Re: "That's simply false."
No, it is TRUE.
The American Savings and Loan associations were puttering along pretty much exactly as they always had been in post WW II history (profitable, slow, steady, boring... making single family home loans) UNTIL the politicians made those TWO CRITICAL ERRORS:
1) Hugely INCREASED GOVERNMENT INSURANCE on the deposits of all Savings and Loan account holders. (Without raising any fees on industry for a sinking fund to pay for the insurance's eventual costs.) And,
2) REMOVED the restrictions that had been in place since the Great Depression on the type of investments that Savings and Loan institutions could make. (Allowing them to speculate with their depositor's money for the *first time* in such high-risk / high-potential investments as junk bonds... massive commercial real estate developments such as malls, office towers developed 100% on spec., raw land for tract housing developments - again, on speculation, not pre-sold, etc.)
Without these TWO GOVERNMENT ACTIONS there could have been no big systemic crash because there could have been no huge bubble to pop.
This is one of the CLEAREST EXAMPLES that I can think of, (in all of man's economic history), where a government CREATED an entire bubble/burst cycle by it's actions.
CONGRESS and the REAGAN WHITE HOUSE (who passed the laws and signed them) are entirely responsible for the 'eighties Savings and Loan Crisis.
There *was no* 'crisis... not even a "developing one" until Congress and the White House took those TWO ACTIONS. (Go back and look... There was no bubble *prior* to the government interventions.)
None.
No crisis, no 'Savings and Loan problem'. No bubble.
The politicians created the opportunity for massive fraud with the depositor's money and, (of course!), there was no shortage of people willing to avail themselves of 'free money' at 'no risk' since the government said it was guaranteeing the deposits no matter WHAT the S&L guys bet it on....
(Just as there ALWAYS is and always will be people willing to snap at a "free lunch" on the taxpayer's dime.) |
