Liquidation

By the early 1990s the Resolution Trust Corporation (RTC) and the FDIC were the country's largest owners of residential properties, commercial properties, raw land, and loans backed by residential and commercial real estate, and it was all for sale. The prices at which the two agencies sold these assets had a dramatic effect on real estate values, businesses, and local economies across the country.

Once closed, the FDIC assumed responsibility for everything owned by insolvent banks. The RTC did the same for insolvent savings-and-loans (S&Ls). Simply put, the FDIC and the RTC were to pay back the money that was owed by these failed institutions, and collect the money that was owed to them.

Money would have to be paid out first. Insured depositors at failed banks expected their reimbursement right away. Paying insured depositors quickly requires a lot of cash. Throughout its existence, the RTC had a more difficult time raising money than the FDIC did. The banking industry paid deposit insurance premiums to the FDIC's bank insurance fund, providing the FDIC with a relatively stable source of funds. When the FDIC needed more money, it simply raised deposit insurance premiums. The banking industry did not like it, but the process was sufficiently manageable that adequate funding generally was available to the FDIC. The RTC was dependent on Congress for funding, which greatly complicated the RTC's task.

Much of the money used to reimburse insured depositors would be paid back. That's where the sales process for the real estate and real estate–backed loans that the FDIC and the RTC owned comes into the picture. How quickly and at what prices these loans and properties could be sold would impact not only the two agencies' cash needs but also their ultimate costs and, in the RTC's case, the ultimate cost to taxpayers.

There were two schools of thought on how the RTC and the FDIC should proceed. One was to sell assets as quickly as possible. While this approach would depress real estate values, it would eventually allow markets to recover. In other words, take your medicine and get it over with. The other approach called for the agencies to proceed in a more measured way, selling assets more gradually and thus mitigating the risk of a large drop in prices that could undermine the economy. Proponents recognized that it would prolong the pain, but also believed it would limit the overall damage.

The FDIC and the RTC needed to navigate through those issues, while at the same time learning how to market and sell assets. The RTC was a new organization with no sales experience. The FDIC had existed since 1933, but its expertise was in supervising banks, not selling them.

When the FDIC closed an insolvent bank and sold it to a healthy bank, it would traditionally only sell the failed bank's good assets to the buyer. The prevailing view was that it would be a mistake to put bad assets back into the banking system. These assets were left behind for the FDIC, which would either manage them or sell them to other buyers from outside of the banking system. The FDIC usually managed the assets, collecting loan payments until they were either paid off or determined to be worthless. That slow, deliberate process was acceptable if there were only a few failed banks to deal with. It wouldn't work with hundreds of failed banks.

When Bill Seidman arrived at the FDIC, he saw that the amount of money available in the FDIC's deposit insurance fund was dwindling fast, as cash was being replaced with illiquid failed-bank assets. He believed that if we kept managing assets in such a slow manner, we not only would run out of cash, but it would take us about 300 years to clean up the problems in the industry.

Late in the 1980s, the FDIC began experimenting with a variety of new methods to sell insolvent banks and their assets. While we traditionally sold off the assets of insolvent banks in piecemeal fashion, we began to sell the entire failed bank to the highest bidder. The FDIC would simply write a check to the healthy bank that asked for the least amount of money in order to take over the failed bank's deposit accounts and virtually all of its assets, good and bad. Buyers were allowed to return certain bad assets that they didn't want within 90 days.

These whole-bank transactions preserved a lot of cash since failed-bank assets were quickly sold back into the private sector, but they were very expensive. Buyers were taking on all of the risk if the economy continued to deteriorate and drive down the value of these assets. To protect themselves from those risks, buyers reduced the amount they were willing to pay, adding to the FDIC's overall cost. We eventually modified our sales processes, but assets were moving out the door at a much faster rate, preserving some badly needed liquidity.

In the early 1990s, the RTC was faced with even more pressing issues. Its to-do list included the closure of 262 insolvent S&Ls. Each had insured depositors to reimburse, assets to sell, and lawsuits to manage. These S&Ls were still operating, but they were in conservatorship, which meant they were under government control. While waiting for Congress to approve the funding that was needed to shut them down, their value had continued to decline, and the expected bill to taxpayers had expanded.

