Wall St.: Bank Stocks, Bonds Tumble

Bank stocks and bonds fell sharply today, despite Obama's inauguration. More from Bloomberg News:

Barack Obama became the 44th U.S. president today, inheriting the most severe economic crisis since Franklin D. Roosevelt was sworn in 76 years ago. The turmoil has dragged the world’s largest economies into recession, caused more than $1 trillion of losses at financial institutions and prompted a sell-off in global stock markets.

Treasuries fell for a second day on speculation Obama will sell record amounts of debt to battle the recession. The dollar strengthened for a second day against the euro.

Tough times ahead, even for those of us who see the sun coming out.

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    Bush sure helped it along (5.00 / 1) (#13)
    by mmc9431 on Tue Jan 20, 2009 at 02:16:10 PM EST
    The Republican mentality of deregulation and trusting business to do the right thing is a major factor in the economic crisis we're facing. Business needs to have acccountability, something that was always missing in the Bush adminstration. (in all aspects!)

    Who gets more blame? (none / 0) (#20)
    by bocajeff on Tue Jan 20, 2009 at 02:51:22 PM EST
    The banks for poor lending practices or the buyers who knew they couldn't make the payments?

    One blames business, one blames individuals for not taking responsibility for themselves.


    Neither. (5.00 / 3) (#21)
    by gtesta on Tue Jan 20, 2009 at 03:07:44 PM EST
    I blame the investment banks and their utterly ridiculous, highly-leveraged positions of "junk bonds" a.k.a. high-yield, mortgage-backed securities.
    One of the main root causes of this has to be the 2004 SEC rule change allowing investment banks to borrow up to 30 times their capital requirement (as opposed to the previous 12 times) to establish their holdings AND to allow
    them to use all of their assets within a "consolidated financial servies" model as the basis for calculating whether they met capital requirements.
    Honestly, since the Investment Banks managed their downside risk so poorly, I really think that placing blame on individuals or commercial banks misses the point.  After all, I think the last numbers I heard, only about 5% of all mortgages are in default.

    Don't forget the regulators (none / 0) (#24)
    by Abdul Abulbul Amir on Tue Jan 20, 2009 at 03:17:20 PM EST
    Don't forget the regulators that approved risky practices such as no money down mortgages.  Or regulations like CRA that required banks to lend to underserved (risky) borrowers.  

    This mess is the outcome when regulators are more concerned with "affordable housing" than financial soundness.

    The regulators were not asleep at the switch, they were pouring gas on the fire.  

    BTW, I heard an ad on the radio just last week for an FHA mortgage up to $360K with no money down.  


    Still Missing the Point... (5.00 / 3) (#26)
    by gtesta on Tue Jan 20, 2009 at 03:28:38 PM EST
    Only a few percent of mortgages are actually in default.
    No, you really have to look at allowing the investment banks to purchase mbs's by borrowing up to 30 times their cash holdings.  Only within that context can you see how these relatively small numbers of defaults are leveraged into astronomically huge losses.
    It is actually the SEC regulators (or lack thereof) who do bear alot of the blame for this, but not the commercial lending practices like those examples you cite.

    BTW, FHA and VA loans actually did have government guarantees...through ginnie mae, so they definitely were't the problem.


    Not part of the problem? (none / 0) (#29)
    by Abdul Abulbul Amir on Tue Jan 20, 2009 at 03:54:02 PM EST

    BTW, FHA and VA loans actually did have government guarantees...through ginnie mae, so they definitely were't the problem.

    Not a problem? Ginnie Mae if you recall had to be bailed out.  Further, it was selling those, what turned out to be toxic, MBS's.  Those MBS's were held by regulated banks and SNL's as well as investment banks.



    If you take your life savings (5.00 / 2) (#31)
    by gtesta on Tue Jan 20, 2009 at 04:01:45 PM EST
    and use it to purchase the Brooklyn Bridge, the bridge is not "toxic".  You're just dumb.
    ONLY a few percent of mortgages are in default, and most mortgaged backed securites are good investments.  It is the position, i.e. how the assets are purchased that is more important in understanding this.
    Yes and if I held a mortgaged backed security that was based on goverment-guaranteed FHA and VA loans, it is still a good investment precisely because of that guarantee.  

