Resolution Trust Corp. FAQs
Mere talk of a possible government solution to the credit crisis weighing down the U.S. and global markets provided enough hope to investors to support a mammoth rally in the U.S. stock market this week.
When the first reports of a federally funded bailout for the sector leaked Thursday afternoon, the market rallied large in the last hour of trading. The market expanded that rally Friday with gains large enough to effectively wipe out the week's earlier losses.
As Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke work with members of Congress over the weekend to hammer out specific details of the bailout plan, market player are already speculating about what the plan could look like and if it could really provide an effective solution to the financial crisis.
Essentially, the goal is for the government to take the bad debts that are weighing on these banks and liquidate these illiquid assets in an orderly fashion. And that has people who were around in the 1980s reminiscing about the so-called savings and loan, or S&L, crisis of that era and the aggressive way in which the government bailed out the that mess -- specifically, Resolution Trust Corporation, or RTC.So here's a simple FAQ on the '80s-era RTC and some thoughts on what a similar program could mean some 20 years later. What was the Resolution Trust Corporation (RTC)? The RTC was created following the savings and loan crisis in 1980s. The government inherited thousands of failed small banks and had to dispose of the real estate assets and mortgage-related loans of the thrifts. It originated as part of the Federal Institutions Reform and Recovery Act of 1989. Before the RTC was formed to deal with the mess, the Federal Savings and Loan Insurance Corporation (FSLIC) had closed 294 thrifts. What did the RTC do? The RTC provided two functions. It shuttered many of the failing institutions, which wound up totaling 747. The total amount of assets equaled $394 billion. It then liquidated those assets over a period of time until it was folded back into another federal agency -- the Federal Deposit Insurance Corporation (FDIC).
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV