Savings and Loan Crisis: Explained, Summary, Timeline, Bailout, Finance, Cost, History


well the savings and loan crisis thing is really struck a responsive chord around the United States we’ve been getting more mail from the programs which we’ve done on the savings and loan crisis with Rob Widdowson than any other subject even those of the CIA or the Kennedy assassination people are astounded by it they want to hear more about it and you have a kind of come to Superstar everybody getting these letters you know they want to know about you and people stopping you on the streets and not only that rob has become one of the country’s experts and has been taken into the confidence of some of the high executives of these Savings and Loan institutions investment bankers are our colony month and spilling their guts to him and business organization Colin tell us what are we going to do how are we gonna get out of this this is the weirdest situation I think I’ve ever seen and all this seems to be focused on you because you I’ve been writing articles and been on TV and people recognize you and think you’ve got all the answers well I don’t have many answers but I have been studying this pretty carefully for a year and the more I probe into it the more detail I see naturally and so one of the problems is that now that I’ve been doing it for so long I have a kind of responsibility to try and explain what I see have a happening and what has happened to cause this enormous financial disaster let’s say today if we can get the big picture so for all the media has done in this S&L crisis is to blame guys like Neil Bush or Charles key Ian as if it’s just a few entrepreneurs that went berserk rich kids gambling with the taxpayers money that that’s all the savings and loan scandal really amounts to but there’s much more behind this isn’t it yes it appears that there were structural changes in many areas that relate to thrift the banking that really created as much of this disaster as the these evil SNL owners like Keating and don’t mean like changes in the laws and policy or regulatory agencies and and what the federal government did to these people is just brutal I mean for those people who are interested in conspiracy theories I’m sure somebody can find something I’m not going to come up with anything right today but I mean there’s some threads in here that are really nasty yeah but tell us about what some of these changes apparently they made changes and learn some of these naughty guys in any way exactly that’s exactly that okay first of all it’s pretty well known that at the end of the 70s the thrift industry was on the ropes because of rising interest rates and the thrifts had their money invested in long-term mortgages and as interest rates on deposits rose people took their money out of thrifts and put them in money market funds of banks and other agencies that give him a high return so now thrifts were carefully regulated and had been all throughout their history they were designed just for single-family homes basically well in 1980 the first step was taken and that was to lift the cap on interest rates and raise the amount of insurance for each deposit $200,000 okay now that one’s pretty well-known now in addition right around that time because the thrift industry was in so much trouble the regulator’s began to grant what they call forbearances now part of the regular regulatory apparatus was that each thrift had to maintain a certain amount of freeze serve money on hand it was calculated as a percentage of assets assets being outstanding loans and any property or any other asset that the thrift owned and they had to maintain 5% which means that if the thrift was liquidated on a given day they had to have at least 5% left anything under that and they were in violation of the rules and technically they were insolvent they could be closed but because the whole industry was in trouble the regulator’s took it easy on him and they granted forbearances which allowed them to carry a lower capital reserve than the law required now what that effectively meant was see if you if you were a thrift owner and that that 5% capital reserve was really your profit because if you liquidated the thrift on any given day what was left over was what you took home so in the early 80s with these four when through in trouble there were many of the thrifts had no capital reserve which meant that the owner had no more stake in the thrift he already lost his money say so so anything that he could grab the antics in any way with his turn into assets that could preper s’en allure corporate that he could take control outside of the framework and it so then it meant that he really had no loyalty to the organization exactly because he had no money of it ah he had already lost his money okay and this began actually with Carter or when Reagan first came in as president well the problems in the thrift industry began in the 70s and it dates back to us going off the gold standard and floating interest rates and all of that goes back to Nixon really uh-huh exactly 70 and then the high inflation under Carter and high interest rates exactly then forced them to give a lot of money I was getting 17% at one time yeah a little part of certificate prime rate got up