    That's just silly (5.00 / 1) (#33)
    by NYShooter on Tue Jan 20, 2009 at 04:55:18 PM EST
    First of all the figure is much closer to 10%, and accelerating. You must know that the last thing homeowners will let go of is their homes. They'll stop going on vacations, eating out, buying new clothes, or going to the dentist.

    It's not the figure that's important, but the direction of the trend and the rate of acceleration. Unemployment is "only" about 7% so what's the big deal; 93% are still working. The big deal is, and the reason everyone is so depressed, is because they know their number is coming up. An engineer, laid off from his $75,000 job, who now is working as a deli clerk for $23,000 is still "working."  That fact doesn't show up in the employment figures either.

    After all, the poor souls who jumped from the towers on 9/11 had a fine trip 99% of the time. It was "only" that last 1% that was real bummer.

    Figures lie, and............


    "You must know that the last thing homeowners (none / 0) (#34)
    by vml68 on Tue Jan 20, 2009 at 05:21:10 PM EST
     will let go of is their homes"
    That was true in the past. Many homeowners are walking away because the difference between what their homes are worth and what they owe on their mortgages makes it not worth continuing the payments.

    Thats right (none / 0) (#43)
    by Abdul Abulbul Amir on Wed Jan 21, 2009 at 07:58:04 AM EST

    Plus, in many states the lender can't come after the borrower for the difference for what the house will bring at auction and the loan amount.

    The CRA did not require the banks to lend (5.00 / 1) (#27)
    by tigercourse on Tue Jan 20, 2009 at 03:33:04 PM EST
    to risky borrowers. It simply made Redlining illegal. The mortgage meltdown did not come from places in inner cities (the CRA's prime target) it came from boom areas in Florida, New Mexico, California and Arizona.

    Yes, but the comment (5.00 / 1) (#28)
    by eric on Tue Jan 20, 2009 at 03:42:34 PM EST
    was just a regurgitation of the right wing talking points.  He probably knows about the CRA, but if Limbaugh keep lying, so does he.

    Simply? (none / 0) (#30)
    by Abdul Abulbul Amir on Tue Jan 20, 2009 at 04:01:44 PM EST

    What was the mechanism that ensured compliance?  Once you have to make X number or percent of loans to ensure compliance, the riskieness if the borrowers becomes secondary to the demands of the regulation.  

    That is how the regulation is suppposed to work.  


    Lenders, Republicans & regulatory non-feasance (none / 0) (#42)
    by FreakyBeaky on Wed Jan 21, 2009 at 01:07:47 AM EST
    Once the financial wizards came up with all these neato, wizard-y mortgage-backed derivatives, the resale market for mortgages exploded.  Combined with non-regulation and Easy Al's easy money, underwriting standards collapsed.  Why? Because you can return a loan  to the originator for non-performance only within the first 6 or 12  or 18 months, depending on the loan.  Therefore, if you are doing the lending, the borrower only has to be credit-worthy for 2 years instead of 30.  With a zero or negative interest rate, or a 2-year interest-only loan, etc., just about anyone is credit-worthy for two years.

    If your financial wizards think they've got everything hedged, on the other hand, there's no reason to be cautious about the loans you buy and sell bonds against (e.g., CDOs).  Or about the credit-default swaps you sell to insure holders of CDOs that they will be paid (this is how AIG got destroyed).  Etc.

    People who couldn't pay their loans after two years and didn't know their way around mortgages?  They had no idea what the hell they were doing.  Oh yeah - and they weren't credit-worthy by any rational standard, and everyone except them knew it.  


    As excuses go (2.00 / 0) (#6)
    by jimakaPPJ on Tue Jan 20, 2009 at 01:54:51 PM EST
    that is pretty weak....

    As you may not know, for that to happen there must also be an expectation of an over heated economy causing a rise in inflation.


    Cheney prolly had his guys do some short selling (none / 0) (#2)
    by Angel on Tue Jan 20, 2009 at 01:40:50 PM EST
    or something to wreak havoc.  Seriously.  