Once Congress provided the initial funding for the RTC, an entirely new organization had to be created virtually overnight. Seven hundred employees, mostly from the FDIC's Division of Liquidation, were transferred to the new agency. The FDIC's Knoxville Liquidation Office became part of the RTC. Employees who had built a career at the FDIC woke up to find out that they now worked for a different agency. It was unnerving.

In my new job as deputy to the chairman, I served as support for Bill Seidman. Since he was running both the FDIC and the RTC, I was getting a crash course in how to create a new government agency and then navigate a range of day-to-day issues, including congressional relations, media relations, and internal operations.

We were running at full speed, yet we seemed to be falling behind. Each day brought countless new problems. Advanced planning was difficult in the crush of day-to-day business. The crises of the day were all consuming and there was no let-up in sight.

I brought Seidman lists of issues that needed his immediate attention. He wanted to know the pros and cons of various alternatives, what the staff recommendations were, and why. Then he would make a decision. I didn't waste his time with idle conversation. Anyone who thought they could linger in his office with small talk was simply walked out the door and politely thanked for stopping by.

The RTC needed many more people than what the FDIC could provide. These additional employees had to be hired under government procedures, leading Seidman to remark that if Hannibal had a government personnel office, he never would have been able to cross the Alps.

There was a need for accelerated hiring, but it was important that the S&L cleanup effort not create new scandals along the way. A lot of money was changing hands, and we needed to ensure that our efforts did not create new opportunities for fraud and abuse and further waste taxpayer money. While speed was paramount, so, too, were background checks and proper controls over the hiring process.

Proper controls were needed for hiring contractors as well. By law, the RTC had to rely extensively on the private sector to get its work done. That meant the agency would need a lot of contractors. While most companies were more than willing to play by the rules, there were some that looked for any inside track they could find. I received calls from people who claimed to be good personal friends of Bill Seidman's, as though this would magically open some doors for them. If I mentioned their names to Bill, he would just smile and say if they were good personal friends of his, they wouldn't be calling me. The contracting process, like the internal hiring process, remained competitive.

The RTC needed a robust governance structure. But the political process had resulted in a compromise that no one liked. There were two boards of directors, one for policy and one for operations. For policy, Secretary of the Treasury Nicholas Brady chaired the five-member Oversight Board that also included Federal Reserve Chairman Alan Greenspan, Housing and Urban Development Secretary Jack Kemp, and two private-sector representatives. Seidman chaired the five-member FDIC board of directors that was responsible for operations. Drawing a clear line between the two sets of responsibilities presented enormous challenges, which created a constant source of friction between the two groups and a lack of clear accountability.

The RTC needed information systems to track the hundreds of thousands of assets it was responsible for managing and selling. The FDIC's systems were woefully inadequate for the scale of what was needed, so the RTC had to build its own systems. Even more troubling was the reckless record keeping at the insolvent S&Ls. Lacking reliable information about the assets at insolvent S&Ls continually haunted the RTC as it tried to keep track of what it owned and what it was selling.

Despite the diverging views on the appropriate speed at which the RTC should sell assets, the initial criticism directed at the agency was that it needed to move faster. There was little sympathy for the RTC as it worked through a litany of challenges, including hiring employees, building appropriate internal controls, developing policies and procedures, and verifying the records of failed institutions.

In the interest of showing some progress, Seidman announced “Operation Clean Sweep” in March 1990. This initiative called for 141 S&Ls in conservatorship to be sold or liquidated by the end of June. J. Paul Ramey was in charge of handling the closings for S&Ls that were equal to or less than $100 million in size. Every Friday afternoon that an S&L was shut down and sold, he would blast a large air horn that he kept in his downtown Washington, D.C., office, so that everyone in the building would know that the RTC was one step closer to meeting its goal.

Sherwin Koopmans was in charge of the closings for S&Ls that were over $100 million in size. When asked why his group didn't announce its closings in the same manner, he just smiled and replied, “We don't toot our own horns.”

The RTC not only met the Operation Clean Sweep goal of closing 141 S&L's but exceeded it, resolving 155 institutions, with assets totaling more than $44 billion.

But the progress in closing insolvent S&Ls and transferring their insured deposits to healthy banks or S&Ls was not matched on another important front: selling the loans, properties, and other assets owned by these insolvent S&Ls.

One of the RTC's key early decisions was to use a competitive bidding process for all of the various sales processes. There would be no negotiated deals with individual buyers, despite buyer interest in having such opportunities. Open competition was the best way to protect the RTC and taxpayers.