over 20% when you grab it suddenly anything so there’s a point about the psychology here the regulator’s were given everybody a break because they didn’t want to have to shut it shut it all down they didn’t have enough money in the interest in the insurance fund to cover all these deposits anyway the FSL I say the FS LS a right so the owners were kind of set up already psychologically now in 1982 the famous deregulation Act occurs and that’s Garn San Germain we’ve all heard about that all the right skulduggery and corruption went on in that right well let me just go through a couple of the provisions of garance and remain and show how they have the kind of effect they had first of all they dropped the capital requirement from 5% to 3% okay so that meant your reserves had only to be 3% now that had an interesting effect particularly with the people that wanted to buy in okay they need as much they didn’t need as much so if you had a hundred million dollar bank a medium-sized thrift that was up for sale in a small town in Texas for example all you needed to come up with was three million bucks to buy that bank and you set that aside as a capital reserve and you were off and running and some people bought some very big banks with even less than that yeah well there’s the famous stories of this Florida guy uh-huh exactly with promises that they were going to make it up and they had investors and all of this now the other another interesting part of Garn San Germain was it allowed the banks to take six percent loan origination fee on any loan they made now what that means is that you go into a town you buy one hundred million dollar bank you put up three million bucks the next thing you do is you loan that hundred million out and you take a six percent loan origination fee and you just put three million dollars so you’re being paid to loan money to whoever there’s any shady wheeler-dealer here getting a letter and they took us at the front and the government will ensure the loan if it goes bad exactly and you took it upfront so you’re encouraged to give bad loans by this bill in a sense yes and they didn’t make any difference them if they were paid back or not because they had their 6% exactly okay now the savings and loans were allowed by garnish and remain to branch out into all kinds of investments in fact they were allowed to invest directly in commercial real estate projects so what they all did was the minigun San Germaine was passed they all set up a holding company construction holding company sort of off to the side and then they would loan money to the construction company and the construction company would go ahead and develop property so the first thing they all did was they designed office towers and they counted on themselves to be a primary tenant so they built themselves buildings okay they’ll on themselves money built themselves building right and then they charged themselves absorbed in rent which came out of the deposit Hawkins of the savings in law exam he’s at the end there and they could take his profit and their loan fee they got on top of all the rest exactly exact God now another thing they were allowed to do this is it just gets more and more incredible a hundred percent financing so borrower comes into your back he’s got the project he wants to doing these 50 million dollars well they never asked him what he was going to give him upfront they just said okay we’ll enjoy the 50 million they didn’t have to put up a dime they’d even check see the guy with had credit were they well they were supposed to check that it was called due diligence but it was length left for somebody else diligence I was lacking his eglee and as part of the deal they would loan little extra like if you want a fifty million they were lonely 58 million they’d set the 8 million side in an escrow account to pay off the interest the first years out premiums so the developer never put in a penny the bank loans out the 50 million bucks right the payments are made on time they’re just pulled out of the escrow account that the bank also learned as part of the deal all right so the developer didn’t have to put up a penny so this encouraged a lot of development that wasn’t needed I mean already Houston for instance had about a fifty percent vacancy rate on their office buildings right in the throughout Texas this was the case exactly now there’s a lot more and here in Austin we got all these buildings and nobody’s in yeah exactly now there’s a reason for that and I’m getting okay okay there’s one other point I want to make about Garn syndrome a-all right and this is really a killer they were allowed to loan money on the appraised value of a piece of property not on the purchase price on the appraised value so who is a present well you go around time you get an appraiser but of course the appraisers are going you know they listen to the tone of your voice if you’re telling the tajmahal would you’re going to cover it with mosaics this big and it’s going to cost one hundred million bucks well the you know suddenly that’s the prize exactly so I mean you bought a piece of land for five million dollars and you’re going to put a hundred million dollar development line then a 100 million bucks was the appraisal and that’s how much you