What Was The RTC?
The Resolution Trust Corporation, or RTC, was a government corporation created by the Financial Institutions Reform, Recovery, and Enhancement Act (FIRREA) in 1989 by the U.S. Congress. The purpose of the RTC was to manage and dispose of the assets of the failed savings and loan associations and savings banks that resulted from the Savings and Loan Crisis of the 1980's and 1990's.
What Was The Savings And Loan Crisis?
Thrift institutions, such as savings and loan associations and savings banks functioned by taking deposits from individuals who would open savings accounts, and then lending the money from those to deposits to buyers of real estate. Traditionally, these deposits funded residential mortgages. The deposits were insured up to a certain amount by the U.S. Federal Government.
Due to a high interest rate environment coupled with regulatory changes and induced incentives to lend, thrift institutions used savings deposits to fund risky investments, notably commercial real estate mortgages and other real estate financing.
Exacerbated by moral hazard, hundreds of thrift institutions collapsed leaving the U.S. Federal Government with the responsibility of covering the savings deposits and the task of managing and liquidating the assets of the failed thrift institutions.
How Was The Savings And Loan Crisis Resolved?
In order to execute the undertaking of liquidating the assets of the failed savings and loan institutions, the United States Congress created the Resolution Trust Corporation as the entity that would be tasked with the management and disposition of the assets of the failed banks and savings and loan associations.
These assets were acquired by various investors, many of whom have become iconic figures in the real estate investment industry.