(FORTUNE Magazine) – AFTER THE ELECTION, Congress will finally have to face something it has been avoiding for more than six months: appropriating the funds to continue cleaning up the savings and loan industry. That effort has been stalled since April because the House of Representatives has refused to vote more money for the Resolution Trust Corp., the agency charged with mopping up failed thrifts. According to the Treasury Department, each day of delay adds some $6 million to the final cost of the cleanup, which means that congressional inaction has cost taxpayers nearly $1 billion so far. The irony is that the RTC, after a stumbling start in 1989, is doing good work, creatively shucking properties, loans, and securities to recover the money lost when the S&Ls welched on depositors. It can continue selling off its bloated inventory through 1996, but next September it passes the job of covering the losses of thrifts that go under to an industry-sponsored insurance fund called the SAIF (Savings Association Insurance Fund). The SAIF is also effectively broke and ill equipped to finish the job. Unless these agencies get the money they need, a climate of crisis could overtake the S&L industry again. It's not hard to see why politicians run from the S&L mess: It's enragingly expensive and poorly understood by their constituents. The government pledged $60 billion to shore up the old savings and loan insurance fund, FSLIC, back in 1988. Since then, the Resolution Trust, which took over from FSLIC, has spent $84 billion more. Now RTC chief Albert V. Casey wants another $43 billion from Congress, promising that this is his last request. But no one has bothered to explain to the voters where all this money is going and why they should support the process. The public perception is that the S&Ls are another bailout a la Chrysler, where government gets involved in propping up a failing private business and rescuing fat-cat executives. But the truth is that this so-called bailout is nothing more than making good on the government's promise of deposit insurance. The fat cats already had their free ride in the Eighties, when lax regulatory oversight allowed them to fritter away depositors' money. Now the government has to cover those deposits, most of which are fairly modest -- the average being $9,000. Here's how the cleanup has been working: The Office of Thrift Supervision, which regulates the S&Ls, takes over failing institutions and then hands them to the RTC to sell or liquidate. These sorry thrifts usually have a negative net worth, meaning the value of their assets (loans, securities, real estate, and so forth) falls short of their liabilities (chiefly customer deposits). To dispose of a thrift, the RTC has to make up that difference. Since the agency's pockets are empty, it has to hang on to and manage the money losers sent from the Office of Thrift Supervision. They now number 70 and counting. For example, an institution like HomeFed of San Diego, taken over last summer, stays open for business, bleeding some $200 million every quarter. Meanwhile, the RTC continues to hawk S&L assets. That sell-off -- think of it as the biggest fire sale in history -- is proceeding in an improved, even commendable, fashion. Albert Casey's crew has revved up the pace of disposals and invented new ways to market their less-than-sterling merchandise. Says David M. Bick, president of Manhattan Capital Partners, a real estate merchant bank: ''They've been much maligned, and I was one of the maligners. But I've watched the RTC go from being ineffective to highly effective.'' PLENTY OF problems remain. The agency can be slow to respond to offers and to close deals, partly because only a few people are authorized to approve major transactions. Potential customers still have a tough time getting accurate information about RTC offerings. Terry Struthers, who runs DataSource, a nationwide real estate information service in Boulder, Colorado, says that RTC data is typically only 50% accurate. More worrisome from the taxpayer's standpoint: The RTC lets out thousands of government contracts, and this year property managers, auctioneers, and accountants will bill it for $2.5 billion. But the agency is a slack overseer, and according to the General Accounting Office does little to make sure it is getting what it pays for. The GAO also faults the RTC for halfhearted pursuit of S&L criminals. But at the same time, the agency has sold $296 billion of the $415 billion in assets that have come under its control; it has recovered, on average, 94% of the book value of those assets, or $277 billion. The recovery rate will dive toward 40% now that the agency has mostly delinquent loans, undeveloped land, and other hard-to-sell goods left to peddle. Even so, says Martin W. Taplin, a real estate investor in Miami who has been a losing bidder on several RTC offerings: ''They're moving the stuff at prices the taxpayers ought to be happy with. They're getting top dollar under the circumstances.'' The agency has shifted its marketing strategy to play to its strength: the sheer volume of merchandise it has for sale. It has deemphasized the retail approach of flogging assets piece by piece in favor of auctions, securitizations, and bulk sales to unload hundreds of millions of dollars of assets in a single deal. In August, for example, it sold 47 shopping centers to GE Capital, the finance subsidiary of General Electric, for $71 million. On September 9, more than $500 million of nonperforming loans were auctioned to 170 bidders. Right now the RTC's friendly neighborhood sales reps are marketing a half-billion-dollar portfolio of real estate and real estate loans from Great American Savings, a huge California thrift that failed last year. The shift to megadeals has come in for criticism. Real estate brokers complain that individual properties are being yanked into bulk sales or auctions even though a higher offer than they ultimately fetch as part of a package may be on the table. ''That happens routinely,'' says Charles N. McKinney, head of asset services for Grubb & Ellis, a real estate broker. Thomas P. Horton, the RTC's vice president for field operations, responds: ''Often the buyers don't have financing lined up. If they have a real deal, we give them time.'' Casey adds that the return is higher on portfolio deals once you take into account their lower overall cost and the greater speed at which assets go off the books. Bulk sales can also help move less appealing merchandise by pooling it with more fetching wares. Says Gary R. Horning, a principal with Richland Interests in Houston, which is bidding for the Great American package: ''It's true that some of these assets will sell at a discount just because they're in a pool. But some won't be sold for ten years unless they're pooled.''