could loan out and was the appraisers getting kickbacks or were they getting percentages based upon the appraisal hungry of course agenda standard fees huh right exactly so okay now here comes a big kicker one of the very first things that Ronald Reagan did when you get into office was he pushed through the tax reform act in 81 now there were two major clauses of the Stax Reform Act one was it dropped the tax rate for the very wealthy the highest bracket from 78 percent 73 percent of 28 percent that’s a big guy that was a big drop freed up a lot of bucks the second thing that it did and this is the important thing for the Savings and Loan industry is it changed the way depreciation worked now when you when you buy commercial property you’re allowed to depreciate that property over the average length of existence of that property so for example if you buy a building for a million dollars and it’s got a 20 year life let’s say then you can depreciate the value of that property five percent every year for 20 years okay which means that you can write that off your taxes you take it off the gross your gross income well the Tax Reform Act of 1981 allowed for accelerated depreciation so and instead of 5% every year for 20 years you could write off 12 percent the first year 10 percent the second year 8 percent the third year so in 3 years you’ve dropped 30 percent instead of 15% okay now what that meant was that you could get an enormous tax break in fact most of the people who invested went back and refigured their taxes 3 years in advance and took tax breaks on that too so they made a fortune so they’re defined tax payments right there waiting to the future to pay the taxes on it and they’re getting their deep discounts early on is that the way it works well when you’re allowed to depreciate the value of the property it means that yeah you pay less tax at the beginning in more tax okay okay says deferring the [Music] taxes l the the properties after three or four years they wouldn’t pay any taxes right exactly so what this did was everybody wanted to build everybody wanted to develop right so all as you were saying all of that development all of those properties were not built to put people in their offices to meet needs the people were known and there was no market demand whatsoever right it was a place to put your money and it was an enormous tax shelter right okay now this is going to come back to haunt people okay now there’s some other changes there were changes in the appraisers laws one key one was something always troubled me was in 1983 and 1984 here in Austin along Congress Avenue on Main Avenue all these office towers went up all at once again some notice that yeah okay and I always bothered me I mean why was everybody building at once and likewise modern-style well the reason was that the rules for phrases were changed normally if you put up a property the appraiser would have to take into account the surrounding properties so in other words if you put up a luxury apartment building on a block with four other luxury apartment buildings it’s worth less than if it sits by itself right naturally market value well under the new appraisal laws appraisers did not have to take into account any building in the area that was under construction so in other words when they appraised one of those towers on Congress out they didn’t have to take into account the fact that there were five other towers being built right on the same street within a few blocks okay so that the market value was completely inflated for all of those towers okay now you couple that with the fact that you could loan on appraised values and I mean you had an inflation that went through the roof and people began to do things called Lin flipping mm where they would buy a property I’ll give you an example uh there’s a guy named Lou Reese Louie Reese from Dallas he was a developer and in 1983 he bought a property in DeSoto town just south of Dallas 223 acre tract for 5.3 million dollars a year later he set up a partnership with a guy from Holland and he sold the property to himself and the partner for ten million dollars a year after that that partnership sold the property back to another Reese company he sold it back to himself for fifteen million dollars now what’s the point of this I’m not sure I understand the financial benefit accrued from doing this land flipping well he would borrow the money from a bank to sell the property from himself to himself so he would take the Prophet himself exactly okay okay and and the way you would do it is he did an appraiser to appraise the land at a higher value each time and this was called land flipping and it was very common in fact one developer told the story of being in a courthouse County Courthouse near Dallas one afternoon and a real prime piece of property was up for sale and what they did was they lined a hallway in front of the County Clerk’s office with card tables I’m here the story and now it was incredible with the card tape okay so the deed comes and sits on the first card table here’s the buyer here’s the seller they sign everything pass papers all the checks but then they pass the deed to the next card table new buyer same property same property right and they pass it down this line would go up