ceived $54 million or 13 percent of all legal fees from the RTC, which represents a significant increase over the $38 million, or 10 percent paid in 1992.

Significant minority participation has also occurred in the RTC's asset disposition sales initiative over the past year. At the RTC's nonperforming loan auction in August of last year, 14 percent of the registered bidders identified their firms as either minority or women owned. In its judgments, delinquencies, and chargeoffs initiatives, about 80 percent of the bidders had minority or womenowned business equity or minority and women-owned business subcontracting participation.

In the Affordable Housing Disposition Program, approximately 40 percent of the buyers at recent sales events were minorities and 74 percent were first-time buyers.

Mr. Chairman, let me turn now to the newly enacted RTC Completion Act and its provisions to provide enhanced opportunities for minority and women-owned businesses and minority and womenowned law firms.

I want to be clear about the approach we are taking. We fully support the inclusion of minorities and women in all aspects of the RTC work, from contracting, to asset sales, to resolutions, to employment. Whenever possible, we have and will interpret minority preference provisions as expansively as possible within both the letter and spirit of the law while at the same time balancing the mandate to do our job at the least possible cost to the taxpayers. The RTC Completion Act requires the RTC to establish guidelines for achieving the goal of a reasonably even distribution of contracts awarded to the various subgroups of minority and womenowned businesses and minority and women-owned law firms that comprise 5 percent or more of all certified minority and womenowned businesses and minority and women-owned law firms. These subgroups include such minority groups as blacks, Hispanics, Asians, and nonminority women.

These guidelines will, of course, be applied prospectively. As the first step to developing such guidelines, the RTC is conducting an analysis comparing contracts and fees awarded to various minority and women-owned business subgroups in each RTC region and the Washington office so that underrepresented subgroups can be identified.

The RTC's interim final rule, Rule on Minority and Women Outreach and Contracting Programs was published in the Federal Register on August 10, 1992, and is currently in effect. To incorporate the RTC Completion Act requirements, the RTC is in the process of preparing a new interim final rule. The new interim final rule will incorporate parity guidelines for all future contracts, including legal contracting. These guidelines will also be reflected in an upcoming revision to the Contract Policy and Procedures Manual.

The RTC currently awards bonus points on both the technical portion and cost portion of contract evaluations to minority and women-owned businesses or firms with substantial minority and women-owned business participation. To augment this policy, the RTC Completion Act requires the RTC to establish a goal for mandatory minority and women-owned business subcontracting for all contracts equal to or greater than $500,000 with certain exceptions.

The new interim final rule on Minority and Women Outreach and Contracting Programs will provide the following:

First, 10 percent participation, subcontracting participation, for nonminority and women-owned business prime contractors and minority and women-owned business joint ventures with less than 50 percent prime contracting participation; 5 percent for minority and women-owned business firms or joint ventures with 50 percent or more of minority and women-owned prime contracting participation.

The RTC Completion Act also requires a review of our contracting policies and guidelines as regards their effect on minority contractors. All solicitations for new contracts and renewals of existing contracts undergo, on a continuing basis, an extensive review to identify any inadvertent exclusionary language. The RTC will also review existing lists of eligible contractors to ensure maximum participation by minority and women-owned businesses.

I turn now, Mr. Chairman, to the minority acquisition of financial institutions that you referred to in your opening remarks. FIRREA provided certain preferences to minority acquirers in the acquisition of failed minority institutions.

The Completion Act further enhanced the opportunities the RTC can provide to minority acquirers by requiring the RTC to give preference to an offer of a minority bidder over any other offer that results in the same cost to the RTC for any institution or branch located in a predominantly minority neighborhood.

We have been working diligently on definitions and procedures to be used to implement this provision while mindful of two basic requirements imposed on the RTC. One, that minority acquirers be given a meaningful preference, and, two, that the preference be consistent with the resolution of the institution at the least cost to the taxpayer.

On February 24, 1994, the RTC published in the Federal Register an interim rule that defined "predominantly minority neighborhood" as any postal Zip Code in which 50 percent or more of the residents are minorities unless other reliable data indicate otherwise.