    Rove did it. (none / 0) (#18)
    by sarcastic unnamed one on Tue Jan 20, 2009 at 02:34:06 PM EST
    A senator collapsed at the luncheon (none / 0) (#3)
    by ruffian on Tue Jan 20, 2009 at 01:42:33 PM EST
    CNN does not know who yet - possibly Byrd

    Obama just said Kennedy... (none / 0) (#4)
    by indy in sc on Tue Jan 20, 2009 at 01:53:38 PM EST
    Is there anymore news?

    Ted Kennedy (none / 0) (#5)
    by SOS on Tue Jan 20, 2009 at 01:54:06 PM EST
    was taken out of the Statuary Hall luncheon after suffering an apparent seizure -- a few minutes after Sen. Robert Byrd was removed in his wheelchair under the supervision of medical personnel.

    Byrd was conscious and had been having trouble eating, according to a witness.

    I'm surprised half the Nation hasn't passed out today just from finally letting go of all the tension and stress Bush Co. inflicted on us.

    The whole world is in a financial (none / 0) (#7)
    by Slado on Tue Jan 20, 2009 at 01:57:16 PM EST
    crisis so unless Bush can control the economy of the whole world it doesn't matter who's president tough times are ahead.

    I don't think you can blame Bush for all the bad (Obama said so in his speech quite frankly) and to be fair Obama can only help stop the bleeding in the upcoming years.   I hope all those who would blame this on Bush hold Obama responsible when it doesn't turn around as fast as we like.

    I hope Byrd and Kennedy are OK.   Those guys are institutions in and of themselves.

    Bush (5.00 / 2) (#9)
    by SOS on Tue Jan 20, 2009 at 01:59:35 PM EST
    is 100% responsible for failing to put a halt to the Robber Baronsim we've all witnessed this past 8 years.

    It started with Enron (California Energy Crisis) and never stopped.


    Sadly. . . (none / 0) (#12)
    by LarryInNYC on Tue Jan 20, 2009 at 02:15:54 PM EST
    a great deal of deregulation that ultimately led to Enron has been going full bore since Reagan, not excluding the Clinton years and not excluding the legislature, even when controlled by Democrats.  Plenty of blame to spread around.

    True (5.00 / 1) (#16)
    by SOS on Tue Jan 20, 2009 at 02:30:02 PM EST
    but we still got nothing but talk for the past 8 years while it was obvious to anyone with any economic knowledge outright highway robbery was taking place.

    So did the US drag the whole world down (none / 0) (#22)
    by Slado on Tue Jan 20, 2009 at 03:13:33 PM EST
    with it or (much more likely) was all of capitalism guilty of the same thing....GREED.  Every corner of the globe got rich off of property and now we're all paying the price.

    This is the growing pains as the world moves towards a more global economy.   All ripples and patterns move more quickly and we're all literally in this together.

    We can go forward one or two ways.  Try to pretend that we can go back to America keeping it's money to itself or learn from this and insure that the government doesn't encourage (Freddie and Fannie, improper regulation etc..) the very bad practices that create these types of booms and busts.

    The bottom line is if the economy grows it's bound to retract.   The trick is keeping both from being so extreme which is exactly what's happened in the last decade.

    Good luck President Obama.


    Bush starts an avalanche, and (none / 0) (#8)
    by ThatOneVoter on Tue Jan 20, 2009 at 01:58:38 PM EST
    you're already preparing to blame Obama if he can't stop it?

    No, No, No. (none / 0) (#19)
    by bocajeff on Tue Jan 20, 2009 at 02:49:39 PM EST
    By not taking a serious look (and, quite frankly, a lot of it is guessing - see chaos theory) at everything in the world economy then you are apt to repeat some of the same mistakes.

    Yes, it's easy to blame this and that on those we disagree with - but there are so many other factors in place.

    Was it deregulation, was it opening up credit markets to the communities that had previously been shut out, or was it trying to fix things with unproven theories.

    I have a friend with Stage 4 lung cancer that was given months to live. It's been two and a half years and she's doing fine. She says it's because she is eating more meat and doing yoga. Is she right, is she wrong? Who knows.

