9 ms·

Savings and Loan Crisis 1980–1989

129 points by everybodyknows 4y ago

cs702 4y ago
The parallels with today's banking problems are eerie. Instead of "savings and loan" community banks that loaded up on risky high-yield bonds that could not be repaid in full, today we have local and regional banks that have loaded up on (a) loans to office buildings that cannot be repaid in full, and (b) long-term treasury and agency bonds whose present value has declined well below par due to rising long-term interest rates. The clock is ticking.
- baggy_trough 4y ago
  Yes it's hard to see how the office mortgage market can escape a catastrophic outcome.
  - latchkey 4y ago
    https://www.bloomberg.com/news/articles/2023-04-30/munger-warns-banks-stuck-with-commercial-property-debt-ft-says https://www.bloomberg.com/news/articles/2023-04-30/munger-wa...
- mjevans 4y ago
  B] The bonds themselves aren't risky, they're just long term securities that don't fully appreciate in value for a long time. A very quick change in environment, much higher interest rates, result in immediate liquidation only at far less desired prices. A buyer can still hold them to term and get their full value; it's just there are better investments. A] I can't really speak to real-estate, but generally as a consumer I find the market incentives are misaligned to what should be socially desired results. There's too much darn rent seeking.
  - dragontamer 4y ago
    B was also true in the Savings and Loan Crisis of 1980. The mark-to-market decline of long-term loans wiped out an entire category of financial services (the Savings and Loans service). Remember "A Wonderful Life??" George Bailey? That was "Savings and Loans". Gone, the entirety of the entire sector was wiped out, despite the 30+ year bonds still being "good on their money".
    - dllthomas 4y ago
      > Remember "A Wonderful Life??" George Bailey? That was "Savings and Loans". Bailey ran a savings and loan. The run in the film was not a reference to the S&L crisis, seeing as the film predates it by decades. I assume you meant the right thing, but there's enough ambiguity that I could see a reader being confused.
  - skybrian 4y ago
    While it’s true that the future cash flow from the bond hasn’t changed, it is quite literally worth less money now, because better investments are available. For a bank, these better investments are available to its depositors if they leave. The bank’s borrowing costs have gone up (or will soon) and that’s the difference between profits and losses. The losses will happen sometime (unless interest rates go down again), but when they get recognized is a matter of accounting. So the bonds were risky, as is any fixed-income investment when your borrowing costs are variable. (Though it’s clearly not as bad a loss as it would be if the bonds defaulted.)
  - onlyrealcuzzo 4y ago
    > There's too much darn rent seeking. It's kind of hard for the American Dream to be a rent seeker, and for their not to be a lot of rent seeking...
  - thefounder 4y ago
    Well..imagine if you as a trader would never get the "margin-call" and you would be able to defer the currebt payments until you cash in your future bets. Here we have the banks simply bailed out by the gov(i.e the tax payer gets the short stick while JP Morgan gets the long stick).
- lamontcg 4y ago
  > (b) long-term treasury and agency bonds whose present value has declined well below par due to rising long-term interest rates. Apparently 10y US T-bills are now financial weapons of mass destruction according to the HN hivemind. > (a) loans to office buildings that cannot be repaid in full, This is a big problem with CMBS but I'm not aware of those being significantly involved in any of the recent blow ups. AFAIK this is still next-year's financial crisis that is only just starting to simmer.
- jmyeet 4y ago
  > The parallels with today's banking problems are eerie. No, no they're not. Not even close. Please read up about this before propagating outright falsehoods. The S&L industry in the 1980s was doing FTX type nonsense: using depositor funds for very risky investments. This worked great when the markets were going up. Not so much when the market crashed in 1987. Banks now are holding excess liquidity and funds they otherwise can't lend out (within their risk limits) in US government bonds. The problem is they took long term bonds for slightly higher yield at a time when interest rates were near-zero. And then interest rates went up and created a loss if it were realized. Many companies have been undone by this kind of penny-pinching. It's bad risk management. Even in the case of SVB, it had more assets than depositor funds and despite the vast majority of deposits (by value) being uninsured, every depositor got their money back and it cost the taxpayer nothing.