On February 28, we issued a directive that defined a predominantly minority neighborhood institution as an institution whose home office is located in a predominantly minority neighborhood or that has 50 percent or more of its branches located in a predominantly minority neighborhood.

We believe this definition of an institution is consistent with the intent of Congress to create real opportunities for minority acquirers of failed institutions. Based solely on the Zip Code areas, 10 of RTC's current conservatorship institutions meet this definition. Collectively, those 10 institutions have 122 offices and hold $3.5 billion in total deposits. In addition, there are another 35 offices of 11 other institutions with over $900 million in deposits that are located in predominantly minority neighborhoods. All told, about $4.3 billion in deposits or roughly one-quarter of total deposits held by RTC conservatorships will come under the minority preference provisions.

The RTC directive also establishes bidding procedures for institutions or branches in predominantly minority neighborhoods, allow

ing a minority bidder as well as the high majority bidder to submit best and final bids in cases where the minority bid is within 10 percent of the high majority bid.

Mr. Chairman, we believe that this bidding procedure will give minority bidders a meaningful preference while still maximizing returns to the taxpayers.

RTC policy also provides that minority bidders for institutions or branches in predominantly minority neighborhoods are to be offered interim capital assistance for up to two-thirds of required regulatory capital.

This assistance may include up to two-thirds of any premium paid by the acquirer and, Mr. Chairman, that is new, that is a new policy on the part of the RTC, provided that the total amount of the interim capital assistance does not exceed the tangible equity of the institution.

It is important to note that this will increase the amount of the capital assistance that may be provided by the RTC by as much as 50 percent over what was provided before.

As in existing minority acquisition programs, we will continue to make earning assets available to minority acquirers of institutions and branches in predominantly minority neighborhoods in order to augment their operating income.

In order to provide additional flexibility in asset selections, minority acquirers will have an option to acquire assets at market value up to 100 percent of net deposits to be selected from a pool equal to 110 percent of net deposits.

All told, the RTC is holding approximately $3 billion in residential mortgages for possible transfer to minority acquirers.

Finally, both to aid minority acquirers and to promote banking services in predominantly minority neighborhoods, the RTC may offer minority acquirers rent-free occupancy of branch offices owned by the failed institutions located within a predominantly minority neighborhood for a period of up to 5 years.

In conclusion, the RTC stands committed to expanding opportunities for minorities and women, and to fully implementing all aspects of the RTC Completion Act.

I would like to make one observation, Mr. Chairman. As I said at the outset, I arrived here early January of this year. In preparing for this testimony and going over the numbers, I think it is clear to any observer that the commitment to the Minority and Women-owned Program has resulted in some good results, particularly over the last 2 years. I think in large part the credit for that goes to the lady on my left, Johnnie B. Booker, who has headed up that program and has-and is largely responsible for those results and it has not been an easy task and she deserves, I think, a lot of the credit for what we see here today. Thank you.

[The prepared statement of Mr. John Ryan can be found in the appendix.]

Chairman FLAKE. Thank you very much, Mr. Ryan.

And I certainly will join you in the excellent relationship that my staff has had with Ms. Booker and others in RTC. And overall I think that your staff will indicate that I was the first Congressman to come there, been there a few times so that I am not an adversary of the RTC. I am an adversary of practices that are not con

sistent and compatible to a level of full participation by all individuals who ought to have access and opportunities made available to them.

Let me just ask several questions.

Mr. Wynn, good morning. I am happy to see you.

Mr. WYNN. Mr. Chairman. Thank you.

Chairman FLAKE. Albert Wynn has joined us from Maryland representing the Prince Georges County area.

I look with interest at particularly your testimony from page 13 through page 15, and certainly it gives indication that on paper that there clearly is a movement in terms of trying to deal with predominantly minority neighborhoods, branches in those neighborhoods or banks in those neighborhoods, trying to address how we might be able to assure that those branches get into the hands of those individuals who have the capability and competency with the balancing of soundness and safety and costs and all of that.