    The point is that it's easy to blame everything when things go wrong and to credit everything when things right. Sometimes it's just a T-bone steak and some stretching...


    Exactly (none / 0) (#23)
    by Slado on Tue Jan 20, 2009 at 03:15:21 PM EST
    I hope Obama does well.  But just making changes and blaming the last guy won't get us anywhere.

    As much as I want a republican in office I'd rather have anyone in office who helps end this economic purgatory.

    I am in sales afterall.


    The misplaced optimism from the end (none / 0) (#10)
    by tigercourse on Tue Jan 20, 2009 at 02:12:32 PM EST
    of 2008 has faded and the market is confronting the reality of this year. 10,000 + retail stores closing. Banks still in jeopardy. Housing prices continuing to decline. Manufacturing still contracting.

    We're due for more economic. . . (none / 0) (#11)
    by LarryInNYC on Tue Jan 20, 2009 at 02:13:40 PM EST
    bad news, with the financial and manufacturing centers continuing to meltdown and a post-holidya retail collapse to follow.  I kind wish we'd gotten the worst of it out of the way while Bush was still there, but at this point continuing worsening in the short term is inevitable.

    If you haven't read this, (5.00 / 1) (#15)
    by Anne on Tue Jan 20, 2009 at 02:24:01 PM EST
    Paul Krugman's What Obama Must Do, it is sobering reading, and makes one realize that while there is not going to be a swift end to the economic pain, the choices Obama makes and the policies he fights for could make a considerable difference in the severity and duration of it.

    The economy (none / 0) (#17)
    by jbindc on Tue Jan 20, 2009 at 02:30:57 PM EST
    Will make or break the Obama presidency.  If these bailouts start to work, along with the natural progression and cycles of business, we will see the results in 2-3 years - just in time for Obama to be re-elected as a genius.  If they don't work, or the cycle timing is off, Obama will have an uphill battle in 2012.

    This is for all the marbles and it starts now.  This is his gig now (and for all intents and purposes, Obama has been running the economy for a couple of months now - he's the one been working the phones and votes, he's the one been working behind the scenes, and it's been him, not Bush, that Wall Street has been listening to and reacting to.)


    Through hard work and determination (5.00 / 1) (#25)
    by Inspector Gadget on Tue Jan 20, 2009 at 03:21:28 PM EST
    Democratic Senator Patty Murray managed to cancel the Pentagon's contract with AirBus for our military transport planes so Domestic airplane manufacturers could have a fair chance at the bid.

    Perhaps Obama will cancel the Halliburton and Bechtel contracts and spread out the work to get money moving for lots of contractors.

    Is Blackwater still active in Iraq?

    There are so, so many places to look for economic changes. Cheney and Bush kept way too much flowing into the hands of their friends and associates.


    I think it's going to be more medium term (none / 0) (#14)
    by tigercourse on Tue Jan 20, 2009 at 02:16:55 PM EST
    then short term. I'm just starting to see the housing market collapse hit where I am (New York)in earnest (though things have been bad for a couple years). And there are other areas of the country that remain in an economic bubble, waiting to be popped by the rising unemployment.

    Mark to market. (none / 0) (#32)
    by wurman on Tue Jan 20, 2009 at 04:15:47 PM EST
    Read the underlying documents.

    All lenders, not only Freddie Mac & Fanny Mae, took on mortgages based on the appraised values of the properties that secured the loans.

    Then one morning a bunch of experts decided that there was a housing bubble & the underlying real estate was worth about half of the book values. As a result, all of the lenders held bad paper.  At an astonishing pace, a large number of mortgage finance companies became nominally bankrupt--on paper.

    The foreclosures began [Later, in about 2 years, we will see the experts who invented the housing bubble concept buying a great many of the foreclosed properties for 5 cents on the dollar].

    People with ARMs who had been paying $1,500 monthly on a $250K house were suddenly unable to pay $3,000 a month on a $150K dump, which was the same house.

    As this played out, the re-writing of the event took place instantly.  Mis-management, lack of regulation, executive pay, scummy borrowers, bad loans on junk properties, greed, corruption, goldbricking, & mopery became the often recited causes for the collapse of the bubble.

