When General Manager Bob Lexold on Friday turns off the lights and shuts the door to the office of the Resolution Trust Corp. in Elk Grove Village, he will close the Chicago-area portion of a brief but painful period in U.S. financial history.
Shuttering the office, which once employed 455 people, will be no loss as far as taxpayers are concerned. Most surely would consider it good news that the federal agency, formed in 1989 to clean up failed savings and loan associations and recover taxpayer dollars, is shrinking along with its mandate.
Even those who work at the local RTC outpost look positively on its closing, hard to fathom though that may seem.
“No one can quite believe people will work themselves out of a job,” said George W. Miles, assistant director of administration and field operation for the office.
Yet that is exactly what the local RTC staff has done, he said, taking three years to do a job estimated at five.
Miles attributes the speed and efficiency of the operation to the preponderance of experienced professionals hired from the world of business, instead of moved from elsewhere in government.
“We were dominated by private-sector people. They knew it would be a term assignment of at most five years,” he says. Only 18 came from another government agency, the Federal Deposit Insurance Corp.
Although it may seem the acronym RTC has been part of the bureaucratic lexicon forever, it is a relative newcomer.
In August 1989, when President George Bush signed legislation intended to bail out the savings and loan industry, the RTC was formed to dispose of the assets and deposits of what were then 219 failed thrifts under the conservatorship of the FDIC.
Those savings and loans represented about $98.4 billion in deposits and about $95 billion in assets. They were only a portion of the mess left behind after deregulation of the thrift industry collided with the economic downturn of the late 1980s.
With the U.S. government insurance fund, and ultimately the taxpayers, left holding the bag for the cost of these failures, the infant RTC had to recoup the losses-and fast.
The agency had to take over management of failed thrifts, try to stem the losses and sell the assets as quickly as possible. It started with the barest of organizational plans-critics howled the agency was so loosely sketched by legislation that it was a virtual mandate for corruption-and with no staff.
“This was like a company that went from zero to $200 billion in a year and one-half,” recalled Miles, a former banker and thrift executive who joined the agency in January 1990. The experience of the Chicago field office was typical of what happened in many of the 20 RTC offices that soon dotted the country.
With no time to train employees, administrators hired professionals in banking, the thrift industry, computer science, human resources and the law. “Most had 10 to 15 years’ experience,” said Miles, in “all the disciplines needed to run an office.”
The Chicago office-at first located in a modified warehouse before it was moved in mid-1990 to its present four floors in a building within sight of the Northwest Tollway-was responsible for institutions in Illinois, Indiana, Michigan, Ohio and Kentucky.
Staffers took orders from the newly formed Office of Thrift Supervision (OTS, or “oats,” as some employees call it). When the office declared a savings and loan insolvent, it called on the RTC to stage one of the infamous Friday-night takeovers that were probably the most public and publicized of the agency’s acts.
Those seizures, in which RTC officials walked into an institution to assume control, garnered headlines and photos but involved some of the smallest groups of workers. “There were only two to five or six people in the intervention teams,” Miles said.
“The goal of the intervention team was to stabilize the thrift and continue to operate it,” said Lexold. “We wanted to streamline it and save it.”
The Chicago office participated in 73 interventions, representing $21 billion in assets and involving 10,000 savings and loan employees. The biggest was the $4 billion TransOhio Savings and Loan in Cleveland. The smallest was the $30 million Crest Federal Savings and Loan of Kankakee.
The 73 represent “about 10 percent of all the institutions intervened in” nationwide, said Miles, and only two branches of institutions that were disposed of went unsold, forcing the government to reimburse depositors.
The RTC nationally has handled 738 institutions and has sold or paid off 654. The agency still has 84 institutions in conservatorship and holds $100.5 billion in assets, in book value. It has sold assets worth $330 billion in book value and claims a recovery rate of 92 percent, totaling $310.6 billion, on assets it has handled.
What happened to those recovered funds? Most paid off loans from the U.S. Treasury, and the rest have been used to continue to operate institutions and assets that remain under RTC control.
The Chicago office’s operating budget was about $90 million a year. More than $70 million was for fees to outside contractors who performed nitty-gritty work, ranging from auditing to counting chairs to publicizing auctions; 15 percent went to pay full-time staffers.
The bare-bones full-time staff often worked long hours but enjoyed the reward of being allowed to come up with creative solutions, Miles said. Among ideas pioneered here was the auction of non-performing loans; the biggest and most recent example of these now-common events came last week, when a two-day auction of 17,828 loans with a total book value of $502 million, most of them residential mortgages, brought 50 cents on the dollar back to the government.
Although local officials can spout a torrent of statistics about what they consider the Chicago office’s successes, its work is not completed. It is being consolidated with work done in Kansas City, Mo., at one of the six remaining RTC offices.
Lexold, who came to Chicago from Kansas City in December to supervise the shutdown, will take about half the remaining 130-member staff back to Kansas City. Before noon Friday, staffers will finish packing records for five institutions, including Chicago’s Irving Federal, that remain in conservatorship, and for $1.5 billion in assets from other institutions that have not been disposed of.
Miles, a Lisle resident, is among those returning to the private sector. Despite 20 years’ background as a bank and savings and loan executive, he intends to jump into a new, but related, field.
“We’re going to see a lot of outsourcing in the 1990s,” he predicted. “Other than computers, outsourcing is new for the service industry.
“I think there are things we learned from RTC on how to hire people, how to write contracts, how to define the work for outside contractors. . . . That’s one of the things we think people in the RTC will walk away with.”
