Another look at the RTC.

In many respects, the sun is setting for the Resolution Trust Corp. (RTC). Its massive task has been to salvage the nation's ailing savings and loan industry, a task it expects to complete by 1996. But for African American-owned businesses, with the capability and desire to compete for the billions in contracting fees, the sun is rising.

Last March, offical clout to ensure that all segments of U.S. business participate in the largest disposition of property and other assets grew. (See "The World's Biggest Fire Sale," June 1991.) The push was given by an impatient Congress and by a new RTC president and CEO. How? The RTC consolidated and expanded its minority outreach program increased cost advantages for minority firms in the bidding process and promulgated new rules to substantially increase the share of minority-awarded business contracts in fields as diverse as accounting and law.

As of March the RTC had disposed of more than $234.1 billion in assets that belonged the 630 savings and loans. It spent $81.5 billion of the taxpayers' money in the process. This created a bonanza of $1.87 billion in fees awarded in 60,226 service contracts. Though the RTC's authority expires in 1996, between now and then, it is expected to authorize some $15 billion or so in contracting service fees.

These days, minority businesses are in the thick of the action. Nine black companies or joint-venture shares placed among the top 100 RTC contractors receiving fees in excess of $4 million. But minority firms' share of the total was still small as black-owned firms received only $80.2 million in fees of the $1.87 billion total. Black law firms earned only 1% of legal fees generated and Hispani-owned firms took in an even smaller $39.2 million in total fees. Other minority groups trailed further behind.

Why minorities have had a problem getting equal representation is embedded in RTC history. The RTC was created after the passage of the 1989 Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), which aimed to stabilize the struggling thrift industry. The RTC was charged with managing thew real estate and securities of insolvent thrifts. From the beginning, Congress felt that minority participation was important enough to write it into law. As passed, FIRREA required RTC to "prescribe regulations to establish and oversee a minority outreach program...to ensure inclusion, to the maximum extent possible, of minorities and women and entities owned by minorities and women." Yet minority firms were left at the starting gate.

During its first two years, with real estate in a tailspin, the main task of RTC official was getting contracts out before the assets they managed depreciated further. The key to private contracts' participation was RTC registry. Once registered, contractors could get "SOSs" or solicitations of services telling them which properties were up for RTC management, disposition or other services. In most instances large, white-owned firms got the largest contracts. Albert V. Casey, current RTC president and CEO says, "We had to get control of the situation. We thought it would be 50 savings and loans at first and that grew to more than 500. Originally we were just going willy-nilly out there, and there wasn't time and there weren't a lot of minorities registered."

That neglect is reflected in the numbers: In June 1990, there were only 500 registered minority- and women-owned firms. By January 1991, 4,320 minority-owned firms out of 40,577 firms were registered. That year, minority-owned companies were awarded only 7.5% of the contracts, worth $12.4 million. Firms owned by white men were awarded 80.2% of the contracts, followed by firms owned by white women, with 12.3%.

Last September, the General Accounting Office (GAO) completed an investigation clearly stating where responsibility lay: "The RTC got off to a slow start in implanting a minority- and women-owned business program for asset management contracting." The GAO found a persistent pattern of understaffing and underfunding of RTC minority efforts. One year ago, the RTC outreach office at its Washington headquarters consisted of a director and one secretary. The GAO also said minority programs at the RTC were "inconsistent."

Others said they were ignored. Minortiy-owned firms complained they were neither notified when contracts were to be let nor were they contracted by larger corporations that were supposed to be cuscontracting with them. Ralph C. Thomas III, the executive director of the National Association of Minority Contractors says this proves, "the old boy network is still alive."

But hat has begun to change. Under fire from Congress, civil rights groups and the Rainbow Coalition, the RTC has consolidated its various minority programs under one roof: the Minority and Women Outreach and Contracting Programs, headed by an African-American Johnnie B. Booker, who was a Housing and Urban Development deputy assistant secretary of Operations and Management for the office of Fair Housing and Equal Opportunity. Since joining the RTC last November, Booker's Staff has expanded from one professional to eight. And it wasn't long before she heard from her constituency. They told her one thing: "'Give us more contracts!' That was the song we heard," she says with a chuckle. "And we're planning to move very aggressively in that direction."

Last March, the RTC announced all of its offices will be expected to allocate a minimum of 30% of their contracts and fees to minority- and women-owned businesses and 20% of all new legal assignments. Additionally, all RTC major contractors with fees of $200,000 or more will be required to subcontract at least 25% of their work to minority- and women-owned businesses. Right now, such firms have gotten about 27% of all contracts, so the new policy means an 11% surge in business. Contractors will have six months to comply.

Booker says the subcontracting goals are important because the largest deals for asset disposition have already been done. "There probably won't be any more Onyx's," she said, referring to the Onyx Asset Management Joint Venture (see chart), a minority-controlled firm that was awarded a contract worth an estimated $7.8 million in fees to dispost of $560 million in Texas commercial property. However, the goals are simply that. They lack force of law. But Booker says RTC executives' success in meeting such goals is an integral part of their review process for promotions and raises.

Last November, Congress passed a new RTC funding bill that increased minority preferences in the bidding process. Minorities will get a 10% bonus on technical specifications and a 5% bonus of the total cost points achievable in the cost-rating system. And as per the 1991 RTC refinancing law, there is also a set-aside for market-rate financing for minority businesses that want to buy financial institutions or assets.

That possibility intrigues John L. Guess III, 47, chairman of Onyx Asset Management, the Texas joint venture that includes him partner Robert L. Watson Jr., and Oklahoma City-based Ram Management Associates. For Guess, working with the RTC has been a profitable experience once the bumps of dealing with a paper-intensive bureaucracy were taken care of. The joint venture was assisted by the fact that Texas real estate has recovered move quickly from the slump. Guess says the joint venture is smoothly disposing of its properties, which include shopping centers, office buildings and multi-family apartment buildings. "We're not going to see the RTC around much past 1996, but by us getting into the game we're looking at a good three-year run where we can continue to make some serious money," he says.

He says: "Certainly the exposure has helped us. My company, the Guess Group Inc., has gotten an opportunity that we wouldn't have had before with major companies. They know that we can handle larger portfolios and more sophisticated transactions." Guess said he was negotiating with a major investor on a commercial real estate deal that was a direct result of Onyx's work for the RTC. As a final comment, Guess says minority firms "should be looking at the buy side. Then it's not about working for the RTC; it's about buying assets and working for yourself."