The problem is that no matter what is written, you cannot write in attitudinal kind of questions and the issue becomes up and down the structure to guarantee that persons within RTC have a clear understanding beyond that which is written, that their attitudinal approaches, their sense of what they think is appropriate for a minority versus what in fact ought to be a determination based on the ability of the person to be able to manage the bank well, to get it back into the marketplace, to make it productive, and do all the things that any other business person would.

And I guess at the first offering of guidelines, obviously, our offices, most of the Black Caucus Members that I have spoken to, were just inundated with calls because there was not a problem of what is on paper. The problem seemed to have been either misinterpretation or some what I call "historical attitudes" that suggested a continuation of traditional old boy network kind of approaches which even raised the questions in some minds with persons knowing that an agency is going out of business in a year or so are they now preparing to pass along to individuals certain assets so that those persons will be empowered and to the point of their departure from RTC be able to become a part of those operations.

I realize that this, you know, is conjecture, but at the same time there is enough-I tend to think perhaps not anecdotal evidence nor data, but enough of a reaction to suggest that something is wrong beyond what is put on the paper in terms of people making other kinds of definitions.

So my concern, for instance, on page 13, if you will look, you have given a general directive of definitions of institutions and predominantly minority neighborhoods as, one, an institution whose home office is located in a PMN or an institution with 50 percent of its branches in PMNs.

Now, for one sitting and making an interpretation in terms of how you determine whether or not the person making that location for the branches based on home office location is inclusive of any branches outside of that particular address seems to be an area where there seems to be a lack of understanding on the part of some persons within the structure to the degree that, say, if I came in and I said, I want to buy in-I want to buy a branch whose ad

dress is in downtown Manhattan, and I find that predominantly minority neighborhood is defined as Harlem and Bed-Stuy and South Bronx and Queens, where I am, but there are also some branches that happen to be in Westchester County.

Now, would one interpret that I am only eligible because I am an African-American to purchase the branches that are a part of those defined communities within the scope of the city as PMNs or would I also be eligible to have included in the package those branches that are in Westchester County even though they are not predominately minority neighborhoods; they are part of a bank whose address is in a predominantly minority neighborhood? What interpretation can you give me on that?

Mr. RYAN. That was an important issue that we considered when we devised these implementing guidelines. There was a concern that from a viability perspective it made no sense to look at an institution solely as those institutions that were located in a predominantly minority neighborhood. In many cases, the investors couldn't get the financing to purchase those institutions that were so restricted, so we tried to be as inclusive as we could within the spirit of the law.

So what we have said, in effect, is if 50 percent or more of the branches of an institution are located in a predominantly minority neighborhood, the whole institution including the other banks in Westchester County or wherever are also included as part of the institution as a whole.

We have also said that for the purchases of the home office. The home office is located in a predominantly minority neighborhood if the operations of the bank are directed from that home office and if that home office does a banking business, then the whole institution, including the branches in the more affluent areas or a majority area are also included.

Chairman FLAKE. Whether they exceed 50 percent or not?
Mr. RYAN. Whether they exceed 50 percent or not.

Chairman FLAKE. So that if I had a branch in four boroughs in New York City, and I had the opportunity as a part of that bank to have another 12 banks that are in Westchester County which are not PMNs then I would not be precluded from purchasing the whole package?

Mr. RYAN. If the headquarters is in a predominately

Chairman FLAKE. It is in South Queens. If it is, I get South Bronx. I get Bed-Stuy and I get Harlem. That is 4 branches and I get the 12 branches in Westchester County even though they are in the predominately minority neighborhoods? Is that a correct interpretation?

Mr. RYAN. That is correct.

Chairman FLAKE. I—just to be clear.

Mr. RYAN. That is right.

Chairman FLAKE. And that is what you are giving as guidelines, as directives for all of the persons within the structure of RTC and their understanding of what their interpretation ought to be regardless of whether the person trying to buy the branch is AfricanAmerican, Hispanic, women, regardless what race that person happens to be?