Comments on: Monday’s Blame Game: The S&L Crisis.

By: Mikew

Mikew — Tue, 08 Jan 2008 14:48:27 +0000

$350 Billion dollars 20 years ago! Wow thats amazing. I am not even sure what $350 billion dollars in the early 80s translates into today’s dollars but I suspect its probably $700 billion dollars at least. By most estimates this present mess should not even total the $350 billion in today’s dollars. Its a damn shame that the government decided to bailout all of those greedy idiots back then.

I believe if we put this crisis in perspective to the SnL crisis we can see that a lot of the doom and gloom forecasting is not necessary. Infact its counter-productive.

I am not saying that we don’t have a real fat mess here. Fortunately we do have history to help us make educated decisions about what to do today. This will pass sooner than later. Maybe it will take a few years but it will pass. Housing is a commodity. We need them to survive.

There are so many drastic proposals out there which are quite frankly counter-productive to fixing this mess.

Instead of the government coming in and making rules which will have no effect because they only work on half of the originators they should stay out of the way and let the chips fall where they should. Let the poorly managed lenders and originators fail. The real estate investors who were greedy and liars should lose their investments. The borrowers who claimed that they didn’t know the terms of their loan contracts should learn to read or at least listen to the closers about the 100 documents that repeatly disclose the terms of their loans. The wall street firms who made bad bets should take their lumps. The credit rating agencies that basically took various types of payoffs should have to revamp their operations to regain trust. The investors who bought bad investments should wisen up and study what they buy instead of passing the blame to the credit rating agencies.

If this happens, the markets (albiet more painfully initially) will correct themselves quicker and perhaps we will avoid this in the future. Everyone will be more responsible in the future. However, if banks, wall street and every other segment of this mess continues to buyoff the politicians than we can expect this to happen again several more times in our lifetimes.

By: Toby

Toby — Mon, 07 Jan 2008 22:29:00 +0000

This just in. Looks like NAR is getting ready for a media offensive in a week. Read about it here:

http://www.realtor.org/pac.nsf/pages/pachome

By: toby

toby — Mon, 07 Jan 2008 17:26:42 +0000

Not sure what S&L history you are reading. No one except depositors got bailed out in the S&L fiasco. The FSLDIC (now part of the FDIC) went bust and the feds paid off depositors up to $100k as they should have. I worked for the RTC (resolution trust corp) right out of college. It was a mess. The RTC essentially took over the busted S&Ls and sold off thier assets. The original cost was estimated at north of $500 billion. The actual cost was around $350 billion over 7 years. A few “millionaire” S&L owners went to jail. A few that shold have, such as Neil Bush, GW’s brother, did not. The biggest losses, about 80%, were in commercial and commercial vacant land loans with the rest in residential (half in Texas).

In the end the failure of the S&Ls was the combined result of congress reneging on agreements with the good S&Ls after they purchased some of the failing S&Ls, an oil bust, a mini housing bust and an overall recession.

The SINGLE biggest lesson that ALL the lenders learned was to sell off your loans to someone else. And if you want to actually hold loans then buy them form the GSEs with their implicit federal backing. The last part of that lesson was ignored as many banks recently purchased “AAA rated” subprime debt which is defaulting.