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of Irving picked up 12 thrifts with rural deposits of $363 million. In the RTC deals, big banks were the big winners. Of the $2.1 billion in rural deposits distributed by the RTC, 74 percent were transferred to commercial banks. More than half of every rural dollar went to large institutions banks or thrifts with assets of more than $1 billion. Few of the operators had ever operated in the rural counties where they acquired branches. In three-fourths of the counties affected by RTC sales, rural deposits were transferred into institutions with no local track record. Despite their lack of local experience, the big banks got a good deal. In addition to expanding their rural franchises, they bought rural deposits from the RTC at bargain-basement prices. In 14 Southern states, buyers paid approximately 1.6 cents for every dollar of deposits they obtained. GOLD BULLION The numbers make clear that government deals helped transform the financial landscape of the rural South, fueling the trend toward fmancial consolidation. Between 1986 and 1990, the number of local S&Ls operating in rural counties declined from 107 to 63, while the number of commercial bank branches increased from 1,594 too1,645. As a result, large financial institutions significantly increased their share of rural deposits. In 1986, the largest banks and S&Ls held 15 percent of all rural deposits. Five years later, such institutions held 25 percent of all local money. In fact, rural deposits in large institutions have soared by 96 percent since 1986, compared to an increase of only 19 percent for rural deposits overall. The RTC insists that the consolidation of money in big banks and thrifts won’t affect depositors and borrowers in small towns and rural communities. “What’s the alternative?” says RTC spokesman Mark Burmeke. “If we can’t find a buyer, the institutions would just be closed down. How would rural communities benefit under that scenario?” But the numbers indicate that the trend toward bigger banks could make it harder for rural Southerners to borrow money for homes, farms and businesses. According to the Southern Finance Project study, the bankers who acquired rural thrifts tend to be less interested in home lending than their predecessors were. The eight institutions that acquired nearly all of the rural Texas deposits in 1988, for example, devoted between 4 percent and 20 percent of their total assets to home lending in 1990. The statewide average for Texas thrifts that year was 44 percent. The result: Local borrowers are finding it harder to get a loan. Many rural officials report that the new owners of their local S&Ls don’t seem interested in lending to local homebuyers. To make matters worse, local banks in rural counties where thrifts were sold or closed have not stepped up their home lending to make up for the loss of the failed S&Ls. Between 1988 and 1991, home loans by local banks declined or remained stagnant in eight of the 12 Southern counties that lost a local tIvift including Karnes and Shelby counties in Texas. The reluctance of local banks to increase their home lending suggests that residents in rural counties where the RTC sold or closed local S&Ls can expect to have a tough time getting credit. How tough? According to one county official in Texas, who asked not to be identified, “You have to have gold bullion as collateral to get a home loan from the new S&L owners here.” A TAXING PROBLEM Having a hard time getting a loan for a home or business may not be the only way rural residents are hurt by the collapse of the savings and loan industry. Rural officials and real estate agents also say the RTC is selling off the assets of failed thrifts at such rock-bottom prices that the deals may depress real estate prices and reduce property taxes that pay for essential local services. San Saba County Judge Harlen Barker said the RTC sold the office building of the failed Heart of Texas S&L which cost $1.7 million to build for $330,000. The lost money, he said, could have been used to help pay the cost of bailing out the bankrupt thrift. Instead, he said, “Guess who picks up the tab?” Such examples are not isolated incidents, if the RTC’s own real estate inventory is any indication. The average list price for rural residential properties in the inventory for July 1990 was $40,748. Fourteen months later, the average price had plunged to $25,817. Some of the decline may have been caused by the sale of high-priced property, which would lower the average price of remaining properties on the inventory. But figures show the inventory is growing faster than the RTC can sell the properties; in September 1991, 41 percent of all RTCowned real estate was located in Texas, and the agency recently loosened its pricing guidelines suggesting that the RTC has lowered prices on a significant portion of its rural inventory. Many rural officials and residents also said the RTC and its contractors are not marketing rural properties aggressively. A major problem, they say, is that the agency contracts with outof-town real estate agents and asset managers to dispose of properties. According to some who have dealt with the RTC, agency contractors have little incentive to sell the properties in their charge. “Once the properties are gone, they can’t pull down any more fees,” said an Arkansas man who spent nine months negotiating with the RTC over a modest, agency-owned home in Independence County. Barker recalled trying to obtain information from the RTC about a former county-run hospital on its inventory. The county wanted to buy the building and turn it into a rural health center. “I called them up about it and they said, `What hospital?'” Barker said. “I really believe that if we called them up and said we found a million dollars that belonged to them, they couldn’t tell me where to send it or what to do with it.” Indeed, the RTC has a poor record of keeping track of the properties it owns. The U.S. General Accounting Office has repeatedly ripped the agency for its shoddy recordkeeping. The first two editions of the RTC inventory, for example, listed more incorrect counties for Texas properties than correct ones. Rather than fixing the problem in subsequent editions, the RTC simply stopped listing the counties altogether. Similarly, the inventory omits or incorrectly reports vital information about property condition and appraigal value. When researchers with the Southern Finance Prdject examined the inventory, they noticed the address “475 Seagate Drive” listed for hundreds of properties in dozens of cities. It turned out the “address” is also a brand name for a common type of computer hard drive. MORTGAGING THE FUTURE Some local officials report that residents in their counties had purchased properties at RTC auctions but could not obtain deeds and titles from the agency proving ownership. Ramage Appliance and Furniture Co. of Mitchell County, Texas, bought an RTC property in December 1991 and moved in just before Christmas only to receive an RTC eviction notice in early January because the agency had mixed up its records. County officials in Texas seem especially concerned that underpriced and unsold property will diminish county tax collections. In rural Texas counties, a 10 percent decline in real estate values means a 10 percent drop in local school budgets Mitchell County Judge Ray Mayo said the RTC inventory has contributed to the decline in local property values. Houses formerly appraised at $100,000 are now selling for $20,000 or $30,000, he reported, and tax appraisals have gone down to the purchase price. According to Mayo, 20 to 30 houses in the Mitchell County seat of Colorado City, a town of 5,000, have been devalued in this fashion. In some cases, the RTC itself appears to have directly contributed to a drop in rural taxes. In some places, RTC officials claimed an exemption from local taxation. In Pecos County, the RTC paid its local property taxes late then refused to pay the full amount of late penalties and interest due. According to many community leaders and activists, economic recovery in rural areas depends upon local control of lending. “If your hometown bank or S&L is bought by a big bank like NCNB, you’ve got to go to Dallas to get a loan,” Hightower said. “The folks in Dallas have to ask the folks at corporate headquarters in Charlotte [North Carolina]. And the folks in Charlotte aren’t very warm to the business possibilities in Liberty or New Deal or Idalou.” The answer, says Hightower and others, lies in stopping giveaways to big banks and creating financial alternatives that put money in local hands. “We need to decentralize banking and create a layer of community-based banks that support local needs,” Hightower said. “Federal policy should protect such community banks not mortgage our economic future to big banks.” 12 AUGUST 7, 1992 .V.;viocotlwoumAronitr..1 ,