Perfect Storm - Page 7 - Political Fever

Finny · #61 (**permalink**) 03-04-2008, 04:44 PM

Quote:

Originally Posted by mwillman

Here is a website with the history of the S&Ls

FDIC: The S&L Crisis: A Chrono-Bibliography

The problem with S&L's is they are a bad business model. Of course they werent started as a large profit business. They were created to help people buy homes. It wasnt until republicans decided that they should be more about profit then homes that they started on the downward slide that caused the major problems.

Also here is a website that explains the Bush families involvement with the S&L scandels.

The Bush family and the SL (Savings and Loan) Scandal

He doesn't believe in the FDIC website..and whats the point of putting up conspiracy stuff? Affrayer is going to eat it up... He already posts stuff from Prisonplanet.com.

mwillman · #62 (**permalink**) 03-04-2008, 04:52 PM

Whos talking about conspiracy. these are all proven facts.

Quote:

Between 1981 and 1989, when George Bush finally announced that there was a Savings and Loan Crisis to the world, the Reagan/Bush administration worked to cover up Savings and Loan problems by reducing the number and depth of examinations required of S&Ls as well as attacking political opponents who were sounding early alarms about the S&L industry. Industry insiders were aware of significant S&L problems as early 1986 that they felt would require a bailout. This information was kept from the media until after Bush had won the 1988 elections.

Jeb Bush defaulted on a $4.56 million loan from Broward Federal Savings in Sunrise, Florida. After federal regulators closed the S&L, the office building that Jeb used the $4.56 million to finance was reappraised by the regulators at $500,000, which Bush and his partners paid. The taxpayers had to pay back the remaining 4 million plus dollars.

Neil Bush was the most widely targeted member of the Bush family by the press in the S&L scandal. Neil became director of Silverado Savings and Loan at the age of 30 in 1985. Three years later the institution was belly up at a cost of $1.6 billion to tax payers to bail out.

The basic actions of Neil Bush in the S&L scandal are as follows:

Neil received a $100,000 "loan" from Ken Good, of Good International, with no obligation to pay any of the money back.

Good was a large shareholder in JNB Explorations, Neil Bush's oil-exploration company.

Neil failed to disclose this conflict-of-interest when loans were given to Good from Silverado, because the money was to be used in joint venture with his own JNB. This was in essence giving himself a loan from Silverado through a third party.

Neil then helped Silverado S&L approve Good International for a $900,000 line of credit.

Good defaulted on a total $32 million in loans from Silverado.

During this time Neil Bush did not disclose that $3 million of the $32 million that Good was defaulting on was actually for investment in JNB, his own company.

Good subsequently raised Bush's JNB salary from $75,000 to $125,000 and granted him a $22,500 bonus.

Neil Bush maintained that he did not see how this constituted a conflict of interest.

Neil approved $106 million in Silverado loans to another JNB investor, Bill Walters.

Neil also never formally disclosed his relationship with Walters and Walters also defaulted on his loans, all $106 million of them.

Neil Bush was charged with criminal wrongdoing in the case and ended up paying $50,000 to settle out of court. The chief of Silverado S&L was sentenced to 3.5 years in jail for pleading guilty to $8.7 million in theft. (Keep in mind that you can get more jail time for holding up a gas station for $50.)

Today Neil Bush is working on closing a deal in Florida, where his brother Jeb is governor, to sell a software package to schools with his startup company Ignite.

The Bush family and the SL (Savings and Loan) Scandal

Affrayer · #63 (**permalink**) 03-05-2008, 04:57 AM

Quote:

Originally Posted by Finny

I can tell you why.

Oh I'm sure you are going to fabricate something...

Quote:

The Fed allowed the S&L.....

Oh, the FED regulated the S&L's? Since when? Try FSLIC regulated the federally associated S&L's.

How embarrassing for you...

Quote:

Originally Posted by Wikipedia

Carter left office in January 1981, a year in which 3,300 out of 3,800 S&Ls lost money. In 1982, the combined tangible net capital of this industry was $4 billion. The chartering of federally regulated S&Ls accelerated rapidly with the Garn - St Germain Depository Institutions Act of 1982, which was designed to make S&Ls more competitive and more solvent. S&Ls could now pay higher market rates for deposits, borrow money from the Federal Reserve, make commercial loans, and issue credit cards. They were also allowed to take an ownership position in the real estate and other projects to which they made loans and they began to rely on brokered funds to a considerable extent. This was a departure from their original mission of providing savings and mortgages.