every each time the value would rise okay now where was the money where was the money coming in to do this I mean there yeah that’s right each buyer at the battle had had it borrowed from savings in less so that increases the debt so every time they do this they put in their pocket the profit but they increase the debt that’s exactly borrowing from the SNL’s or whoever to finance these actions so the debt grows it doubles every time they you know double the price that’s right of this things this is how the debt doubles and sky rocks it’s that’s exactly right that’s how all of these these inflated values took place now each each borrower would have its own appraisal and it would have its own idea for the property okay so if we’re going to build a Taj Mahal somebody might want to paint it somebody else might want to put mosaics this big well that’s gonna cost you more okay so all of this development was like the figment of people’s imagination now at the same time we’re in the early 80s Congress passed the law that said that savings and loans could go use new accounting procedures here’s another change in an Associated industry the accountants the way it works was uh let’s say you had a piece of property and he sold and there was a $20,000 loss just for fun never happened in those days but let’s say it was a twenty thousand exactly well in the old days before these new accounting procedures were put in you had to say minus twenty thousand and subtracted out of weight of your net worth well these new accounting changes allowed you to spread that loss over twenty years so you could divide it so you lose twenty thousand you spread it over twenty thousand or twenty years you subtract one thousand dollars each year so even though you took the hit in 1983 for example it never showed up on so it was like deferring the taxes is deferring the losses and exactly and so the boost looked great I mean you lose a thousand bucks away come on the whole thing is a fairy tale then exactly it’s like fantasy finance a whole thicket of capital exactly the whole thing was made up okay it was a daydream it’s now our nightmare but it was a daydream then now at the same time remember and by the way the accountants were also following the same pattern as the appraisers the accountants were supposed to be independent auditors who went in and looked at the books okay but remember there would be a paid a fortune to do it and so I mean one of the prime examples for example is Keating his parent company was called ACC American I know he went to Arthur Young in 1986 and the now they they were making about 20 million dollars a year gross Keating ghost woman says I’ve got a three million dollar account here and I want you guys to cooperate how naturally they’re going to cooperate they’re going to do any thousand exactly exactly and of course two years later the guy who was in charge of that account suddenly left his job at Arthur Young and took a job with Keating for a million dollars a year I mean joining all of Keaton’s siblings we were getting over a million a year exactly salaries exactly so now the other factor was the bank board itself now the way the Savings and Loan industry was arranged was the federal overseer of all of the savings and loans was called the Federal Home Loan Bank board they had an office in Washington and then they had 12 regional offices and they had a dual function they were there to support the Savings and Loan industry for example each of the twelve offices had a bank no bank and they would lend savings and loans in their jurisdiction money if they needed it they would support them in various ways and they would promote them they would help with advertising and all kinds of stuff but at the same time they were the regulators so I mean they had this dual schizophrenic role to play and for most of the time the savings and loans existed the first 40 years there was no problem because they were mom-and-pop industry everybody was pretty honest nobody megan Achille anyway but when these other changes started to take place and things started to explode nobody changed the regulatory structure so there was this intense coziness okay between the regulators and the examiners and the banks themselves we give you an example yeah right here at the University of Texas at Austin there’s a gentleman whose name is Robert Medellin now Medellin is an expert in the world of thrift finance okay that’s his field and apparently is quite good at it from 1983 to 1985 he sat on the board of directors of Lamar Savings the biggest SNL in town right exactly also the biggest bailout in town that’s how our alternative years account as well as my house well you’ll be very interested in this so Madeleine was on the board of directors of Lamar Savings he was also on the board of directors of Lamar Financial Corporation which was the holding company that owned Lamar savings hey he was also at the very same time from 1982 to 1987 the head of the regional bank board so he was the head bank examiner responsible for Lamar Simmons at the same time he was on their board and both boards as boards and is in 1984 he was named the Lamar saving Centennial professor of Savings and Loan finance at the University of Texas which means is that an endowed chair which