AUSTIN, TEX. -- For another lesson in how the economic world has turned upside down, consider the plight of Austin, capital of a state whose residents often act as though they invented free enterprise.

This lovely town on the edge of the juniper-draped limestone bluffs of the Texas hill country has become a center of government intervention. Some here would call it occupation. The local real estate scene, once the exclusive domain of Lone Star wheeler-dealers, now features federal bureaucrats controlling much of the action.

Nearly 8 percent of Austin's real estate is in the hands of the Resolution Trust Corp. (RTC), the agency created to handle assets of failed savings and loans. That percentage, among the highest in the nation, only begins to tell the story. Local brokers estimate that between 60 and 70 percent of all recent commercial deals in Austin required RTC approval.

"The market here is bastardized," said Bill Warford, a property broker for JB Goodwin Co. "The sellers are bankrupt, the lenders are in conservatorship, the feds are calling the shots. There's no such thing as an old-fashioned free-market deal."

The portfolio of Austin properties that came to the RTC through bankruptcy, foreclosure and institutional collapse is worth more than $1 billion. It represents a veritable cross-section of modern American civilization: affordable homes, mansions, condominiums, garden apartments, strip shopping centers, motels and hotels, factories, warehouses, marinas, restaurants, parking garages, country clubs and undeveloped plots ranging in size from one to 3,200 acres.

All of this makes Austin a kind of national shrine to the savings and loan disaster, perhaps the historically appropriate site, because Texas and its neighboring states are where the whole mess began.

But Austin is more than a mausoleum to an era of miscalculation, hubris and scandal. For federal officials, the city serves as a laboratory where it can test and refine its mind-boggling set of instructions on how to proceed as the largest real estate disposal company in the world. The recession devastating the economies of other regions hit Texas five years ago, giving this area an unwanted but now advantageous head start in working out the bailout and recovery. Whereas RTC regional offices elsewhere are deluged with newly foreclosed properties, Austin has suffered through that cycle -- 33,000 bankruptcies from 1985 to 1990 -- and is nearing the stage where RTC properties are not just being listed for sale but also actually starting to sell.

And it is here where compelling issues raised by the cycle of boom, bust and bailout are most heatedly debated from all points of the spectrum. Leaders from business and environmental circles are confronting federal officials with key policy questions concerning the RTC's effects on local economies and on natural habitats and endangered species.

From one end, the RTC is feeling pressure from financiers and banking lawyers who fear that the federal agency will further debilitate local property values by "dumping," leasing and selling its properties at low prices just to regain some money or reduce its massive portfolio.

"We're trying to get the property back into the private sector at a decent value without destroying everybody else's collateral," said Conrad Workinthin, a lawyer for a business lobbying group with the prematurely optimistic acronym of CURED: Citizens United for Regional Economic Development.

With strong support from Austin's influential Democratic member of Congress, Rep. J.J. "Jake" Pickle, the group has been granted several lengthy sessions with RTC officials in Washington and Austin to make its case. Workinthin said the regulators are starting to respond to local advice, especially in providing flexible financing for the real estate deals so sale prices will stay up.

From the other end, conservationists are urging RTC to remove thousands of acres of undeveloped land from the market and either donate the property for inclusion in a regional preservation plan or sell it for that purpose at bargain prices. Austin conservation groups have been at the forefront of proposing ways in which the bailout could proceed without harming natural habitats and potentially aiding and protecting them.

With geologically rare limestone hills and caves on its western rim, Austin has the highest concentration of endangered species of any urban area in the country: two birds, the black-capped vireo and golden-cheeked warbler; two beetles; a spider; a pseudo-scorpion, and a daddy longlegs. The beautiful rolling hills also were coveted by high-flying developers during the city's growth frenzy in the early 1980s. Many of their enterprises collapsed before the development stage and eventually became part of the federal portfolio. Conservationists identified scores of undeveloped sites controlled by the RTC in that ecologically sensitive region. They hope that several will become part of a preservation corridor.

