million. Rheuban, under investigation by federal authorities for possible criminal violations at First Network, spent at least $1.5 million of the thrift’s money on it. In addition to the manuscripts and books, Rheuban also added to his collection wind-up automatons from the 1800s that show puppet-like figures performing magic, including one built by Frenchman Jean Eugene Robert-Houdin, the father of modern magic from whom Houdini took his name.

Auction experts and others said that determining the value of Rheuban’s collection is difficult because it is so unusual and no one knows what a wealthy investor would pay. But they believe it could easily be worth three to four times what Rheuban spent. No one disputes the library is as rare a magic collection as there is, which is why the RTC finds itself in such a delicate position.

“After our collection here, I don’t think there are any others in the United States that would compare to it. These aren’t just card tricks we are talking about,” said Larry Sullivan, chief of the rare books collection at the Library of Congress.

The RTC’s Penrose said he was talking to auction houses about selling the collection when Library of Congress officials made it clear about three weeks ago that they would like the collection.

Lacking money to buy it outright, they dug up an obscure federal law that suggests the library can get it. The law reads that when one federal agency is selling property other than data processing equipment, it should solicit agencies known to use that equipment and arrange to transfer the asset to that agency.

“The biggest creditor is the federal government, and we are a government agency. The government should benefit from what is an unfortunate situation. The public would gain by it,” Sullivan said.

RTC officials said the law is news to them.

“Generally, we are supposed to sell an asset at the best possible price to recoup some of the losses taxpayers will incur. That is our basic mission and goal,” spokesman Kevin Shields said. But if the law applies, he adds, the RTC may have to follow it.

The prospect of an auction worries those who have been involved with the library. They fear that the library will be broken up forever, or that an investor may buy it and make it off-limits to scholars.

One hope has been that the RTC can sell it to a buyer, perhaps a museum or library, that will make it available. Penrose said he has made some preliminary calls, but found no interest yet.