Sweeping assets off the books -- fast! -- is Casey's goal. An empty office building can easily cost the RTC 20% of its book value annually for maintenance, taxes, and insurance without providing any income in return. Upkeep on the agency's largest piece of real estate, the 23,250-acre Banning- Lewis ranch outside Colorado Springs, Colorado, has already run the government $1 million since regulators inherited the property in 1989. ''It's just too expensive to carry this stuff,'' says Casey. ''We've got to get it off our books.'' But selling real estate today can result in embarrassing discounts. GE Capital bought those 47 shopping centers for less than their construction cost. The asking price for the Banning-Lewis ranch has been cut in half over the past year to $24 million, 10% of the land's book value. Most experts agree with the Casey approach. Edward J. Kane, a finance professor at Boston College, has argued from the beginning that the RTC should not be in the business of buffing up dingy real estate, hoping for the market to turn around. ''It's important to move these assets into the private sector,'' Kane says. ''The properties need a firm entrepreneurial hand to maximize their long-term value.'' In fact, Bert Ely, a banking consultant in Alexandria, Virginia, believes that a turnaround in the real estate market depends on a quick inventory clearance by the RTC. He says, ''Prices stay depressed as long as you have that overhang.'' The high-volume approach is also helping get rid of commercial and residential mortgages, which are roughly half the RTC's remaining assets. Since June 1991 the agency has sold nearly $30 billion of securities backed by pools of these mortgages. Kenneth Bacon, the former Morgan Stanley investment banker who heads up the RTC's securitization program, says proudly: ''Every month we come to market with $1.5 billion to $2.5 billion in new issues. And we're the gang that supposedly couldn't shoot straight.'' Known on Wall Street as Ritzy Maes, these pass-throughs have been absorbed into the more than $1 trillion dollar mortgage-backed securities market with little impact on prices. The RTC has been among the first to sell securities backed by commercial loans, and in the process found a new group of buyers -- institutions. They < wouldn't normally want mortgages on office buildings today, but they are willing to buy RTC securities backed partly by them. So are foreign investors, who typically lap up as much as a third of the offerings. Michael Jungman, vice president for Capital Markets at the RTC, maintains that, in general, securitization results in prices 9% higher than could be realized selling the underlying loans. SECURITIZATION is appropriate for performing mortgages, where the borrower is paying down the loan as scheduled. But the RTC has also created a competitive market for the 30% of its loans not being paid back. Since March 1991 it has held 30 bulk sales of these bummers. The biggest buyers: Wall Street firms like Bear Stearns and Kidder Peabody, which team up with asset managers to foreclose on a property or wring more money from the borrower. Says Martin Taplin, the Miami real estate investor: ''It used to be that institutions wouldn't even look at troubled real estate. But they're all fighting at the trough to buy this stuff.'' At the September 9 auction, the RTC pocketed a respectable 60 cents on the dollar for its $500 million worth of deadbeat loans. Taking a tip from Wall Street, the agency has decided to set up some partnerships of its own later this year. It plans to create two funds, one for raw land and the other to hold bad real estate loans, and keep an equity stake in each. Partners will also be investors and will market the funds and manage the assets. Says Ken Bacon: ''People have been buying our stuff and making money on it, and that's fine. But we thought we should retain an interest in the asset so that if it gets fixed up or worked out, we can get some of the upside.'' What's ahead for the cleanup? More institutions need to be shut down. Timothy Ryan, director of the Office of Thrift Supervision, reckons that 31 S& Ls are now candidates for government takeover in the next two years, and another 50 are on the edge. The Congressional Budget Office expects several hundred thrift failures through 1995. But the Savings Association Insurance Fund currently has less than $200 million in its kitty in preparation for taking over the cleanup next September. Norman M. Jones, head of the SAIF's Advisory Committee, estimates that the fund will require a $32 billion contribution from taxpayers over the next eight years. But now that the money must actually be appropriated, the usual political paralysis has set in. The Bush Administration didn't include a / contribution to the fund in its fiscal 1993 budget. According to Assistant Treasury Secretary Mary C. Sophos, the Administration considers it ''more prudent'' to wait until fiscal 1994 to see ''whether taxpayer funds will actually be needed.'' The stage, then, is set for yet another dismal cycle of political inaction, mounting losses, and, ultimately, higher tax bills. Even if Congress finally gives the RTC the money it has asked for, one more costly chapter in this saga is waiting to be written next September when the SAIF rattles its tin cup. Don't put your wallet away.

CHART: NOT AVAILABLE CREDIT: FORTUNE CHART/SOURCE: RESOLUTION TRUST CORP. CAPTION: WHAT'S LEFT IN THE RTC'S INVENTORY