jmclnx 4y ago
I remember this, IIRC one of the Bush Brothers almost got arrested for what he did. But his farther was president at the time, so no arrest. I forgot the details.
- zafka 4y ago
  Silverado Savings and Loan. Neil Bush was the chosen one to be the next president in the dynasty, but the flack from the S&L scandal forced the family to back George W instead.
- quickthrowman 4y ago
  Neil Bush is the guy you’re thinking of, Silverado Savings and Loan was the institution. His dad (George HW Bush) was the Vice President (for Reagan) at the time. https://en.m.wikipedia.org/wiki/Savings_and_loan_crisis#Silverado_Savings_and_Loan https://en.m.wikipedia.org/wiki/Savings_and_loan_crisis#Silv... > Silverado Savings and Loan collapsed in 1988, costing taxpayers $1.3 billion. Neil Bush, the son of then Vice President of the United States George H. W. Bush, was on the Board of Directors of Silverado at the time.
  - babyshake 4y ago
    He was too Bush to fail.
- deleted 4y ago
  [deleted]
- buescher 4y ago
  There was a president after that who was in a partnership that bought an S&L in the eighties and gave itself bad loans, but it was made out to be so complicated that no one could ever understand it. Everyone else involved in the partnership besides the president and first lady went to prison, though.
  - aidenn0 4y ago
    After investigation, the independent counsel was unable to find any charges it thought were provable beyond a reasonable doubt other than perjury though. If Starr could have hung fraud charges on Clinton, surely he would have?
AnotherGoodName 4y ago
One thing that i feel people really aren't getting right now is that rates are still extremely low and they are moving slowly too compared to previous financial shocks. The fed rate today is 5%. The historical average is 7.5%. They are moving by the smallest amount they can each meeting. There was a post earlier today with comments of the form "why are Meta selling bonds right now when rates are so high shouldn't they sell bonds when it's cheap?" But there's no reason to think rates are high right now except for a comparison to the weird run of near 0% that went on for too long. So we have banks failing due to shock at the recent rate rises but the recent rate rises haven't actually been that extreme or fast. We seem to have got into a phase where there was an assumption that near 0% rates were here to stay. Banks even gambled on this assumption. If anything you should be leaning towards "wow rates are really cheap right now!" because they are historically.
- GalenErso 4y ago
  I am here for $12,000 new houses in good school districts: https://www.pinterest.ca/pin/232639136978161240/ https://www.pinterest.ca/pin/232639136978161240/
  - futhey 4y ago
    With nearly 1000% inflation since 1958, that's $125k in today's money.
    - GalenErso 4y ago
      Cries in Bay Area
      - kmonsen 4y ago
        LOL, it is mind boggling that my shitty Sunnyvale house is like 2x the price of the house Warren Buffett live in!
    - brvsft 4y ago
      This is part of why I don't trust CPI data. Take Warren Buffett's house as another example from 1958: https://www.cnbc.com/2023/03/03/warren-buffett-lives-in-the-same-home-he-bought-in-1958.html https://www.cnbc.com/2023/03/03/warren-buffett-lives-in-the-... > The Berkshire Hathaway CEO still resides in the five-bedroom home in central Omaha, Nebraska, he purchased for $31,500 in 1958, which is about $329,505 in today’s dollars. But the house clearly isn't worth only $329,505 in "today's dollars." Sure, it's more modest than a full-blown mansion, but it's still worth a lot more than that, closer to about a million dollars. And that's including if you were to try buying the house with zero knowledge or context that Warren Buffett once lived in it. Of course, these things are all 'worth' what someone will actually pay for them, but unless we believe that that housing market is so screwed that Buffett's house would sell for ~$330k if the housing market crashed down to reality (which would actually imply potential deflation and a CPI that would result in the home being worth much lower, per "real" dollar figures), that house is never selling for less than $330k. Not even less than $660k, in my opinion. The only way these homes would come close to their price in CPI is if something catastrophic happened to the neighborhoods in which they exist.