means he gets a hell of a lot of money for teaching over and above what professors normally exactly and that that course that had Amin came from Lamar savings and and I said the circle here oh well it gets better it was also on the Austin Chamber of Commerce which was of course regulating or in promoting all this growth and he was the University of Texas vice president for development that was also promoting growth and development exactly mm-hmm so with certain savings and loans finance a more I you know cozy I guess is hardly conveys the kind of content such jurist occupied well it’s just a typical inside game of most regulatory agencies and their clients huh exactly but this is just a little little more egregious there is a difference here though I think the philosophical underpinnings of all this is the Reaganite philosophy of deregulation let the market solve all the problems be it banking or development or savings alone or whatever so this is really the major example of Reagan’s deregulation running a month pretty early on early on the Garn San Germain was touted as the triumph of the Reagan Revolution of the deregulatory policies being extended to the whole realm of finance well that’s true but you say the realm of Finance and remember one of the key the underpinnings of Finance is the notion of and there was no free market here there was no free market at all because all of that money was guaranteed guaranteed right so it was a joke right it was a myth so socialism for the gamblers for then the market for the play was they were there just counterfeit they were just a legal counterfeiters right without restraint so what’s happening here is that the government was with opening all the doors come in let him by the hand open the cookie jar say hey we’re going to live here now and you folks sick yeah no don’t you dare touch that cookie jar yeah if you screw up and spoil all the cookies will give you know giving more cookies yeah exactly we got plenty in the back so you know just to what really happened was now at the same time of course all the thrifts are are pulling in deposits from all over the country the insurance is a insured deposits at a hundred thousand these hundred thousand dollar CDs broker deposits from all of them so the money’s pouring in the thrifts are pouring it out okay there are pain developers who are overcharging them who are paying architects appraisers who are overcharging who are contractors who were overcharged everybody skim and everybody’s taken there was a piece of the action okay so the boom is well underway everything’s going fine now they’ve got to pay high interest rates on these deposits to attract them and that’s taken a big cut what’s probably even a bigger cut is the the lifestyle I mean they they built these office towers they had to buy planes because they had to fly over these tracts of land to look at them and they’re doing deals all over the country now limousines to take them there where exactly they had all of these haul girls to entertain their clients exactly promotional parties ed McBurney spent two million bucks on three parties you know six percent loan origination fees you know you’re bringing in a lot of bucks to get used to driving a Mercedes get tired of the Mercedes you buy yourself a Lamborghini and so forth well this doesn’t sound like mom-and-pop anymore who used to own the S&L so we do guess his whole new stratum of scumbags and charlatans move into the S&L industry exactly over in fact there was a big split in the industry right that took place during this several of the old-timers would own savings and loans for years refused to play and they just kept doing the same thing they’d been doing they were laughed at by the high flyers who said man were everybody’s making a kill and let’s go but they refused and in fact there was a almost a like a little secession there was a secession in a sense from the US League of saving institutions which was the main organization National Organization several of these more conservative first drop-down and in fact there are about 1,500 healthy thrifts left in the country most of them are those that didn’t play the guy exactly state concern so there might be a lesson there somewhere now we got the book going and then all of a sudden a bunch of forces began to converge as we’ve said is high interest rates they were Penn the high-flying living high higher cost of living in 1985 oil prices dropped been up to $30 a barrel suddenly dropped to 11 okay so right away several of the developers and investors who were putting together these enormous projects that the savings and loans were funding defaulted now that started the slide this around 80 seconds is a t568a hot okay okay in 86 came the big hit okay and the big hit was the second Tax Reform Act at the Reagan years in which he renamed on all of the deals of the first tax reform act so in other words accelerated depreciation retro actively retroactive retro actively suddenly they had to refigure all the taxes back on a straight-line life of of the asset basis hey okay I want my cookies back to say where but they flushed down that made the her that’s right on the Arkansas all of these people who had taken this enormous tax break suddenly had to make it up had to make it up