Soldiers of fortune.

• Author: Wilmsen, Steven
• Position: Resolution Trust's mismanagement

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The RTC's "Operation Western Storm," a mission to find 7 billion misplaced dollars, was a major victor--for slapstick

To find 800 accountants, the Task Force turned to temporary employment agencies, which produced, among others, a recent high school graduate with no accounting training and a college marketing graduate with little accounting knowledge who was put in charge of an entire field team.

Imagine you've been put in charge of the world's largest garage sale. You've been asked to collect all the merchandise, catalog it, and return the profits to your neighbors after it's over. When the sale starts you encounter a small problem: In your haste you lose $7 billion worth of furniture. Fearing retribution from your neighbors, who stand to lose a lot of money from your error, you hire someone to put things back in order. A fiasco reminiscent of the days of vaudeville ensues and in the end, no one is entirely sure what has to be recovered and what it will cost to get it back.

A suburban nightmare? Not quite. The nation's savings and loan bailout agency, the Resolution Trust Corporation (RTC), lived precisely this scenario, not with used furniture, but with your money. Entrusted to close ailing thrifts and sell their assets to help recover some of the $500 billion lost in the S&L debacle, RTC misplaced $7 billion in loans and other assets--funds that simply disappeared from its computer ledgers amid the chaos of its own burgeoning bureaucracy. Then, in a panicked effort to put its books back in order, it launched a massive campaign that, according to government investigators, was riddled with the same incompetence that led to the initial error.

The story of how the government lost and then found $7 billion is a glimpse inside one of the nation's largest bureaucracies, at the misplaced patriotism, political manipulation, and indecision that have crippled the agency since its formation. It is the story, really, of two giant blunders that began at RTC's birth in 1989.

The first blunder, known as "Operation Clean Sweep," was conceived by three newly appointed RTC executives in a Washington, D.C. conference room in October 1989. Ink on the savings and loan bailout bill that created the agency was barely dry, and RTC was in its infancy with only a handful of bureaucrats in its employ, no offices outside Washington, and only a vague idea of the immense job before it.

The three executives--Lamar Kelly, David Cooke, and Bill Roelle--were career bureaucrats. They had been appointed to help build RTC from scratch. They envisioned Clean Sweep as a symbol of RTC's entry into the world, a debut mission to display all the get-the-job-done, battle-trumpeting bravado the name implied, according to officials who followed Clean Sweep's conception. In one mighty pass, the operation would steamroll the nation, closing or taking control of 189 dead and dying thrifts across the land.

Clean Sweep's planners apparently never considered more modest plans to close a few thrifts at a time, which would have allowed the agency to learn from its mistakes on a small scale before making irreparably large ones. They also apparently didn't realize that RTC had few if any trained staff to do the job or that its computer system was grossly inadequate, patched together from decade-old hand-me-downs from three other government agencies.

What seemed foremost in their minds was the impression their work would make. With an operation as grand as Clean Sweep, who in Congress, or among the public for that matter, could doubt RTC's commitment to the task at hand? Of course, they had good reason to consider public opinion. Americans had watched in horror as the government bungled, played down, waffled, and hushed up different aspects of the savings and loan crisis.

But the bureaucrats catered to public opinion at the expense of the bailour's realities, say some officials in RTC's ranks. "These guys loved the whole military thing," said one official charged with carrying out Clean Sweep. "They liked to pretend we were the army. They talked in terms of missions and code names and deploying troops. They were really caught up in that aspect of it, but I really don't think they understood the magnitude of what we were getting into."

Collateral damage

In January 1990, RTC opened regional ofrices in Atlanta, Dallas, Denver, and Kansas City. It recruited hundreds of workers from its predecessor agencies, the Federal Deposit Insurance Corporation, the Federal Asset Disposition Association, and the Federal Home Loan banks. They were immediately ordered into the field to execute Operation Clean Sweep. "I was just handed a note and told to show up at such and such institution at such and such a time on such and such day," said one of those recruits. "That was all. No explanation, no instructions. Just be there."

The recruits were gathered at each of the 189...