So if we follow your "cough cough" logic, it was the passage of Garn - St Germain Depository Institutions Act of 1982 that doomed the S&L industry.

Quote:

Originally Posted by FDIC

. Savings and loans (S&Ls) were given expanded lending authority in 1982 federal legislation and through state legislation in California, Texas and elsewhere. Many S&Ls combined incompetence with a desperate need to increase income.

. The 1986 tax legislation made investment in commercial real estate less attractive and made it much harder to sell troubled real estate.

. Bank regulators had little experience in evaluating commercial real estate loans, and prevailing accounting practices that permitted capitalizing interest for several years on such loans did not provide the appropriate flags to alert bank supervisors of existing problems. Some have suggested that earlier recognition and action by bank examiners would not have mattered. Perhaps not.

. There was also the fact that somebody else.s bad loan (whether or not an S&L made it) could adversely affect the performance of what otherwise would have been a good bank loan. The impact of others. mistakes was significant, whether that was S&Ls in Texas, savings banks in Massachusetts or Japanese commercial banks in California.

None of this is traceable back to Carter...all of it was due to Reagan's tenure as president just as the subprime mess is all Bush's.

You lose....how embarrassing...

Affrayer · #64 (**permalink**) 03-05-2008, 05:00 AM

Quote:

Originally Posted by xjoe3x

Waiting waiting waiting...

I can wait can't I?

Affrayer · #65 (**permalink**) 03-05-2008, 05:07 AM

Quote:

Originally Posted by mwillman

It wasnt until republicans decided that they should be more about profit....

And how do republicans increase profits? Why unregulation...that's where the government encourages criminal like actions by turning a blind eye to improper activities. It's exactly the same "cough cough" profit model as we saw in the subprime mess and Enron as well.

Finny · #66 (**permalink**) 03-05-2008, 01:28 PM

Quote:

Originally Posted by Affrayer

Oh I'm sure you are going to fabricate something...

Oh, the FED regulated the S&L's? Since when? Try FSLIC regulated the federally associated S&L's.

How embarrassing for you...

So if we follow your "cough cough" logic, it was the passage of Garn - St Germain Depository Institutions Act of 1982 that doomed the S&L industry.

None of this is traceable back to Carter...all of it was due to Reagan's tenure as president just as the subprime mess is all Bush's.

You lose....how embarrassing...

LOL... FSLIC doesn't set National Interest rates (thats the key). The Fed does. I suggest you look into Paul Volcker.

Quote:

The Fed's battle against high inflation during the 1970's led to high interest rates. S&L's were increasingly losing the battle for deposits to money-market funds. Plus, fixed rate mortgages written in the 1960's at much lower interest rates were increasingly unprofitable.

In 1978 Congress passed the Financial Institutions Regulatory and Interest Rate Control Act. It allowed S&L's to invest 5% of assets to such things as land development. It was a token reform, but it was the start of four years of deregulation.

In March of 1980, the Carter Administration raised ceiling on interest rates on deposit accounts, expanded the ability of S&L's to make ADC (acquisition, development, construction) loans, and raised deposit insurance from $40,000 to $100,000.

It was the cause of higher Interest Rates in the 70s and the Fed (which is "control" by our Government).

Bit of News

As I said this is happening again within the Banking Community.

Affrayer · #67 (**permalink**) 03-05-2008, 04:43 PM

Quote:

Originally Posted by Finny

LOL... FSLIC doesn't set National Interest rates (thats the key). The Fed does. I suggest you look into Paul Volcker.

The FED did not set interest rates for the federally associated S&Ls. How embarrassing this must be for you.

Finny · #68 (**permalink**) 03-05-2008, 05:32 PM

Quote:

Originally Posted by Affrayer

The FED did not set interest rates for the federally associated S&Ls. How embarrassing this must be for you.

The FED does set interest rates. That is an undisputable fact. When the Fed increased Interest Rates for Banks, Federal Savings and Loan Insurance Corporation (FSLIC) became effected.

