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It's amazing how quickly we forget history, apparently ignoring the bank crisis of the 1980s and complete failure of FSLIC. Multiple banks collapsed costing tax

It's amazing how quickly we forget history, apparently ignoring the bank crisis of the 1980s and complete failure of FSLIC. Multiple banks collapsed costing tax payers billions of dollars and the institution the government created to insure deposits failed spectacularly.

ceejayoz 4y ago
And the government stepped in to meet obligations to make depositors whole. The S&L industry collapsed, the folks with $100k of retirement savings in the bank did not. FSLIC got rolled into FDIC for a large insurance risk pool, too. They're not going to do that for Coinbase.
mumblemumble 4y ago
It's worth pointing out that the collapse of the S&L industry is widely recognized as being largely a result of loosening of regulations in the 1980s. https://www.thebalance.com/savings-and-loans-crisis-causes-cost-3306035 https://www.thebalance.com/savings-and-loans-crisis-causes-c... Leaving aside the question of whether it's advisable to have the government in this business in the first place, I'd say we should at least agree that, if it's going to happen, financial institutions that benefit from these programs should be required to be absolutely allergic to risk. Letting firms make questionable loans and pocket the profits while passing the risk on to taxpayers has, as far as I'm aware, never worked out well in practice.
JumpCrisscross 4y ago
> and complete failure of FSLIC. Multiple banks The S&L crisis involved S&Ls [1]. Not banks [2]. That was the problem. People making up non-bank “banks” and then blowing them up in the exact way the banking regulations they were looking to escape were written to avoid. Sound familiar? S&Ls were covered by FSLIC. It differs from the FDIC in an important way: it was not backed by the “full faith and credit” of the U.S. That makes it more like Sallie Mae than the FDIC. (Indeed, it comes out of [1] https://en.m.wikipedia.org/wiki/Savings_and_loan_association https://en.m.wikipedia.org/wiki/Savings_and_loan_association [2] Banks also failed. But they were resolved in an orderly way by the FDIC. Nothing there threatened to go systemic. https://www.fdic.gov/bank/historical/history/3_85.pdf https://www.fdic.gov/bank/historical/history/3_85.pdf

ceejayoz 4y ago

And the government stepped in to meet obligations to make depositors whole. The S&L industry collapsed, the folks with $100k of retirement savings in the bank did not. FSLIC got rolled into FDIC for a large insurance risk pool, too. They're not going to do that for Coinbase.

mumblemumble 4y ago

It's worth pointing out that the collapse of the S&L industry is widely recognized as being largely a result of loosening of regulations in the 1980s. https://www.thebalance.com/savings-and-loans-crisis-causes-cost-3306035 https://www.thebalance.com/savings-and-loans-crisis-causes-c... Leaving aside the question of whether it's advisable to have the government in this business in the first place, I'd say we should at least agree that, if it's going to happen, financial institutions that benefit from these programs should be required to be absolutely allergic to risk. Letting firms make questionable loans and pocket the profits while passing the risk on to taxpayers has, as far as I'm aware, never worked out well in practice.

JumpCrisscross 4y ago

> and complete failure of FSLIC. Multiple banks The S&L crisis involved S&Ls [1]. Not banks [2]. That was the problem. People making up non-bank “banks” and then blowing them up in the exact way the banking regulations they were looking to escape were written to avoid. Sound familiar? S&Ls were covered by FSLIC. It differs from the FDIC in an important way: it was not backed by the “full faith and credit” of the U.S. That makes it more like Sallie Mae than the FDIC. (Indeed, it comes out of [1] https://en.m.wikipedia.org/wiki/Savings_and_loan_association https://en.m.wikipedia.org/wiki/Savings_and_loan_association [2] Banks also failed. But they were resolved in an orderly way by the FDIC. Nothing there threatened to go systemic. https://www.fdic.gov/bank/historical/history/3_85.pdf https://www.fdic.gov/bank/historical/history/3_85.pdf