okay
all right
uh feelings on what caused the S and L
crisis
i guess i don't
have a real technical knowledge for what happened i gather that there where large numbers of situations where
loan were made that appear to be
a good loan but in a speculative since and with have little regulation going on because of deregulation during
the Reagan eight years
uh more and more S and L simply began to take riskier and riskier loans
and then when they began to collapse one after the other i think almost like an avalanche of of property values devalued
um-hum kind of like a domino's effect
right i don't have a a field for whether or not
this is the equivalent of what was called the teapot dome
no
uh scandal are you familiar with that from your histories lessons or whatever
no no
uh i vaguely recall but i've never gone and done any study on it since the S and L thing that teapot dome scandal is when i think during the Hoover years
where gobs of land was was sold at really inflated prices on the theory that there were natural gas beneath it and that that appeared to be corruption within the Hoover administration i don't have a real since
of of like corruption that caused S and L all though i have a feeling that people look the other way when things began to go sour
um-hum no i don't think it was really corruption that caused it
maybe
or within i think people just started
you know not not being as careful with the loans that they were making
whenever
you you know whenever they gave them out
uh-huh
i think maybe they didn't check into them enough
or maybe because everyone else was doing they figured they would just go ahead and approve it also so
yeah
yeah
it it seems like there were on awful a lot of people
making loans and business decisions
on a
get rich quick is is the wrong phrase but
if it captures some of the the feeling i have from the people making
business decisions that if they failed it's sort of well no skin of my back i'll move on to this other company or
um-hum um-hum
i i just since that they didn't have a commitment to the stability of the organizations they were were making the decisions for and i don't know whether that's because they had other opportunities to which they could move
um-hum
you know that it was that easy for them to find new work that they didn't weren't stuck to where they were and as the things begin to collapse they just moved on
i'm not sure
or whether they had extracted enough money in a percentage base such that they didn't they didn't care any more i
i just i'm rather puzzled about the whole thing
um-hum i know well i'm um i know a little bit about it but i don't as much as i should know about it i'm a finance major here at Clarion
it
okay
and um i do know that one of the reasons that caused it is the fact that the federal reserved backed any loan that the Savings and L made with a a hundred thousand dollars
so they were kind of insured with that hundred thousand dollars and i think that's kind of why they they were making the riskier loans because they were like oh well we have a hundred thousand dollars insurance on it
well they didn't they didn't have a since of risk
no i don't think so
oh okay
and uh plus where the fact where they were allowed to make loans in any almost any type of loan and like some banks you know they're limited to the types of loans that they're allowed to make
uh-huh
and i think the S and L's were more open with the types of loans that they were allowed to make
okay
and i think if they would be more bound
to certain loans and not as high of insurance by the reserve then i don't think this would have happened
well do you think we there's a final accounting yet not in the since of pennies and
nickels but do you think there's accounting on an ordered of magnitude or that
that they really do understand how much money it is for awhile it seemed like every time i opened the paper up
it was escalating in terms of the damage uh did is your since that we now understand how bad it is
um-hum
or is there more to be heard yet
um
i think that people just basically got tired of hearing it and it wasn't making it was wasn't as good news as it was i think it's still adding you know adding up and i think it will be for awhile
so you don't think necessarily they don't have a complete grasp yet or whether or
no i don't i don't think they do i don't think how i don't think how they could find that big how much was really lost or how much they were going to lose because there still are some S and L's still open
uh-huh
and it's and it's very possible for them to go down in the future because of this
to be caught in the land slide
um-hum um-hum
um-hum
do you think to possibly is that it'll happen with the regular banks
i i don't know i think i think it would be harder but i think there are some regular banks that will go down with it
it seems that i recall reading for the last
oh let's say starting three years ago but not so much in the last year of bank risks
of relative to the loaning funds to third world countries like Mexico Venezuela
um-hum
uh and Argentina based on oil loans and then the price of oil had had gone south
resulting in those loans being very risky and i guess i read articles of various banks that have done
the right thing to contain their risks given that they had made multiple billion dollar loans
i have this vague since that that could happen
that that there are still monies loaned out to third world countries that could end up being totally lost
oh yeah um in some of my classes now i was just reading i think it was in Venezuela i can't remember what company it was but they just wrote off like millions of dollars because they know they will never get it back
um-hum
you know and they just they just wrote it right off
i think i think we've lost a lot of money and you know like we every never going to get it back it's impossible to get it back
and so you think that it's just gone
um-hum
um-hum yeah because we're we're you know we're talking about some peens that have just
like even gave up on getting it back they're even trying any more
okay
they just totally wrote it off their book
do you think it is necessary to have the
federal guaranty program
like my since is that was there to try to protect small investors but it ended up protecting big investors
hum
which i don't think what it was meant to do
so i guess it i feel like as long as we have the possibility for this large numbers of people to be protected
the possibility exists for for these sorts of
of problems
um-hum um yeah i think is it necessary to have um the backing
um it it's it's just for you know safe purposes
you know in case something would happen um
yeah as long as there's enough little companies we're going to have to ha ve something
um
so your since is that the
that uh the
the loan guarantees which really were accounts guaranties so the so that the account holders that if something went wrong they would have their money
um-hum
right
and given that the S and L's have had disasters then those account holders are are their money is still being protected
um-hum
and that is it's million of people with anywhere from thousands to tens of thousands i guess of
um-hum
of dollars being protected
it it seems like um there was a lot of money being protected in multiple accounts
uh it's if if you take
ten million people and protect ten thousand dollars it still only a hundred billion billion dollars and we're taking about monies way in access of that now so it's obvious that we've protected large accounts
um-hum
and perhaps multiple people in multiple S and L's
and and it seems like maybe that needs to be thought about rethought
yeah
you know that the for
i guess i'm content with the need to have protection on on accounts but i feel likes it's on an individual basis someone whose got
um-hum
accounts in thirty five different S and L's or
thirty or forty thousand dollars and they're all protected by the government seems to me like they've gotten around what was intended to be the issue there
uh-huh
i guess i don't have a personal sense of vulnerability on it since i was not a heavy user of any S and L's and and let alone any of them that went bankrupt
um-hum
and i guess that means that from my perspective it could happen again because that means i'm not worried enough
i think it could happen yeah
uh it's kind of thing where maybe we'll survive and then i then it will happen again because we don't pay attention to those kinds of things
um-hum
i think it'll happen again but i think it'll be a long time in the future before it does happen again
because i think like the bank people and any kind of people like that are gonna be worried about it and not to let it happen again in the near future
but i think later on they're gonna start and forget about it and start making some of the riskier loans i mean you're gonna have to take some risks
and as long as they're backed i think they're still gonna you know start taking on riskier loans and i think there is a chance it could happen again but not until you know late you know in the future
uh-huh
well perhaps if there are regulatory
um
constraints put back in place
um-hum
it will protect that maybe we have learned a little bit of a lesson here about what happens if you remove a little of the regulation
uh
