Moreover, the authors contended, by taking ownership of mortgage securities at the heart of the credit crisis, the agency would gain the flexibility to work with financially stressed homeowners to avert foreclosures.
Experts caution, however, that the great differences between the S&L crisis and today's financial meltdown make it far from certain whether a single government agency along the lines of the Resolution Trust Corp. can succeed.
Congress created the Resolution Trust Corp. in 1989 to take over $125 billion in assets owned by 296 failed savings and loan associations. Over the next six years it added $394 billion in assets belonging to an additional 747 insolvent thrifts. The RTC's main job was to sell those assets, mostly real estate, at the best price it could get.
In the end, the S&L cleanup cost American taxpayers an estimated $124 billion. The RTC ceased operation in 1996. Despite the price tag of the thrift bailout, many believe the RTC successfully averted even worse consequences and higher costs.
By contrast with the S&L crisis, a large portion of the distressed assets involved in the current Wall Street meltdown is held by investment banks, hedge funds and other institutions that operate outside federal regulation.
"The S&Ls were regulated institutions and were taken over by the government," said Stuart Greenbaum, a business professor at Washington University in St. Louis. "We don't have that now."
Today's troubled securities are much more complex than the S&L assets, with valuations that may not yet have reached bedrock.
"They're very hard to account for and their value is still a moving target," said Michael Greenberger, a law professor at the University of Maryland and a former official at the Commodity Futures Trading Commission. "Creating a bureaucracy that takes paper that has no value and tries to sell it is just going to look like more smoke and mirrors."
Because the assets are not already in government hands, as was the case with the RTC's portfolio, the new agency would have to acquire them from their troubled owners, presumably at a discount price. This would probably force the sellers to record the sale as a loss -- exactly the outcome that many banks and investment houses have tried to avoid. Any overvaluation by the government buyer would mean a potential loss for taxpayers, which would be politically explosive.
