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Mr. RYAN. That is correct. And we have included a list of those institutions that we have identified as being located in a predominantly minority neighborhood.

We will entertain suggestions if someone wants to make a case that a different additional institutions or branches ought to be included. We will entertain their arguments and listen to their points of view and make a decision as to whether those branches ought to be included.

Chairman FLAKE. Correct. But we will not separate off the minority institutions just because the buyer is minority?

Mr. RYAN. Not necessarily but we will offer the branches separately, too, as well. The minority branches will be bid

Chairman FLAKE. You can either get them separately or you can buy the whole bank?

Mr. RYAN. That is correct.
Chairman FLAKE. If you have the resources to do so.
Mr. RYAN. That is correct.

Chairman FLAKE. And the RTC will not make an arbitrary decision, then, that they must be separated if that person makes the offer for the whole package?

Mr. RYAN. That is correct.
Chairman FLAKE. Ms. Velazquez.

Ms. VELAZQUEZ. Thank you, Mr. Chairman. I just would like to ask Mr. Ryan if you can tell us why Mr. Altman wasn't able to make it today.

Mr. RYAN. My understanding is that he has another commitment that he has to be present for. And was unable to attend.

Ms. VELAZQUEZ. So that other commitment was more important than being here today.

Mr. RYAN. I assume so.

Ms. VELAZQUEZ. Mr. Ryan, based on the RTC's definition of-did you hear that? -predominantly minority neighborhood, how many of the 63 remaining institutions or branches will qualify?

Mr. Ryan. We will have 10 institutions that will meet the institutional definition with 122 offices. They hold $3.5 billion in deposits. In addition, there are 35 branches of 11 other institutions that hold $900 million. All told, it is $4.3 billion in deposits, or about 25 percent of the deposits held by our current conservatorships.

Ms. VELAZQUEZ. We have received several reports from minority contractors and potential acquirers that would indicate at least some inconsistency in terms of field implementation of MWOB Program requirements and outreach. How do you propose to remedy this lack of coordination in the last 22 months?

Mr. RYAN. If you could provide me with some specific examples of the kinds of problems that you are referring to, we would be happy to address them and provide you answers for the record.

Ms. VELAZQUEZ. I will so make those in writing and I expect a response.

Mr. RYAN. Sure.
Ms. VELAZQUEZ. Thank you, Mr. Chairman.
Chairman FLAKE. Thank you very much.
Mr. Wynn.
Mr. WYNN. Thank you, Mr. Chairman.
Good morning, Mr. Ryan.


Mr. RYAN. Good morning. Mr. WYNN. Mr. Ryan, on page 13 of your testimony, you talk about the minority preference and what you seem to indicate is that if a minority bidder is within 10 percent of the high bid by a majority bidder, that both the minority bidder and the high bidder would then be offered the option to rebid.

Mr. RYAN. That is correct.

Mr. WYNN. It would seem to me that a true preference would say that if the minority bidder were within 10 percent of the high bid, that he—if he could match the high bid that he would be given the preference, a more direct route. Because what you have set up, a scheme in which the minority bidder who is already above the high bidder is placed at a significant disadvantage with the rebid process. I don't believe that is a true preference.

Mr. RYAN. If the minority bidder wins, they win.

Mr. WYNN. I understand if they win, they win. But the issue, as stated in your testimony, if the minority bidder is within 10 percent of the bid

Mr. RYAN. If he is under 10 percent.

Mr. WYNN. Under 10 percent, excuse me. He then goes into a second round, so to speak, of competition.

Mr. RYAN. That is correct.
Mr. WYNN. With the majority bidder.

Mr. RYAN. Let me say that this has been one of the most difficult aspects of this policy to deal with given the legislation that we were operating under. I mean, the legislation said we were to give a preference. But the legislation also said we had to get the least cost solution for the taxpayers. A very difficult line to walk.

We considered the match bidding, that we would hold a bid, pick the winner and then show the bid to the minority, the closest minority, and let them match it.