The Federal Savings and Loan Insurance Corporation ("FSLIC")2 was established by Congress to insure the deposits of savings and loan institutions (also known as "S&Ls" or "thrifts"), and the Federal Home Loan Bank Board ("FHLBB")3 was established to safeguard the soundness of those institutions. Pursuant to this regulatory scheme, thrifts that desired to provide depositors with the insurance guaranteed under the program were required to maintain a certain level of capital.

Interest rates soared during the late 1970s and early 1980s, causing the savings and loan industry serious economic problems. At that time, thrifts' liabilities were principally short-term deposits, while their assets were primarily long-term fixed-rate mortgages. When interest rates soared, the value of the long-term fixed-rate assets plummeted, and the thrifts had to pay higher rates on their liabilities. As a result, many thrifts experienced difficulty remaining solvent and many became insolvent.

The Government's insurance fund lacked sufficient funds to liquidate even a small percentage of the thrifts that became insolvent. Consequently, the FSLIC and the FHLBB began to consider proposals for outside investors and thrifts to acquire other thrifts through mergers to prevent an exhaustion of the insurance fund.

GLENDALE FEDERAL BANK v U.S.

Quote:

In the late 1970s and early 1980s, soaring interest rates wrecked the stability of the S&L industry. The industry had to pay the going, high interest rates on short-term deposits. At the same time, it received comparatively low payments from mortgage holders, who had locked in a long-term interest rate when rates were lower.

With lots of money going out, and little coming in, it's no wonder that by the early 1980s, nearly all thrifts were insolvent, with the value of their liabilities exceeding their assets. That was not just a problem for the thrifts, but also for the government — which was responsible for regulating the industry.

To deal with the crisis, government regulators decided to adopt a policy of forbearance, taking steps to allow troubled thrifts, which otherwise could have been required to close, to continue to operate. Special accounting techniques — or, according to the Supreme Court, "gimmicks" — allowed both government and industry to wait for interest rates to fall.

Ut oh..

Wow, I said the samething right here..

Affrayer · #69 (**permalink**) 03-05-2008, 06:36 PM

Quote:

Originally Posted by Finny

The FED does set interest rates.

No one argues that. The issue, my poor embarrassed friend, is whether the FED sets interest rates for the federally associated S&Ls...and the answer is...drum roll please...it doesn't...

Finny · #70 (**permalink**) 03-05-2008, 08:05 PM

Quote:

Originally Posted by Affrayer

No one argues that. The issue, my poor embarrassed friend, is whether the FED sets interest rates for the federally associated S&Ls...and the answer is...drum roll please...it doesn't...

Lets explain this for you.. so you can undertand how Interest rates work for loans. Which is part of S&L, Credit Cards, Car loans, and everything else that is "loaned" to you.

You have fixed loans, which is a rate that is set at the current Interest rate set by the Fed plus a certain precent declared by the loaner. Say Fed Rate is at 3.5% a loaner can add 5% or more.. making it a loan at 8.5% plus loan.

The APR rate is a roaming rate which goes either up or down with Interest Rates (are suppose to in theory).. but its assumed you have the cash to pay it off in the year, if you don't your rates go up.

This is standard stuff.

The US subprime crisis: Was it really the Fed’s fault?

In the discussion about the origins of the US subprime crisis, the overhelming number of explanations contain one predominant element: According to most economists (be it academic or from the financial sector), the crisis it at least partly the US Fed’s fault. Since the US central bank has kept interest too low for too long a period, banks were forced to invest in more risky assets in order to at least get a return a little above the meagre return on treasuries, according to this interpretation. As a consequence, the banks extended loans to people who in fact where not able to pay back there mortgage. Had the Fed increased interest rates earlier, returns on Treasury bonds would have increased and the bank’s would not have been forced into risky lendings.

While this reasoning sounds quite plausible at first, a closer inspection reveals some serious shortcomings. First, from a theoretical point of view, it is hard to really construct a mechanism how low interest rates translate into more risky lending. In the theory of finance, we usually talk about the problem of moral hazard and adverse selection and a shift toward more risky lending if interest rates rise . The logic behind this is straightforward: If interest rates rise, an increasing number of solid investment project cannot meet the return requirements anymore. Risk-avers borrowers drop out of the loan market, while risk-seekers stay behind who gamble on loading off part of their potential losses to the lender while.

The common links between now and the S&L scandal

The only person who does not get this is you. This is not my fault because I have been explain to you the cause and effect process. Be it with Interest Rates.

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