bwanab 4y ago
The wikipedia article (https://en.wikipedia.org/wiki/Savings_and_loan_crisis https://en.wikipedia.org/wiki/Savings_and_loan_crisis) is much more informative. Given that this is a financial sector that no longer exists, it's hard for people who weren't around then to understand what a huge deal this was at the time.
- sroussey 4y ago
  One of the biggest things that had material impact on people at the time was the Resolution Trust Corporation that was dumping real estate into the market over seven years. https://en.wikipedia.org/wiki/Resolution_Trust_Corporation https://en.wikipedia.org/wiki/Resolution_Trust_Corporation
- SilasX 4y ago
  The sector no longer exists? Well, nothing under that name exists, but I'm struggling to see the substantive difference between an S&L and a credit union, even after checking out the Wikipedia page on that: https://en.wikipedia.org/wiki/Savings_and_loan_association?useskin=vector#Characteristics https://en.wikipedia.org/wiki/Savings_and_loan_association?u...
  - JumpCrisscross 4y ago
    > I'm struggling to see the substantive difference between an S&L and a credit union S&Ls focussed on residential mortgages. Credit unions can issue credit cards, business loans, HELOCs, et cetera. Historically, S&Ls had time deposits/CDs which they used to finance mortgages. Credit unions were like banks, but tied to a group, e.g. a church or fraternal organization. Over time, S&Ls started taking demand deposits and credit unions broadened the definition of a member to the point of meaninglessness.
    - hinkley 4y ago
      Credit unions used to have extremely tight criteria for membership. You had to be a former or current employee of the company or things of that sort. If your dad was a member you could start an account, but IIRC not if they were a former employee. If memory serves loosening the rules on CUs was part of solving the S&L crisis. So BECU (Boeing Employees’ CU) could serve any Washington residents for instance.
dukeofdoom 4y ago
Digital Currency will save us. Think what imaginary numbers did for math.
- tenebrisalietum 4y ago
  Explain.
  - dukeofdoom 4y ago
    When imaginary numbers were first introduced, they were viewed with skepticism and even derision by some mathematicians. However, over time, they proved to be an invaluable tool in solving complex mathematical problems, such as those involving electrical circuits and quantum mechanics. CBDC will help resolve the difficult mathematical problem when politicians overspend (or steal) money they took from the public, and the accounts don't balance. They can just create more money instantly. And no one will know.
jmyeet 4y ago
What's happening now is an example of the system working, not broken. The comparisons are also made to 2008. Between that and the SnL crisis there are three important differences: 1. Unlike 2008, we don't have a whole host of risky borrowers and poor debt; 2. Rates are still historically low (as another commenter mentioned); and 3. The banks being taken over by the FDIC are solvent. That is, their assets exceed their depositor funds, even if they have to realize losses on long-term bonds by selling them. It's worth noting that accounting rules allow banks to keep bonds off the books and nominally kept at face valuew with the intention of holding them to maturity. We've had bank runs on banks that largely catered to a single vertical (eg SVB, Singularity) and were relatively small. This made them vulnerable. On top of that, you had poor risk management by holding long-term bonds instead of short-term bonds. Management chases short-term yield and if 10 year bonds are offering 1.75% (a couple of years ago) but 3 month bonds are only offering 1.69%, many banks will hold the long-term bonds instead, even though they open themselves up to rising interest rate risk. They are paying the price for now and depositors aren't left holding the bag. So the system is working.
- 0zemp2c 4y ago
  > 1. Unlike 2008, we don't have a whole host of risky borrowers and poor debt; huh? student, auto, and credit card debt are all through the roof auto loans are the new subprime
  - bugglebeetle 4y ago
    Also, commercial real estate. You can’t fill empty buildings with jeremiads in the Wall St. Journal demanding lazy, entitled workers get back to the office.