    Almost any person who buys a car is aware that a lender can finance 100 percent of the cost.  Many people also know that when they drive the car off the lot its value drops about 20 to 25 percent at the moment.  It's useful to note that the auto lenders do not "mark to market" the next day, write down the paper loss on book value from $30K to $22K, call the loan due, repossess the vehicle, & file a lawsuit against the buyer.

    The financial turmoil is the grandest monetary scam ever perpetrated. Watch where the burst bubble properties actually end up.  This makes the savings & loan debacle of Bu$h xli look like chump change.  But it's the same hoax, just a whole lot bigger.  $700 Billion Dollars.

    You've been "bushed". . . again.

    Nope (1.00 / 0) (#35)
    by jimakaPPJ on Tue Jan 20, 2009 at 08:14:10 PM EST
    This makes the savings & loan debacle of Bu$h xli look like chump change.

    Uh, the S&L debacle you refer to was in '79 and '80.

    In case you don't Google, the Prez was a guy named Carter.

    If you want some info on the subprime mess, view this Link


    heh (2.00 / 0) (#37)
    by jimakaPPJ on Tue Jan 20, 2009 at 09:34:09 PM EST
    Policymakers focused on the symptoms of the sick S&L industry in 1979 and 1980......As the 1980s dawned, hundreds of S&Ls were insolvent.



    Buy a calendar, learn to read it. (none / 0) (#40)
    by wurman on Tue Jan 20, 2009 at 11:51:54 PM EST
    Ronald W. Reagan was President from Jan 20, 1981 to Jan 20, 1989.

    George H. W. Bush was President from Jan 20, 1989 to Jan 20, 1993.

    S & L Crisis, Wikipedia:

    By enacting 26 U.S.C. § 469 (relating to limitations on deductions for passive activity losses and limitations on passive activity credits) to remove many tax shelters, especially for real estate investments, the Tax Reform Act of 1986 significantly decreased the value of many such investments which had been held more for their tax-advantaged status than for their inherent profitability. This contributed to the end of the real estate boom of the early to mid '80s and facilitated the Savings and Loan crisis.

    Silverado Savings and Loan collapsed in 1988, costing taxpayers $1.3 billion. Neil Bush, son of then Vice President of the United States George H. W. Bush, was Director of Silverado at the time. Neil Bush was accused of giving himself a loan from Silverado, but he denied all wrongdoing.[2]

    The US Office of Thrift Supervision investigated Silverado's failure and determined that Neil Bush had engaged in numerous "breaches of his fiduciary duties involving multiple conflicts of interest." Although Bush was not indicted on criminal charges, a civil action was brought against him and the other Silverado directors by the Federal Deposit Insurance Corporation; it was eventually settled out of court, with Bush paying $50,000 as part of the settlement, the Washington Post reported.[11]

    As a director of a failing thrift, Bush voted to approve $100 million in what were ultimately bad loans to two of his business partners. And in voting for the loans, he failed to inform fellow board members at Silverado Savings & Loan that the loan applicants were his business partners.[citation needed]

    Neil Bush paid a $50,000 fine and was banned from banking activities for his role in taking down Silverado, which cost taxpayers $1.3 billion. A Resolution Trust Corporation Suit against Bush and other officers of Silverado was settled in 1991 for $26.5 million.

    From 1986 to 1995, the number of US federally insured savings and loans in the United States declined from 3,234 to 1,645.[7] This was primarily, but not exclusively, due to unsound real estate lending.

    [Excerpted variously by me.]



    A phony link to a phony timeline. (none / 0) (#41)
    by wurman on Wed Jan 21, 2009 at 12:34:49 AM EST
    Bu$h + Cheney, Frist, & Hastert were in charge of this debacle--totally in charge.  Rep. Mike Oxley (a former FBI agent), Republican of Ohio was chairman of the House Financial Services Committee & conducted all the business for these issues [chair, Committee on Financial Services (One Hundred Seventh through One Hundred Ninth Congresses); not a candidate for reelection to the One Hundred Tenth Congress in 2006].

    From your linked video per Fox News, SecTreas Snow testified in 2003. FedChair Greenspan testified in 2005.

