The FDIC is designed to be independent. Its money comes from
premiums and earnings of the two insurance funds, not from
Congressional appropriations. Its board of directors has full
authority to run the agency.
The board obeys the law, not political masters. The FDIC has a
preemptive role. It regulates banks and savings and loans with the
aim of avoiding insurance claims by depositors.
When an institution becomes unsound, the FDIC can either shore it up
with loans or take it over. If it does the latter, it can run it and
then sell it as a going concern, or close it, pay off the depositors
and try to collect the loans. At times, the FDIC ends up owning
collateral and trying to sell it.
Another outcome of the scandal was the Resolution Trust Corporation
(RTC). Many savings and loans were treated as "special risk" and
placed under the jurisdiction of the RTC until August 1992. The RTC
operated and sold these institutions - or paid off the depositors
and closed them. A new government corporation (Resolution Fund
Corporation, RefCorp) issued federally guaranteed bailout bonds
whose proceeds were used to finance the RTC until 1996.
The Office of Thrift Supervision (OTS) was also established in 1989
to replace the dismantled Federal Home Loan Board (FHLB) in
supervising savings and loans.
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