Aloha 4y ago
What's crazy to me - There was more than one Condo complex demolished - and they're still empty land today! https://www.dallasnews.com/photos/2013/03/24/today-in-dallas-photo-history-1987-scandal-ridden-condos-razed-burned/ https://www.dallasnews.com/photos/2013/03/24/today-in-dallas... https://www.google.com/maps/place/32°50'56.0%22N+96°34'01.8%22W/@32.8489054,-96.5720299,875m/ https://www.google.com/maps/place/32°50'56.0%22N+96°34'01.8%... and https://www.google.com/maps/place/32°50'53.1%22N+96°34'53.8%22W/@32.8480795,-96.5841749,875m/ https://www.google.com/maps/place/32°50'53.1%22N+96°34'53.8%...
- robocat 4y ago
  From article: “the FSLIC decided it was cheaper to actually burn some unfinished condos that a bankrupt Texas S&L had financed rather than try to sell them”. That doesn’t sound crazy. Especially if the condos were rubbish (as we see happen on many countries speculating on houses - unused properties with little intrinsic value).
  - Aloha 4y ago
    I mean they're in Garland, which has not had the growth of other northern edge NTX suburbs. But that the land is still empty boggles for me.
everybodyknows 4y ago
Note that this happened more or less concurrently with the LDC (less-developed-country) debt crisis: https://www.fdic.gov/bank/historical/history/191_210.pdf https://www.fdic.gov/bank/historical/history/191_210.pdf While the pre-existing institutional fragilities were different, Fed tightening hit them both hard: > ... rising dollar ex-change rates in response to the high U.S. interest rates of the early 1980s increased the difficulty of meeting debt commitments.
lucas_membrane 4y ago
In 1988 the newspapers showed a list of the 100 S&L failures that were designated by the feederal authorities as highest priority for investigation and prosecution. This article did not mention that list. Since that time, I have never been able to find a scorecard on how many of those 100 cases led to legal consequences for the perps. Anyone here have any such info?
- themagician 4y ago
  Keating is the name that is known, but I do believe it was hundreds of people. Like, hundreds of people did (some) jail time. But as Martin Shkreli would say, "I just want to let you know, jail is not that bad. So don't fret – I hope it doesn't happen. If it does happen...it's not that bad."
  - jimt1234 4y ago
    The name I remember was Neil Bush, who escaped any real consequences, and it was just a coincidence that his dad was George W. Bush, Vice President, and later the President of the United States.
    - wombatpm 4y ago
      I remember John McCain being involved as well as one of the Keating 5. Part of the reason I never voted for him.
- throw0101b 4y ago
  > The savings and loan debacle was one-seventieth the size of the current crisis, both in terms of losses and the amount of fraud. In that crisis, the savings and loan regulators made over 30,000 criminal referrals, and this produced over 1,000 felony convictions in cases designated as “major” by the Department of Justice. But even that understates the degree of prioritization, because we, the regulators, worked very closely with the FBI and the Justice Department to create a list of the top 100 — the 100 worst fraud schemes. They involved roughly 300 savings and loans and 600 individuals, and virtually all of those people were prosecuted. We had a 90 percent conviction rate, which is the greatest success against elite white-collar crime (in terms of prosecution) in history. * https://billmoyers.com/2013/09/17/hundreds-of-wall-street-execs-went-to-prison-during-the-last-fraud-fueled-bank-crisis/ https://billmoyers.com/2013/09/17/hundreds-of-wall-street-ex... It would take some digging to go through press releases and such: > NEVIS was convicted in 1989 of 24 felony bank fraud charges in the District of Oregon arising from the collapse of State Federal Savings and Loan of Corvallis. He initially was sentenced to a term of imprisonment for two years, to be followed by probation for a period of five years, with restitution in the amount of $2 million to be paid in annual installments of $400,000 as a condition of probation. * https://www.justice.gov/archive/opa/pr/Pre_96/November95/584.txt.html https://www.justice.gov/archive/opa/pr/Pre_96/November95/584... I'm sure there's a body of research on it, but you'd have to have decent search-fu to know which keywords for particular academic articles and such.

