Opportunity Costs Incurred by the Rtc in Cleaning Up S&L Insolvencies

This paper draws attention to an important but neglected component of the costs of the thrift cleanup as reported by the Resolution Trust Corporation (RTC). The RTC resolved 747 thrift institutions over the period 1989-1995 at an estimated cost of $90.1 billion. Since the RTC's loss exposure indirectly represented a taxpayer-funded equity position in troubled thrifts, the associated opportunity costs constitute significant costs that are in addition to the reported resolution costs. Recognition of this important category of costs raises the taxpayer burden from the official estimate of $90.1 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