Even so, once the asset sales process was under way, winning bidders were paying low prices for large packages of assets. Some of the early buyers realized huge returns on their investments, which generated further criticism of the RTC. One journalist wrote, “The Resolution Trust Corporation—the government's misnamed S&L caretaker that is neither producing resolution nor inspiring trust—is engaged in a massive giveaway that may make the Teapot Dome look like a demitasse cup.”

Those early deals attracted many more prospective buyers, who saw an attractive investment opportunity. As a result, the RTC kept receiving more competitive bids. Taxpayers benefited from the growing demand, which substantially eroded the buyers' profit margin over time.

The RTC refined its sales practices and learned from its mistakes. In the summer of 1990, the agency sold a multibillion-dollar package of relatively high-quality residential mortgage loans for prices ranging from 93 to 99 percent of the amount owed on those loans. The buyer subsequently corrected some of the documentation problems and other issues associated with these loans, enabling them to be resold as conforming rather than nonconforming loans. The RTC realized that if it corrected such problems itself, it could increase the prices it received either by selling mortgage loans in packages or by using pools of loans as backing for the issuance of mortgage-backed securities.

By mid-1991, the RTC had developed its own securitization program, which helped generate higher returns from its mortgage loans and at an accelerated pace. And while residential mortgage-backed securities were already fairly common in the marketplace, the RTC was the first organization to create securities that were backed by commercial real estate mortgages on any scale. Ultimately, the RTC issued about $40 billion worth of mortgage-backed securities.

The RTC entered into equity partnerships with the private investor groups, selling large packages of assets to the private sector to manage while retaining an ownership position. This arrangement allowed the RTC to share in the upside as market prices gradually recovered. When the pressure grew on the RTC to make some assets available to smaller investor groups, a Small Investor Program was developed. The staff initially resisted this program since it involved a lot more work to sell assets in smaller packages. But the program helped build greater support for the RTC overall as more and more investors were able to participate in the RTC's programs.

There was a lot of pressure on the RTC to sell assets faster, and equal pressure to sell assets slower. Seidman remarked that if the noise from each direction was about equal, then we were probably doing a good job. But by late 1990, the RTC's strategy had moved decidedly toward selling assets quicker.

The RTC transformed itself into an effective marketing and sales organization. Poor-quality assets were rechristened as “opportunity assets,” but it was difficult to see the opportunity in some of these assets, which included a buffalo sperm bank, a Nevada bordello, and a windmill farm.

The FDIC also found itself with unconventional assets, including 12 percent ownership of the Dallas Cowboys during the 1988 and 1989 seasons. Unfortunately, these were two of the worst seasons the team ever had, leading Seidman to joke that the Cowboys were one of the FDIC's nonperforming assets. The FDIC sold its shares in early 1990, just before the Cowboys won three of the next four Super Bowls.

The FDIC and the RTC had established sales or liquidation offices throughout the country by the early 1990s. The FDIC employed more than 15,000 people (nearly four times larger than a decade earlier), and the RTC employed 8,000. Despite their size, these internal staffs paled in comparison to the number of external resources the two agencies hired to help with their clean-up efforts.

In 1990, Seidman decided to reward everyone at both agencies for their hard work with an extra 10 percent pay increase. The FDIC and RTC employees were pleased to have their hard work acknowledged this way. The Federal Reserve, by contrast, had just finished explaining to its employees why they would not be getting a raise.

Seidman's pay increase was the impetus for a new interagency compensation committee among the four bank regulatory agencies. For the first time, we began to share some pay- and benefit-related information on a more formal basis. It was the Federal Reserve's way of ensuring that the FDIC didn't surprise them again. Congress later changed the law to mandate overall pay comparability among all of the financial regulatory agencies, other than the Federal Reserve (contributing to its “Evil Empire” reputation).

The once-quiet FDIC was now a center of attention in U.S. financial markets. There was a constant parade of visitors in to see Seidman. Jack Kent Cooke, the owner of the Washington Redskins, came by to discuss the possibility of purchasing some assets. While walking down the sixth floor hall from the elevator toward Bill's office, Cooke remarked that there was a lot of wasted space. Seidman told him that he should put his name in to run the FDIC so he could fix the problem. After exchanging other verbal jousts, it wasn't clear who was the more ornery of the two. Cooke finally changed tactics and invited Seidman to a Redskins game. Due to ethics rules, Bill couldn't accept the offer. But to get in the last shot, he told Cooke he wouldn't go because he hated the Redskins.