The parallels with today's banking problems are eerie. Instead of "savings and loan" community banks that loaded up on risky high-yield bonds that could not be repaid in full, today we have local and regional banks that have loaded up on (a) loans to office buildings that cannot be repaid in full, and (b) long-term treasury and agency bonds whose present value has declined well below par due to rising long-term interest rates. The clock is ticking.

baggy_trough 4y ago
Yes it's hard to see how the office mortgage market can escape a catastrophic outcome.
- latchkey 4y ago
  https://www.bloomberg.com/news/articles/2023-04-30/munger-warns-banks-stuck-with-commercial-property-debt-ft-says https://www.bloomberg.com/news/articles/2023-04-30/munger-wa...
mjevans 4y ago
B] The bonds themselves aren't risky, they're just long term securities that don't fully appreciate in value for a long time. A very quick change in environment, much higher interest rates, result in immediate liquidation only at far less desired prices. A buyer can still hold them to term and get their full value; it's just there are better investments. A] I can't really speak to real-estate, but generally as a consumer I find the market incentives are misaligned to what should be socially desired results. There's too much darn rent seeking.
- dragontamer 4y ago
  B was also true in the Savings and Loan Crisis of 1980. The mark-to-market decline of long-term loans wiped out an entire category of financial services (the Savings and Loans service). Remember "A Wonderful Life??" George Bailey? That was "Savings and Loans". Gone, the entirety of the entire sector was wiped out, despite the 30+ year bonds still being "good on their money".
  - dllthomas 4y ago
    > Remember "A Wonderful Life??" George Bailey? That was "Savings and Loans". Bailey ran a savings and loan. The run in the film was not a reference to the S&L crisis, seeing as the film predates it by decades. I assume you meant the right thing, but there's enough ambiguity that I could see a reader being confused.
- skybrian 4y ago
  While it’s true that the future cash flow from the bond hasn’t changed, it is quite literally worth less money now, because better investments are available. For a bank, these better investments are available to its depositors if they leave. The bank’s borrowing costs have gone up (or will soon) and that’s the difference between profits and losses. The losses will happen sometime (unless interest rates go down again), but when they get recognized is a matter of accounting. So the bonds were risky, as is any fixed-income investment when your borrowing costs are variable. (Though it’s clearly not as bad a loss as it would be if the bonds defaulted.)
- onlyrealcuzzo 4y ago
  > There's too much darn rent seeking. It's kind of hard for the American Dream to be a rent seeker, and for their not to be a lot of rent seeking...
- thefounder 4y ago
  Well..imagine if you as a trader would never get the "margin-call" and you would be able to defer the currebt payments until you cash in your future bets. Here we have the banks simply bailed out by the gov(i.e the tax payer gets the short stick while JP Morgan gets the long stick).
lamontcg 4y ago
> (b) long-term treasury and agency bonds whose present value has declined well below par due to rising long-term interest rates. Apparently 10y US T-bills are now financial weapons of mass destruction according to the HN hivemind. > (a) loans to office buildings that cannot be repaid in full, This is a big problem with CMBS but I'm not aware of those being significantly involved in any of the recent blow ups. AFAIK this is still next-year's financial crisis that is only just starting to simmer.
jmyeet 4y ago
> The parallels with today's banking problems are eerie. No, no they're not. Not even close. Please read up about this before propagating outright falsehoods. The S&L industry in the 1980s was doing FTX type nonsense: using depositor funds for very risky investments. This worked great when the markets were going up. Not so much when the market crashed in 1987. Banks now are holding excess liquidity and funds they otherwise can't lend out (within their risk limits) in US government bonds. The problem is they took long term bonds for slightly higher yield at a time when interest rates were near-zero. And then interest rates went up and created a loss if it were realized. Many companies have been undone by this kind of penny-pinching. It's bad risk management. Even in the case of SVB, it had more assets than depositor funds and despite the vast majority of deposits (by value) being uninsured, every depositor got their money back and it cost the taxpayer nothing.