"This is our rain forest, an area of incredible biological richness, with drinking watersheds and seven endangered species," said William G. Bunch, a lawyer with the Texas Center for Policy Studies. "Much of the property shouldn't have been developed anyway and would not have been targeted for development if not for the incredible bubble of money available from S&Ls during the boom. If educated, affluent Austin can't protect these few thousand acres, how can we expect nations of the Third World to protect their rain forests? The RTC controls much of our most sensitive land. It has a key role to play in what happens here."

Federal officials said they feel caught in the middle between the conflicting goals of the local groups and the RTC. "We're working with the environmental groups on the one hand while trying to satisfy the taxpayers on the other hand," said Dan Crutchfield, who oversees the Austin properties from the sectional office in San Antonio. "We're trying to cooperate, but the key policy decisions haven't been worked out yet at a national level."

Time now for a trip around Austin, a magical mystery tour of people, places and problems related to the RTC. There are no expert guides for this tour. Even the professionals, especially the feds, acknowledge that they do not know their way through the labyrinth. That becomes clear at the first stop, the RTC's satellite office two blocks south of the state capitol.

The local RTC agent, Rochelle Zimmerman, described by her bosses in the sectional office in San Antonio as the most knowledgeable Austin contact, said she had arrived only recently from Houston and was largely unfamiliar with the Austin market. She said she would be unable to show anyone around the RTC properties in Austin because "frankly, I don't know where any of them are."

As it approaches the end of its second year of existence, the RTC is still rewriting its policies and transforming itself month by month. The purpose of the Austin office, Zimmerman said, was simply to give people interested in the Austin market a public facility where they can begin the convoluted process of trying to make a deal with the government. "It is difficult for people to understand the process," she said. "It is difficult even for people within the process to understand the process."

The task of compiling a list of RTC-controlled properties in Austin reveals how difficult the process can be. Nationally, the RTC is split into four regions. Austin falls under the Dallas region, but Dallas is responsible only for the assets of failed savings and loans whose home offices were located within the region. If you are interested in buying a piece of RTC property that had been in the portfolio of a Colorado thrift, for instance, no one here can help you. You must work through the Denver office.

Bill Warford, liaison with the RTC for Austin's largest commercial broker, JB Goodwin Co., deals with obstacles of that sort every day. So his office is the second stop.

Warford offers some perspective. During the peak of the boom here in 1983, he said, the dollar amount of building permits was behind only those in the behemoths of New York and Los Angeles. The best commercial brokers at his company made $750,000 a year. The city was a magnet for developers and investors nationwide. Nearly 50 percent of the undeveloped lots in town were owned by out-of-state interests.

Then came the bust. The number of commercial brokers at Goodwin was cut from 40 to 18. The office building across the street from his office, built at a cost of $130 a square foot, could not find tenants at $6 a square foot. On the first Tuesday of every month from 1986 through 1988, 500 foreclosures were announced on the steps of Travis County Courthouse. One by one, local savings and loans collapsed, and the federal government started accumulating property, eventually reaching nearly 8 percent of the city's total.

Next stop: downtown. Waller Creek Plaza. Talk about bureaucratic confusion: Waller Creek Plaza consists of a 254-room hotel and a 101,000-square-foot office building. The two were connected by a walking bridge over Waller Creek. Developer Lloyd Hayes financed them separately, using Allied Bank for the hotel and First South Savings and Loan for the office building.

When the partnership owning the hotel fell into bankruptcy, Allied foreclosed on the hotel. But Hayes retained the office building, which also housed the main banquet halls and meeting rooms for the hotel. To retaliate against the bank, Hayes locked them out of those facilities. But the hotel housed the parking garage for the office building, and counter-retaliation was as simple as controlling the parking gate. First South soon foreclosed on the office building, and not long thereafter, the financial institutions collapsed and the whole mess landed in the lap of the federal government. The RTC, conservators of First South, inherited the office building, half of a Siamese twin and not the easiest item to sell.

"Going through the government is complicated to begin with," said John Manolakis, the RTC-appointed sales agent for the property. "Then you add on this complication of owning half of something. It's very difficult."

