Conflict Is Inevitable Byproduct of RTC Workout Efforts

To the Editor:

In "Bankers Blame the Government for Gumming Up Loan Workouts" [Aug. 8, page 1], it would have been helpful to put the issue [of the Resolution Trust Corp.'s role] in its proper context.

The RTC has about $25 billion of defaulted loans in its inventory, involving more than 100,000 loans. The fact that these loans have not been repaid is a primary contributing factor to the failure of the hundreds of S&Ls the RTC is trying to resolve.

The RTC has a statutory mandate to recover as much as we can from these loans. Every dollar we don't collect is one more dollar the taxpayers will have to pay.

Intense Negotiation

As one might expect, the entire process of dealing with defaulted loans involves a tremendous amount of intense negotiation and business judgment. It is not at all unusual for debtors to believe the RTC is being unreasonable in its demands, and often these debtors are respected members of their communities whose opinions are highly regarded.

How comforted would the taxpayers be that the RTC was maximizing recoveries if the debtors were always content? This is not to say the RTC never makes mistakes, but there are two sides to every debate.

It is not uncommon to find that a complaining debtor really wants the RTC to forgive a personal liability without first providing the RTC with information on his or her personal financial condition. We will not do that. If a borrower has the ability to pay his loan, the RTC expects it to be repaid.

Mistakes Will Be Made

There will be times when the zeal to collect debts sometimes gets in the way of good business judgment. In a program as large as ours, there will always be some cases where the time and expense will not prove to be worth what was recovered. We do try to monitor and minimize such cases, and the facts usually show they are the exception rather than the rule.

Our clear preference is to work out loans and avoid costly litigation and, in fact, we restructure loans much more frequently than we resort to foreclosures - almost 50% more often.

It is important to keep in mind, however, that the difficult challenge of working out troubled loans begins with a borrower's failure to repay. There may be many valid reasons, such as declining real estate values and tight credit markets. But such reasons do not diminish the RTC's obligation to maximize and expedite recoveries.

David C. Cooke Executive director Resolution Trust Corp. Washington

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