jmclnx 4y ago

I remember this, IIRC one of the Bush Brothers almost got arrested for what he did. But his farther was president at the time, so no arrest. I forgot the details.

zafka 4y ago
Silverado Savings and Loan. Neil Bush was the chosen one to be the next president in the dynasty, but the flack from the S&L scandal forced the family to back George W instead.
quickthrowman 4y ago
Neil Bush is the guy you’re thinking of, Silverado Savings and Loan was the institution. His dad (George HW Bush) was the Vice President (for Reagan) at the time. https://en.m.wikipedia.org/wiki/Savings_and_loan_crisis#Silverado_Savings_and_Loan https://en.m.wikipedia.org/wiki/Savings_and_loan_crisis#Silv... > Silverado Savings and Loan collapsed in 1988, costing taxpayers $1.3 billion. Neil Bush, the son of then Vice President of the United States George H. W. Bush, was on the Board of Directors of Silverado at the time.
- babyshake 4y ago
  He was too Bush to fail.
deleted 4y ago
[deleted]
buescher 4y ago
There was a president after that who was in a partnership that bought an S&L in the eighties and gave itself bad loans, but it was made out to be so complicated that no one could ever understand it. Everyone else involved in the partnership besides the president and first lady went to prison, though.
- aidenn0 4y ago
  After investigation, the independent counsel was unable to find any charges it thought were provable beyond a reasonable doubt other than perjury though. If Starr could have hung fraud charges on Clinton, surely he would have?

AnotherGoodName 4y ago

One thing that i feel people really aren't getting right now is that rates are still extremely low and they are moving slowly too compared to previous financial shocks. The fed rate today is 5%. The historical average is 7.5%. They are moving by the smallest amount they can each meeting. There was a post earlier today with comments of the form "why are Meta selling bonds right now when rates are so high shouldn't they sell bonds when it's cheap?" But there's no reason to think rates are high right now except for a comparison to the weird run of near 0% that went on for too long. So we have banks failing due to shock at the recent rate rises but the recent rate rises haven't actually been that extreme or fast. We seem to have got into a phase where there was an assumption that near 0% rates were here to stay. Banks even gambled on this assumption. If anything you should be leaning towards "wow rates are really cheap right now!" because they are historically.

GalenErso 4y ago
I am here for $12,000 new houses in good school districts: https://www.pinterest.ca/pin/232639136978161240/ https://www.pinterest.ca/pin/232639136978161240/
- futhey 4y ago
  With nearly 1000% inflation since 1958, that's $125k in today's money.
  - GalenErso 4y ago
    Cries in Bay Area
    - kmonsen 4y ago
      LOL, it is mind boggling that my shitty Sunnyvale house is like 2x the price of the house Warren Buffett live in!
  - brvsft 4y ago
    This is part of why I don't trust CPI data. Take Warren Buffett's house as another example from 1958: https://www.cnbc.com/2023/03/03/warren-buffett-lives-in-the-same-home-he-bought-in-1958.html https://www.cnbc.com/2023/03/03/warren-buffett-lives-in-the-... > The Berkshire Hathaway CEO still resides in the five-bedroom home in central Omaha, Nebraska, he purchased for $31,500 in 1958, which is about $329,505 in today’s dollars. But the house clearly isn't worth only $329,505 in "today's dollars." Sure, it's more modest than a full-blown mansion, but it's still worth a lot more than that, closer to about a million dollars. And that's including if you were to try buying the house with zero knowledge or context that Warren Buffett once lived in it. Of course, these things are all 'worth' what someone will actually pay for them, but unless we believe that that housing market is so screwed that Buffett's house would sell for ~$330k if the housing market crashed down to reality (which would actually imply potential deflation and a CPI that would result in the home being worth much lower, per "real" dollar figures), that house is never selling for less than $330k. Not even less than $660k, in my opinion. The only way these homes would come close to their price in CPI is if something catastrophic happened to the neighborhoods in which they exist.

