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Politics : American Presidential Politics and foreign affairs
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To: DuckTapeSunroof who wrote (39919)12/28/2009 1:43:49 PM
From: TimF  Read Replies (1) of 71588
 
The crisis wasn't just an issue of a bubble. The basic S&L model, as regulated, couldn't cope with the inflation of the 70s, and with the new options people had to park their money. Then when regulations on interest rate payouts where opened up (and they pretty much needed to be) they set themselves up for dealing with high inflation, only to have the inflation get reigned in by the fed. They where in trouble going back in to the 70s, several bouts of deregulation tried to free them up to deal with this trouble, but had the end effect of making them bigger so that when they failed they where more expensive. Then they payout beyond the limits (and also the earlier increase of the limits), of what the feds would cover also increased the size of the bailout, but it didn't cause the problem that led to the bailout. The government payouts mostly happened after the industry started collapsing.
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