PRESIDENT GEORGE W. BUSH Message Board

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Politics : PRESIDENT GEORGE W. BUSH

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To: American Spirit who wrote (532174)	1/29/2004 4:01:20 PM
From: Neocon	Read Replies (2) of 769670

On the S&L crisis: The original role of the S&Ls was to provide long-term fixed rate home mortgages in support of family home ownership. Federally insured deposits funded thrifts and since the interest rates they paid were lower than the interest income earned on mortgages, S&Ls thrived in this environment. In 1980, this environment was severely ruptured when Congress deregulated interest rates. Thrifts were caught with asset portfolios principally invested in long-term mortgages whose returns were less than the prevailing market interest rates on deposits. A large number of S&Ls were unable to manage such interest rate risk exposure. The regulator's solution to the interest rate "squeeze" was deregulation. Thrifts were given expanded investment authority in commercial lending and high-risk, high-yield assets such as junk bonds to bolster earnings. Within a few years, hosts of other speculative vehicles were added to the approved list. creditunions.com [Reagan took office in 1981.]

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