AS, it's time for a few facts regarding the S&L bailout. Once again, facts get in the way of Democrat talking points.
Contrary to popular belief, the savings and loan industry was insolvent throughout the 1970s. It was in the red by $110 billion by 1980, before any of the deregulatory reform initiatives were passed. Before 1980, savings and loans were required to invest a majority of their assets in 30-year, fixed-rate mortgages, secured by real estate within a 50-mile radius of their home offices. Those loans were funded mainly by passbook savings accounts, payable on demand.
Funding long-term, fixed-rate assets with short-term liabilities is a recipe for disaster during times of rapidly rising interest rates. And for the first time (in the 1970's), the economy experienced both inflation and stagnation. Because of this, the health of the S&L industry slowly deteriorated. Especially when interest rates reached 15 percent.
Note: This was well before Ronald Reagan, or George Bush came to power. It was during the Carter years, when congress was controlled by Democrats.
In 1980 congress passed "The Depository Institutions Deregulation and Monetary Decontrol Act". Under this act, it was believed deregulation would reduce fluctuations in the financial system. As a result of the first steps taken toward partial deregulation, 1981 was a record year for mergers. Mergers typically happen when an industry is facing extreme financial difficulties.
The steps toward deregulation taken in 1980, and again in 1982, were attempts to address immediate problems faced by S&Ls. Their overdependence on geographically concentrated fixed-rate mortgages. However, policymakers failed to address the full range of problems, and they allowed hundreds of insolvent institutions to remain open, funded by taxpayers.
This culminated in a nation-wide scandal known as "The Keating Five". Who's members were four Democrats and one Republican. And guess who that one Republican was? Your hero John McCain. Along with John Glenn (D-Ohio) Alan Cranston (D-Calif.), Dennis DeConcini (D-Ariz.) and Donald W. Riegle Jr. (D-Mich.)
Therefore, your conspiracy belief that George Bush or Dick Cheney were behind the scenes manipulating the S&L crisis is ridiculous. As is your belief they are behind California's energy problems. |