bwanab 4y ago

The wikipedia article (https://en.wikipedia.org/wiki/Savings_and_loan_crisis https://en.wikipedia.org/wiki/Savings_and_loan_crisis) is much more informative. Given that this is a financial sector that no longer exists, it's hard for people who weren't around then to understand what a huge deal this was at the time.

sroussey 4y ago
One of the biggest things that had material impact on people at the time was the Resolution Trust Corporation that was dumping real estate into the market over seven years. https://en.wikipedia.org/wiki/Resolution_Trust_Corporation https://en.wikipedia.org/wiki/Resolution_Trust_Corporation
SilasX 4y ago
The sector no longer exists? Well, nothing under that name exists, but I'm struggling to see the substantive difference between an S&L and a credit union, even after checking out the Wikipedia page on that: https://en.wikipedia.org/wiki/Savings_and_loan_association?useskin=vector#Characteristics https://en.wikipedia.org/wiki/Savings_and_loan_association?u...
- JumpCrisscross 4y ago
  > I'm struggling to see the substantive difference between an S&L and a credit union S&Ls focussed on residential mortgages. Credit unions can issue credit cards, business loans, HELOCs, et cetera. Historically, S&Ls had time deposits/CDs which they used to finance mortgages. Credit unions were like banks, but tied to a group, e.g. a church or fraternal organization. Over time, S&Ls started taking demand deposits and credit unions broadened the definition of a member to the point of meaninglessness.
  - hinkley 4y ago
    Credit unions used to have extremely tight criteria for membership. You had to be a former or current employee of the company or things of that sort. If your dad was a member you could start an account, but IIRC not if they were a former employee. If memory serves loosening the rules on CUs was part of solving the S&L crisis. So BECU (Boeing Employees’ CU) could serve any Washington residents for instance.

dukeofdoom 4y ago

Digital Currency will save us. Think what imaginary numbers did for math.

tenebrisalietum 4y ago
Explain.
- dukeofdoom 4y ago
  When imaginary numbers were first introduced, they were viewed with skepticism and even derision by some mathematicians. However, over time, they proved to be an invaluable tool in solving complex mathematical problems, such as those involving electrical circuits and quantum mechanics. CBDC will help resolve the difficult mathematical problem when politicians overspend (or steal) money they took from the public, and the accounts don't balance. They can just create more money instantly. And no one will know.

jmyeet 4y ago

What's happening now is an example of the system working, not broken. The comparisons are also made to 2008. Between that and the SnL crisis there are three important differences: 1. Unlike 2008, we don't have a whole host of risky borrowers and poor debt; 2. Rates are still historically low (as another commenter mentioned); and 3. The banks being taken over by the FDIC are solvent. That is, their assets exceed their depositor funds, even if they have to realize losses on long-term bonds by selling them. It's worth noting that accounting rules allow banks to keep bonds off the books and nominally kept at face valuew with the intention of holding them to maturity. We've had bank runs on banks that largely catered to a single vertical (eg SVB, Singularity) and were relatively small. This made them vulnerable. On top of that, you had poor risk management by holding long-term bonds instead of short-term bonds. Management chases short-term yield and if 10 year bonds are offering 1.75% (a couple of years ago) but 3 month bonds are only offering 1.69%, many banks will hold the long-term bonds instead, even though they open themselves up to rising interest rate risk. They are paying the price for now and depositors aren't left holding the bag. So the system is working.

0zemp2c 4y ago
> 1. Unlike 2008, we don't have a whole host of risky borrowers and poor debt; huh? student, auto, and credit card debt are all through the roof auto loans are the new subprime
- bugglebeetle 4y ago
  Also, commercial real estate. You can’t fill empty buildings with jeremiads in the Wall St. Journal demanding lazy, entitled workers get back to the office.

