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The government’s deregulation of the Savings & Loan industry drove tremendous market liquidity and growth in the real estate industry throughout the eighties.  Financial institutions that previously were the source of home mortgages became the source of debt and capital for increasingly speculative development projects and investments.  During the same decade, the investment firm, Drexel Burnham Lambert (“DBL”), created high-yield bonds (aka “junk bonds,”) as debt source to fund both higher risk real estate transactions and corporate growth. 

This market liquidity resulted in an economic boom-time throughout the 1980’s.  In 1989, however, alarmed by these financing practices, Congress re-regulated the S&L industry through the Financial Institutions Reform Recovery and Enforcement Act (“FIRREA”) and established the Resolution Trust Corporation (“RTC”) as the workout mechanism.  Concurrently, government regulators dismantled the DBL firm.   

The collapse of these two sources of high liquidity caused a severe recession during the early nineties.  The mark-to-market policies under FIRREA resulted in the RTC take-over of nearly 450 financial institutions holding nearly $400 Billion in assets.  The RTC flooded the market with properties when it commenced liquidation of these holdings.  The value of both real estate and high-yield bonds collapsed, imperiling many other financial institutions, including Raleigh’s capital partner, ELIC, which was placed into conservatorship by the Insurance Commissioner for the State of California on April 11, 1991.  With the failure of its capital partner, the collapse of both debt and capital availability from all financial sources and the freefall in real estate values, all during a severe recession, Raleigh’s very existence came under threat. 

Raleigh faced challenges on many fronts and none of the success of the 35 previous years of operations prepared the company and its executives for this decade.  Nonetheless, the company team buckled down and worked countless hours to successfully navigate the company through these perilous times.

As part of the “old guard,” Raleigh’s extensive real estate partnerships with Executive Life were closely scrutinized by the California Receivership Court overseeing the liquidation of ELIC.  Despite claimed challenges to its conduct by the California Insurance Commissioner, Raleigh and its executives were found by the court to have conducted themselves with the highest levels of integrity and professionalism.  Sufficiently so that Raleigh was able to play a key role in the disposition of multiple assets and was well compensated for its efforts.

Concurrently with managing the impact of the collapse of its financial partner, the team at Raleigh had to take aggressive steps to stabilize the company’s finances.