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April 1, 1991
Interest rates drifted lower this week, held down only by expectations of a lousy employment report due out on Friday, April 5.
Most current data suggest an economic turnaround close by. Leading Economic Indicators rose 1.1% in February, joined by a surge in consumer confidence. Machine Tool Orders jumped by 27.7%, while Durable Goods Orders were down only .3% much less than expected.
The Fourth Quarter 1990 GNP was revised to a smaller decline of 1.6% after initial reports of a 2.1% drop.
Home resales climbed 7.9% in February, the biggest monthly gain in nearly five years.
No one has had more fun lampooning the RTC and the S&L bailout than we have. The continuous unjustified optimism from government made a good target, and it was better to laugh at the smoking financial crater than cry.
After further review, we have declared a cease fire, and may even change sides. The RTC has become an underdog that needs help. The Iraqi Air Force had a better chance than does the RTC. If the RTC was a boxer in a fight, the referee would stop it.
The RTC is organized, after a fashion. It has lots of employees (many of them pretty good people), offices, procedures, and it mostly knows what is in its inventory. It even has the authority to cut prices and offer its own financing to buyers.
By many measures the RTC is now the largest financial institution in America, bootstrapped from nothing in less than two years.
But the RTC is utterly paralyzed. And it's our fault.
The RTC has to start to sell seized assets; lots of them, and fairly fast. The only thing more important to RTC employees than selling assets fast is not going to jail for having done so.
Vultures of every political feather are circling, waiting for the first mistakes. The three fatal mistakes for any RTCite are: cronyism, low price, or rereposession.
Go directly to jail if you: sold a property to someone you knew, or that someone else at RTC knew, or let alone had gone with to a barbecue. Or, sold a property at a price that meant the buyer made money someday (this is known in Congress as a "giveaway"). Or, sold a property to somebody who didn't make a profit someday, and the RTC has to reforeclose.
Next time you see your Congressperson, ask him or her to vote a resolution saying "We know you are going to make some mistakes while selling $300 billion in property. Do the best you can, get it over with, and we will back you up."
Dream on.
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