    Many things happened in between the 2 events--all of which is subverted by the YouTube video of the Fox fake "newscast."

    Inserting the "ranking member" comments by Rep. Barney Frank (from a different hearing) is Bushwaaaa.  The fake news item implies that the 3 things took place at the same time rather than over 3 years--a total fraud.

    In 2003 & in 2005 the GOP was in charge of the White House, the House of Representatives, & the Senate.  The sort of, partly, half-heartedly almost proposed "legislation" was blocked & failed because Bu$h xliii's GOP, rightwingnutz legislators slow-walked it & stopped it so their bigtime K Street financier pals could continue the shakedown

    It's astounding that you actually think any people other than GOP functionaries controlled the levers of financial power that generated the financial crises.

    Calendars have meaning.


    You claimed that the S&L debacle happened (2.00 / 0) (#44)
    by jimakaPPJ on Wed Jan 21, 2009 at 01:06:12 PM EST
    under Bush.

    In 1979 and 1980 the President was Jimmy Carter.

    Inflation shot out of sight, home interest rates soared and the country went into recession.

    The basic problem was that thousands of S&L's had millions of home loans out at 4 and 5%. When inflation hit that had to start paying 7, 8, 9 or higher % interest on savings. Worse, many of the loans were assumable. You could buy a home and just assume the low interest loans.

    With more going out than what was coming in, S&Ls failed in record numbers.

    Those are facts, Jacks. Now, go copy some more stuff from wiki that has nothing to do with what you claimed.


    The S & L crash-crisis did not happen (5.00 / 1) (#45)
    by wurman on Wed Jan 21, 2009 at 02:14:13 PM EST
    in 1979-1980.  That's a lie.

    It appears as if you either can't read or choose not to read.  Whether the data is in Wiki or some other source, the dates that certain things take place are very well established by FACTS, not your opinions.


    What Caused the Savings and Loans Crisis?:
    Savings and Loans were specialized banks that used low-interest, but Federally-insured, deposits in savings accounts to fund mortgages. In the 1980's, the popularity of money market accounts reduced the attractiveness of savings accounts, so the banks asked Congress to remove restrictions. In 1982, the Garn-St. Germain Depository Institutions Act was passed, which allowed S&L's to raise interest rates on deposits, make commercial and consumer loans, and removed restrictions on loan-to-value ratios. At the same time, the Federal Home Loan Bank Board regulatory staff was reduced thanks to budget cuts.
    In an attempt to raise capital, banks invested in speculative real estate and commercial loans. Between 1982 and 1985, these assets increased 56%. In Texas, 40 S&L's tripled in size, some growing 100% each year.
    By 1983, 35% of the country's S&L's weren't profitable, and 9% were technically bankrupt. As banks went under, the state and Federal insurance began to run out of the money needed to refund depositors.However, S&L's remained open, making bad loans, and the losses kept mounting.

    Most timelines include the high interest rates of 1979-1982 as a "problem" for S & Ls, but that spans 2 administrations & later economic forces ended the solvency questions for all but a few weak companies.  Some really rightwingnutz time charts go back to the 1930s & the initial charters of S & Ls as the "source" of the problem.  They do this to mask the politics of the Keating 5, the Reagan administration, & the personal involvements of the Bu$h family.

    There are 2 real issues that blew things up.  If you want to actually learn something & repent the nasty habit of Reaganomics talking points take a look here--a book review:
    Inside Job: The Looting of America's Savings and Loans, by Stephen Pizzo

    From Publishers Weekly
    Bound to be controversial, this impressive expose by three journalists charges that the S & L industry was taken over by a national network of Mafiosi, corrupt thrift officers, appraisers, auditors and arms- and drug-dealers laundering money, all of whom exploited opportunities provided by the 1982 deregulation. Fortified with unlimited broker deposits, the network plundered hundreds of federally insured thrifts. The authors discount the role of high oil prices, the Sunbelt recession and other factors as catalysts in the S & L disaster. Excepting Federal Home Loan Bank Board chairman Erwin Gray, who fought to limit deposit brokerage, Pizzo, Fricker and Muolo accuse the Justice Department, the courts and other federal and state agencies for ignoring or covering up four years of fraud. They also maintain that the guilty have not been punished and little of the loot has been recovered out of official fear of revelation.
    Copyright 1989 Reed Business Information, Inc
    The most adamant Reagan/Bu$h apologist on Wall Street can't get the S&L crisis date any further back than about Sept & Oct of 1981--& even that's a patently ridiculous stretch.  Garn-St. Germain has always been recognized as the trigger.

