Imagine having to build a back office from scratch for a $200 billion-asset thrift.
That's just the position the Resolution Trust Corp. found itself in three years ago, when Congress chartered the agency to manage and liquidate over 700 failed savings and loans.
The lack of sophisticated computer systems needed to track and dispose of its holdings left the agency ill-prepared to sell assets. Meanwhile, the RTC's inventory continued to mount as more and more thrifts failed.
"We just didn't have the infrastructure in place to deal with" the workload, says L. William Seidman, the RTC's first chairman.
However, the agency appears to have turned the corner by reorganizing operations and investing heavily in computer technology. It plans to spend $170 million this year alone for technology and back-office operations.
Over the past two years, the agency has managed to sell off $257.8 billion in defunct thrift assets, reducing its portfolio under management to about $116 billion.
RTC executives and thrift industry observers believe there is a direct correlation between the technological improvements and the successful asset sales.
And though no one at the RTC is claiming complete victory in the war on assets, there is a feeling among the employees that they are now at least entering the battle armed.
The trading area, which is the front line of the RTC's sales efforts, has been one of the primary benefactors of the recent technological upgrades.
Nearly a year after the birth of the RTC in 1989, the agency didn't even have a unified trading room operation. Seized institutions were expected to liquidate their own assets and report the fruits of theif efforts to one of eight regional centers set up by the agency to track asset movement.
After only a few months of this system, it was clear that a better plan was needed to dispose of the billions of dollars that were flowing into the asset pool. The Capital Markets Group was created so that large quantities of assets could be sold from a single location in Washington.
A computer system was set up in March 1990, consisting primarily of an IBM mainframe computer - owned and operated by SunGard Data Systems Inc., a data processing services company in Wayne, Pa. - hooked into a network of personal computers in Washington.
Automation was a slow process, RTC officials said, but the payoff has been enormous. In the two years since the trading system was installed, the capital markets division has disposed of over $54 billion in assets.
Although it appears to have crested the hill in terms of assets under management, the RTC continues to upgrade its computer systems. Next week, for instance, the trading room will install a link to the Fed Wire funds transfer network that will enable it to trade securities with the Federal National Mortgage Association and the Federal Home Loan Mortgage Corp.
The commitment to new technologies is necessary, RTC officials said, because most of the remaining assets are the one that are least attractive to investors. So, in many ways the most formidable challenges lie ahead.
"The sports cars are all sold, and now we've got to figure out how to do the same with the four-door sedans," said Eric Alini, acting assistant director of security sales. "Only technology is going to allow us to do that."
How the System Works
The centralized asset-disposal system functions like this: Once an financial institution is seized by the government, it must send a computer diskette summarizing its asset portfolio to the RTC.
After the information has been verified, it is entered into a mainframe data base. Using specially designed software on their personal computers, the RTC's trading personnel assemble attractive packages of securities and loans that can be sold on the open market.
At present the trading room manages about $10 billion dollars in its portfolio, placing it among the top 100 money managers in the nation, RTC officials said.
"Right now, we've got a system that's as sophisticated as any of those employed by money managers in the private sector," said Mr. Alini. "We've got a few layers of internal controls and verification that the other guys don't have to worry about, but on the whole, we compete very well."
The trading room is not the only area of the RTC that has matured technologically. In the back-office areas handling the accounting and reporting functions, a new general ledger system is slated to be installed in September.
Until that point, the RTC continues to make due with a hand-me-down ledger system obtained from the Federal Deposit Insurance Corp. in 1989.
RTC officials view the occasion of installing the new accounting system with a certain amount of pride and relief, for though some mishaps have occurred - including an incident in which a system failure in Denver led to the temporary loss of millions of dollars in assets - the makeshift systems have performed better than anticipated, they said.