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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: shades who wrote (57635)4/6/2006 7:13:44 PM
From: Ramsey Su  Read Replies (2) of 110194
 
shades,

this time is truly different and it will not be a repeat.

the chrono of the S&L crisis can be summarized by two events. This is the start:
December, 1982--Garn - St Germain Depository Institutions Act of 1982 enacted. This Reagan Administration initiative is designed to complete the process of giving expanded powers to federally chartered S&Ls and enables them to diversify their activities with the view of increasing profits. Major provisions include: elimination of deposit interest rate ceilings; elimination of the previous statutory limit on loan to value ratio; and expansion of the asset powers of federal S&Ls by permitting up to 40% of assets in commercial mortgages, up to 30% of assets in consumer loans, up to 10% of assets in commercial loans, and up to 10% of assets in commercial leases.

this is kind of the end. If I remember correctly, FIRREA raised the reserve requirements to a level that rendered all the S&Ls insolvent overnight.
1989--President Bush unveils S&L bailout plan in February. In August, Financial Institutions Reform Recovery and Enforcement Act (FIRREA). FIRREA abolishes the Federal Home Loan Bank Board and FSLIC, switches S&L regulation to newly created Office of Thrift Supervision. Deposit insurance function shifted to the FDIC. A new entity, the Resolution Trust Corporation is created to resolve the insolvent S&Ls.

This time, the problem is with absolutely unsound underwriting guidelines supported by a fearless MBS secondary market.
fdic.gov

Ramsey
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