    My additional link was to move (none / 0) (#47)
    by wurman on Wed Jan 21, 2009 at 05:36:40 PM EST
    away from Wiki, which did not seem to satisfy the stringent proof standards of the commenter about some imaginary S & L problem in 1979.

    Further, my comment about the Bu$h connection is because the Resolution Trust Corp. began shelling out the pay-offs in 1989 as per George H. W. Bush & his administration.  Reagan's thugs never attempted even a semblance of a fix to the problem.  Bu$h xli set up the bailout, perhaps to help the worst of the disastrous S & Ls in his home state of Texas--which involved a great many of his supporters & contributors.


    Quit spinning (none / 0) (#48)
    by jimakaPPJ on Wed Jan 21, 2009 at 06:43:05 PM EST
    Policymakers focused on the symptoms of the sick S&L industry in 1979 and 1980.

    That's from my link. It refutes what you wrote.


    Yup. She contradicts herself. (none / 0) (#50)
    by wurman on Wed Jan 21, 2009 at 11:31:17 PM EST
    Is it the idea in Plan A, following:
    [Reagan's administration]
    Deregulation of S&Ls seemed to fail because forbearance coupled with expansive federal deposit guarantees effectively eliminated the threat of failure.

    Or is it the notions in Plan B, following.
    The S&L industry's initial problems were caused by overregulation. The industrywide nature of the crisis was a direct outgrowth of federal regulation that defined the basic conditions under which all S&Ls operated.

    I are cornfused???  Was it the 1980 or the 1982 degregulation that caused the failures or was it the overregulation that caused the problems.

    What a laffer.  All of them were regulated & some failed.  All of them were deregulated & some failed.  A real thinker might figure that perhaps some other factors besides regulatory behaviors by the government led to the failures.


    heh (none / 0) (#51)
    by jimakaPPJ on Thu Jan 22, 2009 at 07:35:05 AM EST
    As usual the wacky Left wants to rewrite history.

    Now show that you know of nothing of history by keeping on writing about things that happened YEARS after the debacle of the S&L crisis.

    1966-1979   Market interest rates fluctuate with increasing intensity and S&Ls experience difficulty with each interest rate rise. Interest rate ceilings prevent S&Ls from paying competitive interest rates on deposits. Thus, every time the market interest rates rise, substantial amounts of funds are withdrawn by consumers for placement in instruments with higher rates of return. This process of deposit withdrawal ("disintermediation") and the subsequent deposit influx when rates rise ("reintermediation") leaves S&Ls highly vulnerable. Concurrently, money market funds become a source of competition for S&L deposits. S&Ls are additionally restricted by not being allowed to enter into business other than accepting deposits and granting home mortgage loans.

    1967--State of Texas approves major liberalization of S&L powers. Property development loans of up to 50% of net worth are allowed.
    1972--Hunt Commission recommendations would have created federal savings banks to replace S&Ls. The banks would have had additional authority to make commercial loans and invest in commercial paper.

    1973--FINE Study would have granted same powers for S&Ls as for banks, including checking accounts. Also recommends consolidation of the regulators. Interest rate insurance was recommended if S&Ls are to remain primarily involved in housing finance.

    1978--Financial Institutions Regulatory and Interest Rate Control Act of 1978 enacted. Weak version of previous recommendations. Allows S&Ls to invest up 5% of assets in each of land development, construction, and education loans.

    1979--Doubling of oil prices. Inflation moves into double digits for second time in five years.

    1980-1982   Statutory and regulatory changes give the S&L industry new powers in the hopes of their entering new areas of business and subsequently returning to profitability. For the first time, the government approves measures intended to increase S&L profits as opposed to promoting housing and homeownership.

