White House and Treasury Department officials are reviewing a plan to protect fragile regional economies from the quick sale of billions of dollars of real estate repossessed from failed savings and loans.
The plan was developed by former Deputy Treasury Secretary R.T. McNamar, who presented it to Bush administration officials last week.According to an outline prepared by McNamar and obtained by The Associated Press, it would create state or local Real Estate Liquidation Trusts. The trusts would issue bonds, backed partly by the federal government and partly by state or local governments, and use the money to buy distressed S&Ls' real estate from the federal government.
The trusts would be independent of local government and would hire staff who would manage the properties with the goal of selling them at the highest price possible over 10 to 15 years. Trust managers' compensation would be based on long-term performance of the properties under their care.
White House and Treasury Department officials on Monday did not immediately return telephone calls seeking comment. McNamar, who started a merchant banking firm in Los Angeles after leaving the Reagan administration, said in a telephone conversation, "These are just some preliminary ideas we've been working on. They are very consistent with President Bush's program and may or may not be useful."
The McNamar proposal could be warmly received from members of Congress from energy-producing states such as Texas, where already-weak real estate markets could be driven into a tailspin by the quick sale of repossessed property.
Sen. Timothy Wirth, a Democrat from Colorado, where savings institutions and local economies have been hard hit by energy-price problems, said he had not reviewed the plan, but he said it could prove to be a worthwhile mechanism for holding real estate off distressed markets.
Other legislators, particularly in the House, may not welcome the McNamar proposal. Members of the House Banking Committee over the past year and a half have bitterly complained about the performance and quasi-private structure of the Federal Asset Disposition Association, an agency set up by S&L regulators to manage repossessed real estate and bad loans.
Critics say real estate disposal is best handled by a government agency less subject to industry influence and directly under the oversight of Congress. The McNamar outline would put the real estate outside the direct control of the federal government.