OPPORTUNITY COSTS INCURRED BY THE RTC IN CLEANING UP SAVINGS-AND-LOANINSOLVENCIES

This paper draws attention to an important but neglected component of the costs of the thrift cleanup as reported by the Resolution Trust Co rporation (RTC). The RTC resolved 747 thrift institutions over the per iod 1989-1995 at an estimated cost of $90.1 billion. Since the RTC's l oss exposure indirectly represented a taxpayer-funded equity position in troubled thrifts, the associated opportunity costs constitute signi ficant costs that are in addition to the reported resolution costs. Re cognition of this important category of costs raises the taxpayer burd en from the official estimate of $90. I billion to a cost of between $ 112 and $146 billion. Budgetary recognition of these implicit expenses would have had to affect the operations of the RTC and Congressional decisions to fund RTC activities.