The problem we have with that is we don't think we could certify that we necessarily got the least cost solution if we did that, because we believe that if we use serious bidders as, in effect, stalking horses, that they would not want to incur the expense of doing the due diligence, the expense of preparing a bid, if they knew that there was, in effect, a right of first refusal waiting out there behind them.

So we selected this process because there is some precedent in other laws that have such a scheme of rebidding and to my knowledge, there has not been a serious chilling effect on the bidding process as a result of this kind of an approach where we do believe there would be if a matched bid approach were used.

Mr. WYNN. OK, Mr. Ryan, who made that decision?

Mr. RYAN. I suppose I did. With the input from the executive committee. And the other senior officers that were present providing input.

Mr. WYNN. Are you willing to revisit that decision?

Mr. RYAN. I always would be willing to consider any new facts, new circumstances, new

Mr. WYNN. I guess my concern is I am not sure you had any evidence of a chilling effect when you made a decision to rule out a match process.

Mr. RYAN. I think it is intuitive.

Mr. WYNN. It could be equally intuitive that a match process would encourage bidders to come in even lower or higher, encourage people to come in higher with the realization that they were competing in a preference context, in the context of a preference.

They are actually bidding on a property, institution, excuse me, in a minority community. They understand that. If they say, well, we want nonetheless to acquire this, then they should come in higher. I think this decision ought to be revisited because I think this is really a very, very serious flaw in terms of trying to accomplish the objectives we have described, and I would like to engage in further discussion with you.

The second question I have is if you have two bids and, let's say, they are in fact comparable but one is straight cash and the minority bidder offers a bid that includes financing, how do you treat that? Do you still award the minority preference?

Mr. RYAN. Yes.
Mr. WYNN. So there is no-

Mr. RYAN. There is no discounting of the bid because of the financing

Mr. WYNN. OK. All right. That is certainly helpful. The other question is all of the subjective elements in analyzing a bid. How do we address the concern that we in the minority community have that these subjective elements can lead to the downgrading or discounting of a bid or rather the downgrading of a bid based on subjective elements, the management experience, these types of

Mr. RYAN. Let me ask Mr. Ramey who has gone through this process to respond.

Mr. RAMEY. First of all, I am not clear on what you mean by subjective elements, because our analysis is based strictly upon cost. It is strictly upon an evaluation of assets of the institution, what it would cost to pay the institution off, and then we strictly evaluate bids on a cost analysis. It is dollar for dollar.

We also do not discount the interim capital assistance. That is considered a no cost part of the transaction. The sale of loans at market value is not.

Mr. WYNN. So you do not make considerations for management experience and those kinds of things?

Mr. RAMEY. Management experience and the business plan and so forth are addressed by the regulators. We must defer to them on that, the chartering.

Mr. WYNN. So they could make the decision. So even if the bids from a purely numerical stance were comparable, that for other subjective reasons they would reject a bid by a minority bidder.

Mr. RAMEY. The regulators do not have an ability to reject a bid. We do not even discuss the amounts of the bids with the regulators. From their standpoint, their analysis is based upon the management of the institution, their financial capacity, their business plan, and so forth in awarding both a charter and FDIC insurance. All we request of the bidder is to have them obtain a charter and FDIC insurance. We think we have come a long way with the interim capital assistance and also financing part of the premium.

Mr. WYNN. How does that work, by the way, the interim capital assistance?

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Mr. RAMEY. I will just use an example. Let's assume, and I won't speak for the regulators, let's assume we have a $100 million institution and the regulators require 6 percent capital. So the acquirer, any acquirer would have to put $6 million of their own financing or money into that institution. We are willing to finance up to twothirds of that. In other words

Mr. WYNN. To refinance?

Mr. RAMEY. We would put up $4 million of that for no less than 2 years and we will entertain now, which is another revision, up to 5 years.

Additionally, if there is a premium bid, which there should be, we will now finance up to two-thirds of that premium but in no case, as Mr. Ryan said, to go over the total capitalization of the institution.

Mr. WYNN. Mr. Chairman, if I could have one more question?
Chairman FLAKE. Yes.

Mr. WYNN. Mr. Ryan, you talked earlier about the mandatory subcontracting requirements for professional services. Exactly how many, how many contracts have you awarded to minorities? Compared with prior to the new legislation.