Aloha 4y ago

What's crazy to me - There was more than one Condo complex demolished - and they're still empty land today! https://www.dallasnews.com/photos/2013/03/24/today-in-dallas-photo-history-1987-scandal-ridden-condos-razed-burned/ https://www.dallasnews.com/photos/2013/03/24/today-in-dallas... https://www.google.com/maps/place/32°50'56.0%22N+96°34'01.8%22W/@32.8489054,-96.5720299,875m/ https://www.google.com/maps/place/32°50'56.0%22N+96°34'01.8%... and https://www.google.com/maps/place/32°50'53.1%22N+96°34'53.8%22W/@32.8480795,-96.5841749,875m/ https://www.google.com/maps/place/32°50'53.1%22N+96°34'53.8%...

robocat 4y ago
From article: “the FSLIC decided it was cheaper to actually burn some unfinished condos that a bankrupt Texas S&L had financed rather than try to sell them”. That doesn’t sound crazy. Especially if the condos were rubbish (as we see happen on many countries speculating on houses - unused properties with little intrinsic value).
- Aloha 4y ago
  I mean they're in Garland, which has not had the growth of other northern edge NTX suburbs. But that the land is still empty boggles for me.

everybodyknows 4y ago

Note that this happened more or less concurrently with the LDC (less-developed-country) debt crisis: https://www.fdic.gov/bank/historical/history/191_210.pdf https://www.fdic.gov/bank/historical/history/191_210.pdf While the pre-existing institutional fragilities were different, Fed tightening hit them both hard: > ... rising dollar ex-change rates in response to the high U.S. interest rates of the early 1980s increased the difficulty of meeting debt commitments.

lucas_membrane 4y ago

In 1988 the newspapers showed a list of the 100 S&L failures that were designated by the feederal authorities as highest priority for investigation and prosecution. This article did not mention that list. Since that time, I have never been able to find a scorecard on how many of those 100 cases led to legal consequences for the perps. Anyone here have any such info?

themagician 4y ago
Keating is the name that is known, but I do believe it was hundreds of people. Like, hundreds of people did (some) jail time. But as Martin Shkreli would say, "I just want to let you know, jail is not that bad. So don't fret – I hope it doesn't happen. If it does happen...it's not that bad."
- jimt1234 4y ago
  The name I remember was Neil Bush, who escaped any real consequences, and it was just a coincidence that his dad was George W. Bush, Vice President, and later the President of the United States.
  - wombatpm 4y ago
    I remember John McCain being involved as well as one of the Keating 5. Part of the reason I never voted for him.
throw0101b 4y ago
> The savings and loan debacle was one-seventieth the size of the current crisis, both in terms of losses and the amount of fraud. In that crisis, the savings and loan regulators made over 30,000 criminal referrals, and this produced over 1,000 felony convictions in cases designated as “major” by the Department of Justice. But even that understates the degree of prioritization, because we, the regulators, worked very closely with the FBI and the Justice Department to create a list of the top 100 — the 100 worst fraud schemes. They involved roughly 300 savings and loans and 600 individuals, and virtually all of those people were prosecuted. We had a 90 percent conviction rate, which is the greatest success against elite white-collar crime (in terms of prosecution) in history. * https://billmoyers.com/2013/09/17/hundreds-of-wall-street-execs-went-to-prison-during-the-last-fraud-fueled-bank-crisis/ https://billmoyers.com/2013/09/17/hundreds-of-wall-street-ex... It would take some digging to go through press releases and such: > NEVIS was convicted in 1989 of 24 felony bank fraud charges in the District of Oregon arising from the collapse of State Federal Savings and Loan of Corvallis. He initially was sentenced to a term of imprisonment for two years, to be followed by probation for a period of five years, with restitution in the amount of $2 million to be paid in annual installments of $400,000 as a condition of probation. * https://www.justice.gov/archive/opa/pr/Pre_96/November95/584.txt.html https://www.justice.gov/archive/opa/pr/Pre_96/November95/584... I'm sure there's a body of research on it, but you'd have to have decent search-fu to know which keywords for particular academic articles and such.