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To: Henry Volquardsen who wrote (2940)	1/8/2001 3:09:09 PM
From: Robert Douglas	Read Replies (1) \| Respond to of 3536

Henry, Your memory of the S&L crisis mirrors my own. I can distinctly remember a discussion I had in 1980 with the man who would later chair the Federal Home Loan Bank Board - Richard Pratt. We were discussing the problems of the S&Ls. You are right, there was a lot of blame to go around, just like there is blame to spread on the most recent financial charade - the bubble in a number of tech stocks. I suspect we will pay for that folly with lower capital spending for several years. I'm looking at a chart of capacity utilization right now and we've never had such a high level of over-capacity on the doorstep to a slowdown. This does not bode well for a quick turnaround in the capital spending cycle.

To: Henry Volquardsen who wrote (2940)	1/9/2001 7:54:47 PM
From: Sam	Respond to of 3536

Sorry it took so long to respond, I've mostly been out today and yesterday. Truthfully, my recollection of the S&L crisis is fuzzy enough that I don't want to push any argument about it too strongly. Certainly, as you say, there is plenty of blame to go around, as far as the politics of the situation is concerned. As I recall it, at least, the S&Ls were being squeezed out of their primary business by banks and mortgage companies, and that is why they were potential disasters when RR came into office. They became great disasters when they were allowed to expand into new and more dangerous areas in the Reagan years. But as you said, that expansion had to be approved by Democratically controlled congresses. I don't really have the time (or the interest) right now to look into it more deeply to remind myself of the exact chronology of events or who actually took the lead in these things. Was the RTC really a disaster, given what they had to work with? At least they limited the damage somewhat. But I think the more general point stands: that the question isn't one of regulation or no regulation, the question is intelligent regulation that both respects markets and has a good sense of the good and bad aspects of human nature, or stupid, short-sighted regulation that basically panders to narrow interests. Of course, telling the difference at any given point in time isn't always easy.