and so they all I mean almost a hundred percent defaulted on their heels they couldn’t make any payments the escrow accounts that were set up as the original part of the deal were running out and all of these deals fell apart now the developers were in another serious bind because when a property was foreclosed the and if the SNL forgave the dead didn’t chase you the IRS treated that forgive forgiven dad as income and so if you were forgiven $700,000 debt then they sent a little form to the IRS and they are arrested what US taxes on $17,000 plus any depreciation that they did get from the now straight-line depreciation was treated as capital gains so they had to pay capital gains tax on what they had written off so everybody declared bankruptcy I mean it’s a joke now but if you look at the curves by year of bankruptcies in Texas it goes and then bow like that and that’s the reason I mean they just had no choice so now the dream is over party’s over the party’s over hangover is very happy that’s right and so all the savings and loans now have to foreclose now when they foreclose in most of these deals the property was set up as collateral so now all the savings and loans suddenly are taken in all this property now they’re taking in apartment buildings they’re take in developments that have a few roads in them and they got the Golf Course up that now people live in there’s nothing there I empty office buildings they got nothing now this is their these foreclosed properties are called real estate – owned on the books of the the banks so there’s known as REO property for short REO was a real problem for banks savings not because first of all they had to take care of him and he got apartment building somebody’s got to manage it somebody’s had to get to rent somebody’s gotta clean em of maintenance all of that they gotta pay taxes if you got a development that was half finished – it and uh suddenly they were in the serious development business and they didn’t want to be so that was the first problem the second problem was that REO was subject to regulatory write down okay now because that may well the regulator’s would come in and they’d look at the REO that you had on your books if you were counting out they were supposed to be trying to sell us to get back their investment if you couldn’t sell it the regulator’s would come in and actually arbitrarily drop the value yeah well which was realistic though exactly because it wasn’t selling or I wasn’t even developed in some case I didn’t have the capital to complete the project that’s right but you can see what this did to the bank to the to the Savings and Loan all right the profits go down no more bonuses based on profits their capital reserve go down now they’re technically insolvent and the regulator’s are banging on the door to close them in one case you can examine other– example from Lamar here in town they had a development out on route 22 22 I went to town here enormous development golf course little water company and made water some 1,200 homes many of them in the high dollar bracket it’s called River place well they sank 63 million dollars into River plants when they foreclosed on it they got I think 100 homes the golf course and the water company in the land the roads over time the regulator’s wrote it down and the eventual final write down value was five million dollars so on that one deal Lamar lost gone forever 58 million dollars which was actually in the pockets of all the people to start out with that’s rank people and the construction people well now is the appraisers everybody who skimmed some of the action so the money is gone but it’s gone somewhere else in their pockets or an offshore banks or that’s ready ia or mafia and the whole thing remember that the whole value was originally inflated yeah by those appraised values by by all of that so REO property was an enormous problem for the SNL’s and this is where the owners the executives stepped over the line okay now they’ve been living the high life for a few years legally huh legally originally right okay even though we know it’s a figment of their imagination it was legal but now they got all this REO and they got to get it off their books so they developed some schemes to get it off their books one thing they did for example was a simple deal called a sham transaction can you got a friend okay you were the owner of the bank you sell apartment building to your friend and you write into the deal you will not be held responsible for this loan if you have to foreclose and they put in the interest and all that and you know you’d be allowed to take couple hundred thousand dollars out of the operating expenses or you get your money somehow okay now what this did was it took the REO off the books gave it to you while I’m looking for a buyer but I didn’t have any responsibility because in contract said if I default it I wouldn’t be held exactly there was a case here in telling for example another Lamar case the owner had a friend named an Indian guy DJ Parikh and there was a apartment building here in town that was REO and lamar sold the building to vijay parikh and during the trial he was tried and convicted fraud during the trial it came out that Parikh didn’t know how much the loan was that he was