Not all of the money collected by the FDIC and the RTC came from asset sales. Some came from lawsuits initiated against the directors, officers, and accountants determined to be responsible for the failure of these banks and S&Ls. Ernst & Young paid $400 million to settle claims related to their audits of failed banks and S&Ls. Michael Milken and Drexel Burnham paid $1 billion to settle claims that they used a number of S&Ls as dumping grounds for their junk bonds. Despite those large numbers, the overall amount collected from such lawsuits was relatively small. Nevertheless, these lawsuits played an important role in trying to ensure that those who had contributed to the financial crisis either through fraud or negligence would be held responsible for their actions.

By the early 1990s, the FDIC and the RTC had more lawsuits to manage than any organizations in the world. They also had the largest legal departments to be found anywhere in the world, employing over 1,000 lawyers and additional support staff.

Most of the litigation that needed to be managed was inherited from the failed banks and S&Ls. But the agencies also needed to determine who the FDIC and the RTC should sue, and then manage those lawsuits. After each closing, there was an investigation to determine if there was a basis for criminal or civil charges against the banks' officers, directors, accountants, or lawyers. Such lawsuits were often two or three years in the making, as a careful analysis was needed for each potential case. Some cases were clear-cut, such as an obvious fraud. But not every bank or S&L failure warranted a lawsuit. Even with the best intentions, some situations can get out of hand and drag the directors and officers down. One of the greatest challenges for the staff of the FDIC and the RTC was distinguishing between malfeasance and mismanagement.

The highest profile and most notorious S&L fraud case involved the late Charles Keating and Lincoln Savings & Loan. Keating had purchased Lincoln in 1984. He used it to invest in high-risk real estate development projects and to purchase high-yielding, and high-risk, junk bonds. The bank's regulator, the Federal Home Loan Bank of San Francisco, began paying closer attention to Keating's activities in 1987, as Lincoln's investments started to go sour. Keating turned to five U.S. Senators, Alan Cranston (D-CA), Dennis DeConcini (D-AZ), John McCain (R-AZ), Don Riegle (D-MI), and John Glenn (D-OH) for help. Keating contributed a total of $1.3 million to the reelection campaigns of these senators. When asked if his political support would encourage them to take up his cause, he answered, “I want to say in the most forceful way I can: I certainly hope so.”

The senators met with the Federal Home Loan Bank of San Francisco's supervisory staff. Despite feeling pressured to back off, the staff recommended that Lincoln be shut down. However, the only action taken at the Federal Home Loan Bank's headquarters was to transfer supervisory authority over Lincoln from San Francisco to Washington, D.C.

As a result, Lincoln stayed in business two more years, during which time it continued to grow and continued to incur greater losses. When Lincoln was finally closed, the cost to the government was almost $3 billion. Had regulatory action been taken earlier, the losses would have been much less. Keating also had defrauded thousands of elderly citizens by convincing them to transfer their federally insured retirement savings into uninsured bonds, without telling them that their money would no longer be insured. These customers, who had tried to conservatively manage their savings accounts, lost over $250 million. Keating was later charged with fraud, racketeering, and conspiracy, and sentenced to 12½ years in prison. He was released after 4½ years, when his conviction was overturned on a technicality.

The Senate Ethics Committee determined that Cranston, DeConcini, and Riegle had improperly interfered with the FHLBB's investigation of Lincoln S&L. The “Keating Five” became a symbol of what can go wrong when political pressure is placed on an independent bank regulatory agency.

While members of Congress became much more reluctant to weigh in on how individual institutions ought to be treated by the bank regulatory agencies, the RTC and FDIC continued to receive extensive scrutiny from Congress. The House of Representatives set up a subcommittee to focus exclusively on the RTC's activities, and Dave Cooke, the RTC's CEO, was often summoned to Capitol Hill for testimony. Cooke routinely heard the criticisms that RTC was moving too fast or too slow, wasting money, and generally acting in an incompetent manner.