Luckily, the entire Austin portfolio is not that convoluted. Next stop is 4803 Bergfield Dr., a two-story, three-bedroom, two-bath house that became the 759th house owned by the RTC here when the mortgage on it was foreclosed last May. The mortgage was held by University Savings of Houston, a thrift that long since had collapsed. The asking price is $42,000, and with 8.35 percent financing offered through the Texas Housing Authority, the place should sell. Houses priced under $67,500, categorized by the government as "affordable housing," are the only ones for which the RTC has come up with financing. It is trying to sell everything else on a cash-only basis.

The Bergfield Drive residence is one of 417 single-family houses in Austin that are from the old University Savings portfolio and being managed by Northcorp Realty Advisers Inc., an asset management group in Dallas. Asset management companies are emerging as the big winners in the RTC bailout process. The push is on to contract as many government-controlled properties as possible to these newfangled companies, which one broker described as "big quasi-banks."

Time to play golf. The RTC has inherited five courses in Austin, including River Place, a par 71 near Lake Travis on the city's northwest rim. The course was designed by professional golfer Tom Kite and features an ultramodern split-level country club with four skylights, a 50-meter swimming pool and six tennis courts. River Place bears the distinct cachet of S&L scandal. It was funded primarily by Lamar Savings Association under the direction of Stanley Adams, who, before he was indicted on charges of mismanagement, fraud and conspiracy at Lamar, was so gung-ho that he applied for a branch office on the moon.

Adams's institution pumped $50 million into developing River Place, which was to include 1,500 residences but never got beyond the country club. When developer Steve Topletz (recently indicted on fraud charges related to the deal) fell behind in his payments, Lamar foreclosed and gained control. Then Lamar collapsed and was merged with three other failed thrifts into Southwest Savings of Dallas, run by Caroline Hunt, daughter of legendary oilman H.L. Hunt.

Southwest Savings was a creation of the controversial Southwest Plan in which federal thrift regulators repackaged financially insolvent S&Ls and offered sweet-deal inducements to new buyers. In this case, the concept was futile. Southwest Savings fell into RTC hands last year, the first of the Southwest Plan superthrifts to fail.

For golfers seeking to hack and slice their way through an RTC course with even more S&L luminaries in its history, the final stop is The Uplands, a few miles west of town in the hills above Barton Creek. This course was developed by John B. Connally, the former Texas governor, and Ben Barnes, his prote'ge' and sidekick, whose joint development company borrowed large sums of money from several soon-to-be-insolvent high-flying thrifts before careening into bankruptcy. For The Uplands, Barnes and Connally got financing from AMCOR Investment Corp., a subsidiary of Charles H. Keating Jr.'s Lincoln Savings and Loan. In 1980, Keating served as campaign chairman for what in cost-benefit terms was the most inefficient political campaign in history: Connally's bid for the GOP presidential nomination in which he spent $12 million for one convention delegate.

But when the Connally empire collapsed in 1986, Keating foreclosed and took over The Uplands. He then went on to become the symbol of the savings and loan debacle, known for selling unsecured notes to hundreds of unsuspecting retirees who lost all of their money and for filling the campaign coffers of five senators -- the "Keating Five" -- who then applied varying degrees of pressure on federal thrift regulators to ease up on Keating's enterprise. In April 1989, federal regulators seized Lincoln and its assets, including the property in Austin, which is considered a centerpiece of the environmentally sensitive land that local conservationists would like to acquire.

To environmental attorney William Bunch, nothing could be more fitting than for The Uplands to be known someday as the John Connally-Charles Keating Nature Preserve. "I think people want to see something good, something concrete, to come out of this mess," Bunch said. "They now see it as a black hole for the criminals of Texas. If they see it as a wildlife refuge, if they make preserves out of some of the land here in the capital city, over the bones of financial fraud, that might be not only good for nature but a good reminder of what not to do in the future."

PROPERTIES OWNED BY THE RESOLUTION TRUST CORPORATION

AS OF AUGUST 1990

900 housing lots

850 single family homes

653 duplexes

302 undeveloped commercial properties

249 condominium buildings

105 office buildings

103 garden apartment complexes

27 retail strip shopping centers

22 factories

20 ranches

10 warehouses

5 golf courses

4 restaurants

3 hotels

3 parking garages

2 shopping malls

1 marina

SOURCE: Resolution Trust Corporation