David Auchterlonie, chairman and chief executive officer of The Scotland Group, Inc., a turnaround management firm, has proposed restoring the former Resolution Trust Corporation to relieve small and mid-size businesses of oppressive bank debt without any cost to taxpayers.

Auchterlonie said the new RTC would enable banks to resume making loans to these businesses that can generate job growth and restore a healthy economy.

The RTC was created by Congress in the 1980s to resolve the savings and loan crisis and was credited with helping the economy recover after the staggering S&L losses. The corporation eventually either closed or sold more than 700 savings and loans, and went out of existence in 1995.

Auchterlonie said Congress should create a new version of the RTC that would end banks' practices of extending and amending business debt, which have led to permanent debt service payments on company books and negated potential investment in expansion and hiring in the workplace. He proposes funding the reconstituted RTC solely by proceeds from the sales or work-out of toxic notes provided by the banks.

"No tax dollars would be required," Auchterlonie said.

Under his plan, banks would take permanent and toxic business loans off their books and turn them over to the RTC at par value. The private sector would evaluate the value of the assets, which the RTC could sell individually or in pools. Auchterlonie notes that there is a market for these assets in the form of un-invested capital in private equity, insurance companies and hedge funds. Estimates of this so-called "dry powder" run as high as$1.5 trillion.

Auchterlonie said that under his proposal, banks would have to pay for the RTC's operating expenses and would also be responsible for the costs if assets are sold at a loss.

"The banks knew the risks when they made these toxic loans," Auchterlonie said. "They should be held responsible for cleaning them up."

Auchterlonie said that removing the loans from the banks would free them to make new loans to the 5.9 million small and mid-sized businesses whose growth is critical for a revitalized economy. According to Standard & Poors, only$7.25 billionof syndicated loans have been made to small and mid-sized business sinceOctober 2008compared to almost$230 billionmade to large corporate borrowers.

"The new RTC gives us the opportunity to resolve the job-killing bank debt burden without turning it into another taxpayer bailout," Auchterlonie said. "It would help restore job growth while igniting small and mid-size businesses' role as growth engines in the American economy."