Thrift Agency Gets Vote of Confidence
The General Accounting Office, which has long been critical of the Resolution Trust Corp.’s accounting methods and operations, will certify the agency’s annual financial report next month for the first time in three years, officials said Monday.
The GAO report could boost the RTC’s effort to obtain new funding for the savings and loan cleanup from a skeptical Congress. The assessment comes as RTC officials say the cost of the thrift bailout may be $30 billion less than estimated.
The GAO report, which will be submitted to Congress in mid-June, will say that the RTC has accurately calculated the costs--and estimated future losses--of the S&L; cleanup. The GAO, Congress’ investigative arm, declined in its two previous reports to accept the RTC’s yearly financial statements as correct.
“We feel great,” RTC spokesman Stephen Katsanos said of the latest GAO assessment. “Our numbers, which many have said are suspect, are viewed as reasonable by Congress’ independent watchdog.”
RTC officials are hopeful that Congress will be impressed with the GAO stamp of approval and the agency’s new forecast that the S&L; cleanup will cost $130 billion. That is significantly below the $160-billion Bush Administration estimate.
RTC Chairman Albert Casey, visiting Capitol Hill on a daily basis, is telling members of Congress that another $42 billion, combined with the $88 billion already spent, will enable his agency to finish the job of closing insolvent S&Ls; and selling their assets.
Low interest rates reduce the amount of money paid out by S&Ls;, and the improving business climate helps the survival prospects of troubled but still salvageable institutions, Casey has told several legislators.
A similar note on banks was sounded Monday by William Taylor, chairman of the Federal Deposit Insurance Corp., who said there will be fewer bank failures this year than expected.
Despite the optimism at the RTC, however, there is no sign of an end to the House stalemate over the agency’s budget. Both Democrats and Republicans in the House have an antipathy to the often controversial agency.
With members wary of another unpopular vote for the RTC in an election year, House members overwhelmingly rejected funding legislation in April. Now, Democrats say they will refuse to vote for the money unless a majority of Republicans also vote to support the agency.
Although the GAO report won’t be delivered to Congress until next month, the agency’s top officials shared the conclusions with the RTC and agreed to permit public discussion of the key findings.
In last year’s report, the GAO said it could not vouch for the accuracy of RTC’s numbers because of “internal control weaknesses and significant uncertainties affecting the recovery values of troubled real estate assets.”
Katsanos said the RTC is “ecstatic with the prospect of an unqualified opinion on our financial statements.” An unqualified opinion means that the GAO does not have major reservations or hesitations about accepting the RTC’s financial records and methods.
If Congress approves the $42-billion funding request, “we don’t think they will see us up there again asking for money,” Katsanos said. “The thrift industry overall has been doing better, and the economy seems to be stabilizing and looking more positive. The number of insolvencies will not be anywhere near the number forecast by pessimists.”
The additional funding should cover the cost of disposing of 47 thrifts now operated by the RTC in conservatorships plus 50 to 100 institutions likely to fail, Katsanos said. The RTC had hoped to dispose of money-losing thrifts by the end of the fiscal year Sept. 30.
