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Reviewing and Revising Contracting Procedures

Another provision in the RTC Completion Act requires a review of our contracting policies and procedures with a particular eye to their effect on minority contractors. All solicitations for new contracts and renewals of existing contracts undergo, on a continual basis, an extensive review to identify any inadvertent exclusionary language. The RTC will also review existing lists of eligible contractors (for Basic Ordering Agreements and Task Order Agreements) to ensure maximum participation by MWOBs. For each solicitation, lists are reviewed to include MWOB contractors, and MWP staff input is solicited. More explicit direction will be forthcoming in

the CPPM revision.

Contracting Sanctions

The RTC will provide sanctions for violations of MWOB subcontracting and joint venture requirements, underscoring the importance of this policy. These sanctions will also be incorporated in the new Interim Final Rule on the RTC's Minority and Women Outreach and Contracting Programs. These sanctions may entail contract suspension, exclusion or even

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termination and will apply to MWOBS and MWOLFs as well. When these sanctions are formally approved, they will be incorporated into new contracting documents.

Minority Acquisition of Institutions

Now, let me move on to resolutions. Minority preferences are not new to the RTC. The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) provided for an absolute bidding preference in the acquisition of minority institutions by like-minority bidders. To facilitate these transactions, the RTC developed a program of interim capital assistance. Under this program, the RTC lends the acquirer up to two-thirds of required capital.

Since inception, 29 minority institutions have failed. Of these 29 thrifts:

12 were acquired by like-minority bidders. All of the 12 were offered interim capital assistance, and six accepted such assistance totaling $7.4 million;

9 were acquired by majority bidders;

5 were paid out for lack of acquirer interest; and

3 have not yet been resolved.

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RTCRRIA provided additional assistance to minority bidders. In cases where no acceptable bids are received as part of the normal bidding process, RTCRRIA requires that majority branches and institutions are to be offered to minority acquirers with the option of interim capital assistance and performing loans and assets. In addition, facilities located in predominantly minority neighborhoods that are owned by the failed institution may be leased on a rent-free basis by the minority acquirer for a five-year period with a purchase option available at that time. The rent-free assistance option is the only assistance provision available to non-minority women acquirers.

Under these provisions, one whole majority institution and three branches of another majority institution have been acquired by one minority acquirer. A total of $109 million of assets was sold to the acquirer and rent-free assistance was provided on one branch. One other whole majority institution acquisition by a minority acquirer is in process. In this pending transaction, RTC is making available interim capital assistance and $80 million in earning assets to the minority acquirer.

In addition to those minority resolutions that have occurred with assistance, the RTC has sold

three whole institutions and seven branches of another institution, with deposits of about $600

million, to minority acquirers through the normal bidding process.

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The RTC Completion Act further enhanced the opportunities the RTC can provide to minority acquirers of failed thrift institutions. The RTC Completion Act requires that, in considering offers to acquire any institution or branch located in a predominantly minority neighborhood (PMN), the RTC shall give preference to an offer of a minority bidder over any other offer that results in the same cost to the RTC.

We have been working diligently on the definitions and procedures that will be utilized in implementing this provision of the RTC Completion Act. Throughout this effort, we have been mindful of the two basic requirements imposed on RTC by this provision: (1) minority acquirers must be given a meaningful preference for institutions or branches in PMNs; and (2) this preference must be consistent with the objective of resolving the institutions at the least cost to the American taxpayer.

On February 24, 1994, the RTC published in the Federal Register an interim rule that defines the term "predominantly minority neighborhood" as any postal zip code area in which 50 percent or more of the residents are minorities, unless the RTC has determined that other reasonably reliable and readily accessible data indicate more accurate neighborhood boundaries. The rule, which provides for a 30-day period for public comment, became effective on an interim basis upon publication (Exhibit 3).

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On February 28, 1994, we issued a directive that implements the minority acquisition provisions of the RTC Completion Act (Exhibit 4). In general, the directive defines an institution in a PMN as:.

Mr. Chairman, we believe that this definition of an institution in a PMN is consistent with the intent of Congress that real opportunities be created for minority acquirers of failed thrifts. As shown in Exhibit 5, based solely on zip code areas, ten of RTC's current conservatorships meet this definition. Collectively the ten institutions have 122 offices and hold $3.5 billion in deposits. In addition, there are another 35 offices of 11 other institutions with over $900 million in deposits that are located in PMNs (Exhibit 6). All told, about $4.3 billion in deposits or roughly one-quarter of the deposits held by the RTC's current conservatorships will come under the minority preference provisions.

The directive spells out bidding procedures for institutions or branches in PMNs. Generally, in bidding for institutions or branches in a PMN, if a minority bidder bids within 10 percent of the high bid (which has been made by a majority bidder), both the high majority bidder and the high minority bidder shall have an opportunity to submit one more best and final bid. This is