Resolution Trust Corporation - RTC
Categories: Banking
The 1980s were cray. So much hairspray and acid wash. But even though the fashion trends were tight like Jordache jeans, there was something going on that wasn’t so tight: the savings and loans crisis.
Long story short: high inflation and high interest rates, combined with traditional financial practices at the time, led to over a third of the nation’s S&L (“savings and loans”) associations going belly-up. The U.S. Government couldn’t have that, so they bailed ‘em out. And the federal agency created to manage the bailout and other associated S&L issues was called the “Resolution Trust Corporation,” or RTC.
Just like the 1980s, the RTC isn’t around anymore. But, also just like the ‘80s, it left a big impression on everyone who lived through it. What they basically did was take all of those assets that the S&Ls couldn’t support anymore, sold ‘em, and used the profits to help minimize any further catastrophic financial effects from the whole mess.
At the end of the day, they managed to liquidate about $400 billion in assets, which is almost $840 billion in 2019 dollars. At the time, people freaked out about taxpayer money being used to bail out private companies, because it wasn’t as common then as it seems to be now. But even though it took about six years, the RTC did manage to help mitigate the effects of the S&L crisis.
Are there some who say this crisis would’ve had almost no effect on the American economy, even without the taxpayer bailout? There sure are, but as Bruce Springsteen told us back in 1985, sometimes we’re just dancing in the dark.
How is that related? It’s not, but it sure is a great song.
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