Mr. RYAN. Johnnie has the number of the

Ms. BOOKER. From 1989 to 1993, we have awarded—you mean only to ethnic minorities during that period, we awarded 10.1. That is cumulative. For the last

Mr. WYNN. 10.1.
Ms. BOOKER. Percent.
Mr. RYAN. You want the actual numbers?
Mr. WYNN. The actual amount.

Ms. BOOKER. The actual $384 million estimated fees, I am sorry, $387 million. In estimated fees, $387 million.

Mr. RYAN. That was from 1989 to 1993.
Ms. BOOKER. That was from 1989 to 1993. That is the total.

Now, if you look at last year, just last year, with ethnic minorities, all minorities received $101.3 million, which totaled 20.2 percent. That was for 1993.

Mr. WYNN. Does this also include white females?
Ms. BOOKER. No, that is ethnic minorities.

Mr. WYNN. Mr. Chairman, I would like to ask unanimous consent to submit additional questions in writing.

Chairman FLAKE. Without objection.
Thank you very much.
Mr. WYNN. Thank you.

Chairman FLAKE. I want to recognize Mr. Watt from North Carolina.

Mr. WATT. Thank you, Mr. Chairman. I am an interloper here and if, since Mr. Roth is a member of the subcommittee, I would not be offended, even though you were deferring to a Republican here, as long as he doesn't ask about Whitewater today and get us all caught up in that.

Chairman FLAKE. I won't do that today. And I have been at a prayer meeting and we know what the rules are and the guidelines.

Mr. Watt. I would be happy to defer to the subcommittee member, if that is his preference and yours.

Chairman FLAKE. All right. Thank you very much.
Mr. Roth.

Mr. ROTH. Well, Mr. Watt, you are most gracious and I wasn't going to ask a thing about Whitewater this morning.

Mr. WATT. Good.

Mr. ROTH. But, Mr. Chairman and members, I want to say that I wish I could have been here from the very beginning, but our national commander of the DAV is from my district, Mr. Chairman, and members, of Green Bay, Wisconsin. I had to introduce him and it was a great honor for me to do and he brought those veterans.

Chairman FLAKE. Not long enough sometimes.

Mr. Roth. So I am somewhat late here. But, Mr. Chairman, I know you to be a fair man. Chairman FLAKE. Thank you, sir.

. Mr. Roth. I happen to be the only member of the opposite party here, and I am not here as a partisan, but I must say that I am most disappointed that Mr. Altman is not here this morning. I mean, when I read in the newspapers about the briefing he gave at the White House, this is most inappropriate when you have it attended by Mr. Nussbaum

Chairman FLAKE. Was that briefing on minority and womenowned businesses?

Mr. ROTH. Hillary Rodham's Deputy Chief of Staff, Margaret Williams, to go to the White House and give them a heads-up briefing on this, Mr. Chairman, is totally out of bounds.

Chairman FLAKE. And you know, we are going to have a hearing on that. I think it is the 24th.

Mr. Roth. When has this thing been set for

Chairman FLAKE. It is set for the 24th, and I think that is where we ought to codify all of the data and be prepared, because I think that is an opportunity, and I understand that the Republicans will be inviting their witnesses, and I think that is the appropriate place.

Mr. ROTH. But, Mr. Chairman, it is not a matter of party politics, it is a matter of the taxpayers of this country.

Chairman FLAKE. And some of those taxpayers are minority and women who have not been treated fairly, and I would rather not

Mr. ROTH. Mr. Chairman, if you will allow me just to
Chairman FLAKE. To deal with that

Mr. Roth. Mr. Chairman, if you will allow me just to make this statement. Chairman FLAKE. I will let


make a statement. Mr. Roth. It is imperative that this is said. This issue has been swept under the rug too long.

Chairman FLAKE. I am not trying to sweep it under the rug.
Mr. ROTH. This is a very serious situation.

Chairman FLAKE. Let me assure you that the issue of minority and women who have not had full participation rights in the economic development of this country and full participation is equally as important.

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