getting what the interest rate was what the payments were I mean he just didn’t know anything they just they just gave him the money to take the take the thing off the off their hand right and of course nobody really exchanged hands they just said the apartment buildings in your name and you just borrowed you know the worth of the apartment building from us right and it’s up to him to develop it and to run it yeah exactly he held it for six months or so and actually he was actually pretty good property manager apparently and then a buyer was found and it was sold he didn’t even know the name of the buyer by the way when it happened to sold his own property you know so if there’s all of them buy them are yeah yeah so this was just a way to hide get it off the books and yeah so these are the kinds of transactions that most of the indictments that you read about in the papers are focused on this is after 86 or 87 86 and after was most 85 86 when most of these deals went down well how about some of these things that they did you told my previous program where SNL’s would sell their bad assets to another SNL when they knew the bank examiners are coming in and then when the bank examiner left then that SNL would sell them back to the original SNL those were called daisy chains yeah now this is the same product legal or those earlier oh they’re illegal because it’s it’s a means of hiding the true worth of the bank from the regulator’s so they had a whole bunch of these schemes exactly but they were all focused around this REO which happened after 86 and 85 when oil prices dropped and more importantly when the other tax the second tax reform Act came through and and effectively cut the legs off of the industry well I just wanted to clear up a couple of other kinds of deals that may light okay okay there was one we’ve already talked about daisy chains and if it was just to savings and loans it was called trading a dead horse for dead cow I can’t take my dead cow take your dead horse there was also a kind of transaction called cash-for-trash okay and this has become quite important as is the thing that they’re after Silverado about it sound like a TV program then exactly well it’s sort of a word add game show yeah that’s what it was like because here was the deal if developer came to the bank and said I need fifty million dollars to develop this development the bank would say fine we’ll only fifty million but actually we want to loan you sixty nine and you take that extra ten million and use it to buy some REO from us so it was another way to get REO off the books now remember I was telling about this land flip up in Dallas with Lou Reese who 5.3 million you sold it to himself a couple times 10 15 even ride well in 1985 Lamar savings contracted with Lou Reese to buy the property from himself again this time for twenty eight and a half million dollars two years before he paid 5.3 for but they loaned him thirty seven million dollars now the extra was transferred to another company that looked a resound and that company used that money as down payment for two shopping centers that Lamar owned that they had to foreclose on except so that’s plan an inside game of circulating your bed investment exactly so once again another trick to get REO off your books and was this the illegal this was very illegal and in fact for lamar executives have were indicted two weeks ago for this was one of the transactions that was named in these and what about Eddie Reese Alton Lee did his development projects flop I think I saw something on TV about uh-huh well he says that he took the twenty eight million and he put it into developing this property this tesota property and he had a deal with Lamar that six months later once he had the structural things in that they would lend him more money to build the homes and so forth and he claims that when he went back to Lamar to get more money they reneged and said they were going to give him anymore Lamar says that they were going to give him anymore because he pocketed ten of the twenty eight million dollars which of course he did I mean what would you do so REO is the problem now there was a bank in Denver Colorado that’s gotten quite famous now called Silverado and one of the reasons they’re famous is they had a nifty creative way to get rid of REO now of course this is the one where Neil Bush is on them in fact Silverados kind of a classic example of many of these things that we’ve talked about they use these structural changes to build Silverado into an enormous dream when the bubble burst they just liked everyone else had all this REO property what they did was they set up a little holding company off to the side and they dumped all their REO and all the company now this was called the loan pool and then when developers came to them they loaned them much more than the asking and developers asked for and the developers would then buy stock in the loan pool with the extra money with the extra money I would keep the bad investment cynical a yeah and looking great so they put these all these profits on their books I say now Silverado was notorious they did they had at every time they had been examined they had been warned and cited for excessive bonuses excessive salaries insider loans michael woz was