Toxic Dump or National Bank
            New Orleans               Shelia Bair from the FDIC, one of the few government finance people who has not been permanently tarnished by the financial meltdown, and others on the eve of the Inaugural are starting to talk without fear about whether or not there is a “real” plan or solution to the banking mess.  Today’s Times raised the specter of the Resolution Trust Corporation (RTC) from the savings and loan mess as a potential model for how to do it better.

      
      Yikes!
  
          The proposal would be to create a toxic dump by some name that took all of the bad loans off of bank balance sheets and collected them together in one infernal swamp, called that the last circle of hell, and moved forward from there. 
          
           The alternative, if there is one, is to more overtly recognize that we now have truly national banks and following the Bush principles of the “ownership society,” we now have made such huge investments in most of these banks that we could really direct some real recovery programs by utilizing our shares and operating many of them as truly national banks with national purposes rather than private profit motives
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            It is all worth a lot more thought.

            For some the RTC is a distant memory.  In the low income and working neighborhoods of America, that is not really the case.  Within two blocks of my house in the New Orleans Bywater neighborhood is an old RTC house that just now is getting fixed up thanks to the owners’ agreement to raise the house and FEMA’s provision of funds.  One block from my house, in other words around the corner, is an abandoned house with DO NOT TRESPASS signs all around it, that is an old RTC house that has never come back as anything but an old story of a failed auction bid, not enough resources, and a family lost to Katrina.  Four blocks away is old RTC house where eyes were bigger than the stomach and after all of these years, half of the property has been rehabbed and occupied and the other half still sits vacant. 

            These are the RTC success stories incidentally.  These were homes that regular families bid for and won.  RTC calls them a success because they left their inventory.  For the neighborhoods though they are not success stories because the families had no resources to really rehab and occupy, so they have become “affordable” housing that is not decent.  This is a classic example of pushing the “assets” off on the community without resources.  Exactly what Congressman Barney Frank is fighting today when he demands money to prevent foreclosures.

            The rest of the RTC “asset” disposition story in the main (and there are exceptions here) are tales of speculators buying whole blocks of houses as bottom fishers, putting on some paint, and selling them again.

            Remember the dates, please.  The RTC heyday was twenty years ago from 1989 to 1995 or so when most of the property was gone.  That is a long time to still see the evidence so starkly in American neighborhoods.

            It is hard to get enthusiastic about RTC-2.