    March, 1980--Depository Institutions Deregulation and Monetary Control Act (DIDMCA) enacted. The law is a Carter Administration initiative aimed at eliminating many of the distinctions among different types of depository institutions and ultimately removing interest rate ceiling on deposit accounts. Authority for federal S&Ls to make ADC (acquisition, development, construction) loans is expanded. Deposit insurance limit raised to $100,000 from $40,000. This last provision is added without debate.
    November, 1980--Federal Home Loan Bank Board reduces net worth requirement for insured S&Ls from 5 to 4 percent of total deposits. Bank Board also removes limits on the amounts of brokered deposits an S&L can hold.

    Contribute $20 to TL and I'll give you a link.


    Your stupid intrusion of Texas (none / 0) (#54)
    by wurman on Thu Jan 22, 2009 at 02:57:07 PM EST
    horsecrap into a national debacle is typical of your stunning incapacity to read, total inability to follow a discussion thread, & slavish devotion to bankrupt ideological re-writes of history.

    The only item in your idiotic list of any import is the March, 1980--Depository Institutions Deregulation and Monetary Control Act (DIDMCA) enacted.  This program stopped the S&L failures, for the most part as there were only about 100 of them in 1980.  The moronic Cato article by England that you initially linked points out that this law sort of staved off the inevitable.  Actually, it ended the instant problem until Garn-St. Germain was passed, which produced the inevitable debacle.

    It's not possible to know whether the earlier fixes may have worked because the Reagan-era mistakes took the entire system into failure.  He (they) did nothing & ignored the problem.  Bu$h xli set up the $160 billion bailout in 1989, etc.  Ms. England touches on these 2 things, hopelessly contradicts herself by citing each mutually exclusive program, & you ignore Avenger's & my comments.  De-reg is the problem; no reg is the problem; no Volker's deflation is the problem; wait the Sunbelt real estate bust is the problem; sorry, but interest rates are the problem.  What a krock!

    Your timeline goes back into Nixon era policies.

    Which is hilarious.

    Mainly because it leaves out the commie Wage & Price Controls imposed by the notorious criminals of that stupid administration.  But I digress.

    Your comments do more than mix apples & oranges; they stir together DC apples, Texas horse manure, libertarian bolts, & Florida rightwingnutz.

    I'll save myself the twenty bucks.  There's no purpose served by following one of your links.

    By the way, if you google up the rummy-dummy stuff, you'll find a timeline for the S&L krapola that goes back to the B&L (banking & lending) firms of 19th century England--now that's a creative sourcing that you may really get into.

    Then you could blame the whole thing on the British Labour Party & their krazee socialist ideas--ahh, but wait, that was Nixon's economic plan, ayeh?

    Hope you enjoy your on-going fantasy of American financial history.


    wurman wrote of the Bushies..... (none / 0) (#52)
    by jimakaPPJ on Thu Jan 22, 2009 at 07:37:18 AM EST
    Can't read, eh?

    Well, that's what happens when venom eats away your brain.



    wurman (none / 0) (#55)
    by jondee on Thu Jan 22, 2009 at 03:40:07 PM EST
    Just to put things in a little context, you're debating with the same font of credibility who once took up almost an entire thread arguing with all and sundry that Mission Accomplished refered to nothing other than a successful carrier landing.

    GOP as* wiping and covering pretty much covers ppj's mission here.


    Agreed. But I'm practicing. (none / 0) (#56)
    by wurman on Fri Jan 23, 2009 at 12:18:09 AM EST
    A couple of neighbors tend to read, view, & listen to the same resources.  By responding to the krapola from this line of meandering nonsense, I'm prepared for the local idiots.

    I spent several years insulated from this silly stuff, so there's some interest on my part to learn how such folk construct their nonsensical beliefs.  One conclusion, so far, is that they can't read with any comprehension.  It's also noticeable that calendars seem to be a total mystery.  Logical sequences are far beyond their skill levels.

    What's really cute is the psyops method of not defending the initial argument or link or source, but shifting instead to another source after the foolishness, falsity, or contradictions of the previous phony comment have been demolished.

    At least here, we didn't get Clinton blamed for it.