THERE is a new, potentially explosive dimension to America's
Experts are beginning to conclude that a large but undetermined
number of properties seized from the failed thrifts may carry
serious environmental liabilities.
The taxpayers' soaring costs for cleaning up the S&L mess may
escalate further, despite the government's attempts to recoup some
of its losses.
The Resolution Trust Corporation (RTC), a government agency set
up to dispose of failed thrifts, plans to auction off in the fall
some of its $200 billion portfolio - holdings seized from insolvent
savings and loan associations - but only what it classifies as the
Among the properties that will probably not make it to the
auction block are those that are environmentally impaired.
Residential, commercial, and industrial properties can fall into
that category. Their necessary cleanup costs can very easily turn
assets into liabilities.
Estimates of problem assets run wild. Observers do agree most of
the troubles will involve RTC's commercial and industrial holdings,
which account for some 20 percent of the RTC's overall portfolio.
James O'Brien, a Chicago-based environmental attorney with
Chapman and Cutler, says his firm surveyed the portfolios of lenders
it represents and found that 70 percent of the transactions were
environmentally risky. The RTC took on the same kind of deals and
will probably determine 70 percent of its commercial holdings are
environmentally problematic as well, he says.
The remediation of just one site - where a manufacturing plant
has disposed of waste, underground storage tanks leak into the soil
and water supply, or a shopping center rests on leaching landfill -
can cost tens of millions of dollars to address, says Jerry
Harrison, president of Harrison-Kroll Environmental Services Inc.
O'Brien says the RTC's first step should be to match its
potentially troublesome holdings with the list of 30,000 sites for
which the United States government has received notice or
information of potential environmental problems. This index is
"Right now we're writing guidelines and setting policies
regarding the environmental issues affecting RTC's portfolio," says
James Davis, senior asset specialist in the RTC's asset disposition
office. He says RTC's concerns are two-pronged: properties that
impinge on conservation and wetland concerns and ones that are
Of the latter, Mr. Davis says, "You can't own 36,000 properties
and not find problems." He says the RTC is just in the earliest
stages of assessing the environmental risks. He and three co-workers
have not examined the government's list of 30,000 potentially
"Eighty percent of our holdings are residential single-family
homes," he says. …