RTC Abdicates Details on Assets to Local Offices
After spending nearly $100 million on failed computer systems, the federal agency supervising the massive savings and loan cleanup has virtually abandoned efforts in Washington to keep detailed records on thousands of parcels of real estate and other assets that it is trying to sell.
Rather than try to rehabilitate its crippled systems, the central headquarters of the Resolution Trust Corp. will maintain only limited information on its vast inventory of real estate and loans from failed thrifts. The agency will leave it to local officials, who often depend on handwritten files and improvised computer networks, to keep detailed records on more than $110 billion worth of assets.
RTC’s top managers said they no longer see any reason to develop a comprehensive record-keeping system. The agency, created by Congress in 1989 to handle the S&L; bailout, is in the midst of a rapid drive to sell billions of dollars worth of assets, shut down most of its offices and lay off nearly half its work force of 8,000 people.
“Instead of having a fully operational Cadillac, we can get the job done with a Chevette,” said RTC spokesman Stephen Katsanos.
But the abandonment of two central computer systems and the severely restricted use of a third raise questions about the ability of the agency’s leadership in Washington to oversee the management and sale of thousands of assets seized from nearly 700 defunct thrifts.
Rep. Bruce F. Vento (D-Minn.), a member of the House Banking Committee, warned that the cost of the S&L; bailout could balloon by billions of dollars because the RTC does not have good records on which to rely. “You ought to know what you own, who is working for you, what they are doing with the properties,” Vento said. “These are fundamental questions.”
Congressional investigators and the RTC’s inspector general say there were significant blunders in the development and management of the computer systems.
For example, the cost of a system that IBM developed to track thousands of real estate properties has soared to $52 million from the original contract price of $24 million, according to RTC records and reports. The Department of Housing and Urban Development spends $7 million a year for a computer system that supplies instant data on the 70,000 to 80,000 single-family houses it owns.
The RTC system, called Real Estate Owned Management System (REOMS), is considered virtually useless, according to reports from the General Accounting Office, the investigative arm of Congress. It frequently takes as long as 15 minutes for REOMS to generate information on a single property, the GAO said.
In addition, the system is riddled with data errors. A modest home in Phoenix with an appraised value of $73,000 is listed by REOMS at $79 million, according to a Times examination of RTC records. Of some 1,660 properties that REOMS lists as having sold for $500,000 or more, 552 entries lacked the property’s list price, the appraised value or both.
Although REOMS was designed to supply detailed information about individual S&L; assets, the problems have prompted the RTC’s top managers to decide that they will rely on the system only for a comparative handful of basic facts about each property.
RTC Chairman Albert V. Casey and his deputy, William Roelle, “feel that the amount of information that the (REOMS) system can accommodate is significant, and they don’t need all that information,” RTC spokesman Katsanos said. “It’s not that it doesn’t work, but the volume of information that can be stored in the system is unnecessary to get the job done.”
Another computer system, designed to track loans, has cost the RTC at least $16 million. But in a recent memorandum to field offices, Washington said the Loans and Other Assets Inventory System (LOAIS) was being scrapped before it could become fully operational.
These moves may render useless the Asset Manager System, designed to keep tabs on more than 100 private firms assigned to handle RTC properties. That system, expected to cost at least $8 million, won’t be ready until December. To work properly, it would depend upon detailed information from REOMS and LOAIS.
A special system to keep track of furniture and equipment from failed thrifts also was abandoned, according to the GAO. RTC’s top officials acknowledged that the agency had given up hope of developing a nationwide system that could “update asset management and sales information,” the GAO said in a recent report to Vento.
RTC “will continue to operate with the inefficient processes in place because RTC management believes these processes are getting the job done,” the GAO said. After spending millions of dollars on central computers, the RTC will fall back on “manual data collection and ad hoc automated systems at field locations.”
With Casey insisting that the RTC is nearing the end of its mission to dispose of assets from failed S&Ls;, agency officials say they no longer really need the information they have spent millions of dollars to collect.
“There are probably a number of activities that, at this point in the RTC’s life cycle, we are making the decision we are not going to pursue,” Katsanos said. “We are winding down.”
Federal investigators say they fear that without these or other workable computer systems, the RTC cannot do a good job of disposing of thrift assets. The agency “will not be able to accurately identify assets and target them for specific sales programs, and provide information on the results of these programs,” the GAO said.
By far the biggest disappointment is REOMS, which was intended to produce detailed individual profiles of thousands of properties, from houses and condominiums to shopping centers to undeveloped land.
The RTC awarded the REOMS contract to IBM in January, 1991, along with an ambitious goal: to have it working within 120 days.
According to the RTC inspector general’s office, that timetable turned out to be a bad idea: The RTC simply dumped records from its temporary computer system into the costly new IBM network without checking them for accuracy.
RTC “implemented one of its primary asset-related systems with data which are known to be inaccurate,” the inspector general’s office said. “An effective automated system must contain accurate data.”
The agency is still struggling to correct the REOMS data, according to the inspector general’s report.
“You could probably throw that (REOMS) list in the trash,” said Clint Spurlock, who manages 20 unimproved lots in a development adjacent to a golf course on the intracoastal waterway in South Carolina. REOMS lists one of the lots at $1.2 million. The property actually is priced at $44,918, but the report generated by REOMS incorrectly gave the total price of all the lots in the development.
Similarly, an apartment at 12680 Hillcrest Road in Dallas was appraised at $72,725 but listed at $4 million in REOMS. According to Jack Winburn at Northcorp in Dallas, the list price actually reflects the combined price of all 55 apartments in the complex.
The GAO, looking at the REOMS listings of property available for sale, said 80% of the records were missing one or more key pieces of information, such as list price, name of the broker or the date of the listing.
To make matters worse, REOMS is slow and cumbersome, the GAO said. To find a single piece of property, for example, a user must go through three sets of information on a computer screen just to find the property identification number. Then it takes 12 more steps, each of which can take as long as a minute, to get specific information on the property.
Frustrated by the delays, the RTC staff frequently ignores the $52-million REOMS system when responding to requests from prospective buyers. RTC “sales staff are using outdated data from their own systems and hard copy (paper) reports to respond to customer inquiries,” the GAO said.
The RTC inspector general’s office has been highly critical of the agency’s handling of $34 million that IBM was paid for work on other computer systems, saying the jobs should have been awarded under competitive bidding rather than added to the REOMS contract.
If similar work were done by other bidders, the RTC “could have paid $7 million to $15 million less” on orders placed through September, the inspector general said.
In deciding how much to pay IBM, the RTC’s “cost estimates did not contain any basis or rationale for the type and amount of contractor personnel resources projected for completing the tasks,” according to the inspector general.
IBM spokesman Mark Holcomb noted that the government contract forbids discussion of specific details but said IBM “sold exactly what the RTC asked for, in exactly the mode RTC asked for. The system is doing exactly what RTC asked it to do.
“There is nothing in the inspector general’s report that can fairly and accurately be characterized as a criticism of IBM’s work,” Holcomb added.
Times researchers Murielle Gamache, Michael Cheek and Charlotte Huff contributed to this story.