Sometimes the congressional oversight was overwrought. When the FDIC completed construction of a new office building in Virginia, which was projected to save the agency a substantial sum of money, Representative Frank Annunzio (D-IL) wanted to be sure there wasn't any fancy artwork or other wasteful expenditures in the new building. He had each office searched, and his arrogant staff issued a report on their findings, despite having found nothing more than breast pumps in the nurse's office.

The RTC also was extensively criticized by the private sector. Some argued against using “career bureaucrats” in the cleanup process. One group took out a full-page ad in the Wall Street Journal calling for the resignation of Bill Roelle and Lamar Kelly, two senior RTC officials. According to one member of an RTC Regional Advisory Committee, the RTC's operations were “illegal, immoral, wasteful, and downright stupid.”

The media played its part, trying to make up for lost time. Having missed the developing financial crisis during the 1980s, reporters now looked for stories wherever they could find them, including in the RTC's basement parking garage. Sam Donaldson of ABC News once hid in the garage, popping up between cars so he could surprise RTC officials and pepper them with questions.

The criticism seemed relentless and ever present. Peter Knight, the Director of the RTC's Office of Congressional Relations, once told his taxi driver to take him to the building at 801 17th Street. The driver asked if that was the RTC building. When Peter confirmed that it was, the driver heatedly criticized the RTC, saying he wanted to buy some assets from the agency, but whenever he called no one would answer the phone.

Later, on a skiing vacation in Colorado, Knight found himself stuck 200 feet above ground on a ski lift that had been stopped in midair due to a problem on the ground below. Having nowhere to go, he initiated a conversation with the person next to him. Once this perfect stranger found out that Peter worked for the RTC, he announced that he was a realtor and launched into an angry tirade about how the RTC was ruining real estate markets across the country.

Dave Cooke made preemptive attempts to defuse critical audiences, telling them, “I know most of you think the RTC screws up 95 percent of the time. I like to think that we only screw up about 92 percent of the time.”

The only person who escaped much of the criticism was Bill Seidman, who evolved into something of a media star. Bill would hold quarterly press conferences in the FDIC's boardroom to discuss the latest banking industry performance results. Despite the somewhat dry subject matter, these became big events, and reporters would ask Bill for his views on any and all subjects. Seidman was direct, insightful, and highly quotable, so much so that we nicknamed him “Mr. Natural” after the 1960s' comic book character known for his straight talk and cosmic insight. His invitations to reporters to visit his Nantucket home for drinks, dinner, and inside stories no doubt helped his cause.

In spite of the criticism, the RTC was getting results. By year-end 1991, the RTC had taken over 675 institutions and resolved 584 of them.

Nevertheless, in late 1991, Congress reorganized the RTC's management structure, creating a new Thrift Oversight Board to replace the previous two boards of directors and calling for the president to appoint a new chief executive officer. That meant the FDIC's board of directors would not have any role to play in the management of the RTC, which for me meant that I would no longer have any direct involvement in RTC-related activities. Given my senior role at the FDIC, I was perfectly content to be relieved of my RTC responsibilities. Amid the operational challenges facing the FDIC, there was the ongoing issue of bank failures. In January 1991, one of the country's larger banking organizations, the Bank of New England, which had substantial operations in Massachusetts, Connecticut, and Rhode Island, was closed.

The bank's failure created some concern about the safety of bank deposits in New England, and many people didn't understand the deposit insurance coverage rules very well. I agreed to participate in radio call-in shows in each of these three states, to reassure callers that they did not need to worry about the safety of their deposits, which were backed by the FDIC. That message came through clearly and appeared to reassure listeners in Massachusetts and Connecticut. However, Rhode Island was a different story.

Rhode Island had a problem that I couldn't address; a state deposit insurance fund for credit union deposits had collapsed that same month. Rhode Island's credit union deposit insurance fund was broke. The governor closed all of the institutions that had deposits insured by that fund in the same month. Customers at these credit unions couldn't access their money. They wanted me to tell them what the federal government was going to do to help them. Eventually, the state came up with the money to protect their deposits, but on that particular day there were some angry and less than reassured callers from Rhode Island.

By the early 1990s, the FDIC was looking to find new and better methods for selling failed banks. Given the collapse of commercial real estate markets, many potential acquirers of failed-bank assets were reluctant to take on the risk of buying an entire portfolio from the FDIC without a substantial amount of downside protection. The FDIC did not want to pay enormous risk premiums for an outright sale of those assets, particularly at what was likely to be fire-sale prices. This meant that the whole-bank transactions of the late 1980s were no longer a viable resolution mechanism.

