Summary

In response to a congressional request, GAO assessed the Federal Savings and Loan Insurance Corporation's (FSLIC) continued need for the Federal Asset Disposition Association (FADA) to determine: (1) the legality of the Federal Home Loan Bank Board's (FHLBB) creation of FADA; and (2) whether FSLIC continued to need FADA.

GAO found that FHLBB improperly created FADA as a federal savings and loan association, since: (1) FADA did not perform as such; (2) FHLBB and FSLIC owned and controlled FADA; and (3) FHLBB created FADA to manage and dispose of FSLIC receivership assets in a cost-effective manner. GAO also found that: (1) FSLIC used corporate employees, receivership employees, and the private sector to help manage and dispose of assets before it created FADA, and continued to use them thereafter; (2) FSLIC assets as of July 1988 totalled about $167 million, mostly in real estate; and (3) in June 1988, nine FSLIC liquidating receiverships had contracts with six firms and managed $681.7 million in assets. GAO also found that: (1) FSLIC completed 12 FADA asset management contract performance evaluations as of June 1988, four with FSLIC liquidating receiverships and eight with firms; (2) FADA did not submit 13 of its 20 business plans within the required time period; (3) FADA and firms had similar asset management and disposition rates, their employees had similar qualifications; (4) an FSLIC study showed that the quality of firms' asset management was significantly higher, while FADA and receiverships' quality was about equal; and (5) there was no compelling evidence that FADA was essential to FSLIC, since a combination of firms, FSLIC employees, and receiverships could perform the required work.