Statement of Administration Policy: H.R. 3435 - Resolution Trust Corporation (RTC) Refinancing and Restructuring Act of 1991

(SENT 11/23/91)
(House Rules)
(Gonzalez (D) Texas and 2 others)

The RTC has virtually exhausted its funds and has almost completely halted its efforts to resolve failed thrift institutions and protect their depositors. The RTC has estimated that the cost of delaying refinancing until February would be between $300 and $400 million; the costs of delay would continue to grow at an increasing rate.

The Administration strongly supports legislation to refinance the RTC, and the introduced version of H.R. 3435 is the Administration's proposal to refinance and restructure the RTC.

However, the President's senior advisers will recommend that he veto the version of H.R. 3435 reported by the Committee on Banking, Finance, and Urban Affairs, unless it is amended to: (1) provide adequate funding for the RTC in a manner consistent with last year's budget agreement; and (2) provide the Administration with adequate oversight authority and control regarding policies affecting the cleanup.

Although the Administration supports many provisions of H.R. 3435, it strongly opposes the bill in its current form because it would:

—   Authorize only $20 billion to cover losses, fail to make available even this amount, and require any funding for losses over $20 billion to be offset in violation of last year's bipartisan budget agreement. That agreement (now law) exempted from pay-as-you-go requirements any spending necessary to honor the Federal deposit insurance guarantee.

—   Weaken the Oversight Board's ability to oversee the RTC's activities, even though the Board will continue to be held accountable for the cleanup process and its cost.

—   Restrict the RTC's working capital borrowing to 85 percent of the fair market value of its assets. If only $20 billion were made available after enactment of H.R. 3435 as reported, the RTC would have to set aside about $10 billion, leaving only $10 billion to cover losses.

—   Require that property be managed and disposed of by the local RTC office closest to the property. Mandating local disposition is inefficient and inflexible and would inhibit the RTC's ability to maximize the value of its assets and minimize the cost to the taxpayer. The RTC already uses local property managers and brokers to the extent it makes good business sense to do so.

—   Restrict the efficient disposition of property by establishing cumbersome procedures for the identification and handling of "significant properties."

—   Establish constitutionally defective preferences for businesses owned by women and minorities. The Administration recommends that these provisions be made discretionary and be limited to benefit only businesses owned by economically disadvantaged individuals, without regard to race or gender.

—   Condition the availability of funds on the submission to Congress of independently audited financial statements. This provision is constitutionally objectionable and could cause the RTC to effectively shut down on October 1, 1992, for reasons beyond its control.

The Administration would also oppose provisions that would significantly increase direct spending or reduce receipts for purposes of the "pay-as-you-go" requirement of the Omnibus Budget Reconciliation Act of 1990.

Scoring for Purposes of Pay-As-You-Go

The language of several amendments adopted last night by the Banking Committee is not yet available. A "pay-as-you-go" estimate will be developed when OMB has had an opportunity to review the language.