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| Implicit Liquidity Premiums in the
Disposition of RTC Assets Author: Fred A. Forgey, Paul R. Goebel, and Ronald C. Rutherford Start Page: 347 Abstract: The Resolution Trust
Corporation (RTC) was created by congressional legislation passed in 1989, and was charged
with, among other things, the orderly disposition of other real estate owned (OREO)
property. Questions have been raised about how efficient and effective the RTC has been in
achieved its congressional mandate. One of the issues resulting from the efficiency
question involves the amount of discount the RTC realizes for a quick disposition of the
property. This study utilizes data provided by the RTC concerning its sales to analyze the
implicit liquidity premium resulting from disposing of OREO. The results of the study
indicate what variables contribute to liquidity premiums. This paper's importance relies
most heavily on the finding that realistic market adjustments in regulation, over time,
helped to achieve a higher degree of liquidity for RTC real estate property sales. The
findings of this paper confirm the legislative intent of FIRREA, which is to ensure that
real estate properties acquired by the government are disposed of at the highest dollar
value possible. |