A new Division of Resolutions was created within the FDIC to manage the sales process for failed banks. Harrison Young was hired to run the division. He gathered a talented staff and came up with a new transaction structure called “Loss Sharing,” which helped the FDIC reduce its failure-resolution costs while still moving assets quickly back into the private sector.

While the FDIC was picking up its pace in selling assets, the RTC was moving at an even faster pace. Al Casey, a former head of American Airlines and postmaster general, had been appointed as the RTC's chief executive officer. A seasoned executive, Casey told his staff that he expected to make only a few decisions a year and that one of them was for the RTC to sell assets as quickly as possible. His goal for the agency was to put itself out of business early.

Within a few years, the U.S. economy improved dramatically, which benefited the financial condition of the remaining banks and S&Ls and lowered their failure rate substantially. By 1995, the RTC had completed the vast majority of its work and was merged into the FDIC, a year ahead of its original schedule.

During its brief existence between 1989 and 1995, the RTC handled 747 S&L closings and managed and sold $450 billion in total assets. The final cost, mostly borne by taxpayers, was just under $83 billion, a much lower figure than the $155 billion the Congressional Budget Office had originally projected. From 1980 through 1994, the FDIC handled the closing of over 1,600 failed banks and managed and sold $300 billion in total assets, at a final cost of about $34 billion to the bank insurance fund.

The Federal Home Loan Bank Board and the ill-fated Federal Savings and Loan Insurance Corporation closed an additional 550 S&Ls in the 1980s prior to the creation of the RTC. These S&Ls, in many cases the worst of the worst, had a little over $200 billion in total assets and cost taxpayers about $75 billion.

In the end, the RTC's strategy of quickly selling assets was vindicated. There was a great deal of short-term pain, but once real estate markets hit bottom and the overhang of government-owned assets was gone, those markets quickly recovered. The experience was a striking contrast to what unfolded in Japan, which had a similar set of problems. Assets from insolvent financial institutions were held for long periods of time in the hope that economic conditions would improve, but the Japanese economy didn't recover. Instead, it suffered through two “lost decades.”

“The RTC experience represents a record of huge accomplishment . . . . We soon forgot how bad the real estate and financial asset crisis was in 1989. Our short memory may be the result of how smoothly and smartly the RTC conducted its business.”

“The RTC produced one miracle after another during its seven years at work. Given full authority to act, an absolute sunset, and ample freedom to hire, pay and fire at will, the RTC dumped almost $400 billion in troubled assets and closed or reorganized almost 750 thrifts.”

Today, the RTC is viewed as a great success story. For the staff that was treated like “The Gang That Couldn't Shoot Straight,” it was a remarkable turn of events. The RTC was a government agency that had a short-term job to do, did it effectively, and then put itself out of business. The staff remained focused on its long-term objectives despite all of the short-term pressures. While it was an experience none probably wanted to ever have to relive, each person involved would probably say that there was great satisfaction in having been a part of something so important and successful.

The quotes on this page are from 2011 and represent how many view the RTC today. What a difference time and a little bit of perspective can make.

The work at the RTC and the FDIC during this period was on a scale unlike anything that had ever come before. There was no playbook to follow. The appropriate internal controls and sales processes had to be created for the first time.

Having Bill Seidman as the chairman during the financial crisis of the late 1980s and the early 1990s was enormously important. In addition to his deep knowledge and insight, Bill had rare judgment. He was able to detach himself from ideological views, pull back, and see the whole picture. While he understood the political process and could use it to his advantage, Seidman did not let political considerations drive his actions. He had the much-needed ability to separate noise from substance, and he was willing to take a great deal of personal criticism in order to make the right long-term decisions.

The employees of the FDIC and the RTC gained tremendous experience that would prove to be invaluable during the 2008 financial crisis. Many of these individuals either remained at the FDIC or returned to help at the outset of that crisis. By then, the FDIC staff was able to take the best practices from both agencies' experiences and apply them to the situation at hand.

Loss-sharing transactions were conducted for most bank failures, which returned assets to the private sector quickly and effectively and lowered the FDIC's costs. Equity partnerships were used for certain assets that benefited from a more specialized management expertise that could be found outside of the banking system. The FDIC's handling of its responsibilities during the 2008 financial crisis benefited from this prior crisis experience.