Good questions, and points.
Re: "Buddy, I don't remember, during the S&L crisis, was the return on S&L deposits greater than Treasuries or investment grade Corporate Paper (remember, at the time, those rates were probably ~10%)?"
"Can you name any multi-millionares with millions deposited in the S&L's? I can think of some multi-millionares with stock, but not millions in deposit."
>>> The taxpayer-funded bailout also saved the bond holders and share holders of these institutions, insulating them from any investment risk... that was my larger point.
>>> Also, during this period of time, a fairly widespread practice was the 'demutualization' of many of these savings institutions, i.e., moving from depositor ownership ('non-profit') to public ownership through share offerings. Big money was made in these IPOs, I made some myself.
>>> But the only way to get shares was to have deposits in these 'mutual institutions', so many very wealthy people opened accounts at hundreds of small mutual organizations... taking a 'shotgun' approach toward positioning themselves for eventual public offer gains.
>>> So, yes, many very rich people did have accounts at some of these 'mutuals', then at the newly minted S&Ls... then at the acquiring big banks.
Re: "I believe that the "bailout" was good economic policy, it is better than having large depositors running from one institution to another - resulting bank runs rivaling the 30's."
>>> I don't. The government doesn't insure my brokerage account (beyond the federal minimum). For that, my broker/dealer buys Private Insurance to the tune of $10 million per account (per depositor), at some brokers it's much higher.
>>> The taxpayers are not on the hook for my investments... but the broker/dealer insures my account against their fraud.
Re: "Do you think that your City government (or State) should keep all bank accounts with less than $100K in each account?"
>>> No need. All they have to do is go where their deposits are covered by insurance... and perhaps pay a little attention to the ratings agencies who check to make sure that loan reserves are maintained at an acceptable fraction of total deposits. |