the chairman he Silverado loaned him two and a half million dollars on which he defaulted the major stockholder was a guy named Mets I loaned him one and a half million and he defaulted the old Bush’s companies got millions of dollars exactly and they got millions of dollars from two developers that did many of these deals with Silverado Ken good and Bill Walters and in fact the indictment the charges against Neil Bush are focused on specific transactions involving those two guys and they of course it helped him set up his oil exploration company and so he was known to his business partners exactly had a conflict of interest cuz he was on the bank for exactly now it’s funny because I’m laughing because during his testimony before Henry Gonzalez is banking committee he was trying to explain his relationship with bill Walters and Frank annunzio said so your partner was borrowing money from the bank and you were approving the loans and and Bush said no no no no Walters was a partner in my company but I wasn’t a partner with him so Frank annunzio representative annunzio calls this the principle of Partners interruptus that sounds like Neil Bush you make a good vice president well I’m sure he had the the advice of his dad who was considered an expert in this field he headed the yeah he headed the White House task force to oversee deregulation of the SNL industry and it would grants to me like the worst person possible to get financial advice pantheon because this is such a disaster that’s all operator that’s right but see in 1983-84 it appeared the Jewish was on top of things well and he studied the industry very carefully and Edwin who was on the committee with him said that in testimony before Congress he said that he was delighted to serve with Vice President Bush because Bush was so knowledgeable about the savings alone industry now in 85 86 when the lens got cut out and that’s when Neil Bush went on the board and 1985 so his timing was bad yeah one could say that now there’s some other things about Silverado you know in 1987 they were subject to a big examination and the examiners recommended that it be closed a guy named Kermit Mowbray who was the head of the regional bank board and who was the one issue the order declined to do so and said they’re good guys down there let’s work it out with them and so they were allowed to stay in business for another year and in the summer of 88 they were told that they had to come up with sixty two million dollars in cash by October 13th or they were going to be closed now it was right around this time that Neil Bush resigns because his dad had been nominated for to run for president of party interestingly enough on October 13 when the day that they were supposed to close Silverado actually on October 12th Kermit Mowbray who was supposed to issue the order got a mysterious phone call he can’t remember from home from Washington that said delay the closing of Silverado and so Silverado was not closed until November 9th one day before like Sunday after the other after the election so that it couldn’t become part of the election exactly now a total cost the taxpayer hard to tell one and a half billion probably for us so Silverado loan five executives have been barred from the industry for life and charges are going to be brought against Neil Bush he could have accepted a deal but he chose to fight and it appears that the office of Thrift Supervision is now going to seek a two hundred million dollar lawsuit against the board including bush all over Washington there’s posters jail Neil Bush I was in Washington DC last week this is a very big issue there but I think there’s scapegoating him he was just one of hundreds maybe thousands of wheelers and dealers who were playing these games and everything I’ve read about Bush he was pretty light in the head and he wasn’t very intelligent he was just any sort of suckered into these things well Michael Weiss pulled him into Silverado obviously for his name you know his political connections it wasn’t the bush had any expertise or that he even knew what he was doing well he had some experience in banks he had been a clerk in a bank as a summer job when he was in college because they are service experience that qualified him to be on the board but you know he knew Walters and good they’d invested in his company wise Walters and their common lawyer they all shared a lawyer we’re all members of a Chamber of Commerce at the same time I mean they were just all cozy with friends now let’s together Rob what’s the complicity of Congress in all of this so far we’ve seen that the Reagan deregulation and just stupid banking rules gone amok caused the problem in the first place which was compounded by the change in the tax laws that made the situation worse that you didn’t know what the game rules were anymore now Congress is supposed to have some responsibility well they did it first of all they they passed the to tax reform acts for one thing and and the Garn San Germain and the the cat lead lifting off the cap on deposits they approve the changes and accounting procedures edwin gray went to congress he testified before several congressional committees in 1994-1995 he warned this was going to happen he said there’s going to be an enormous taxpayer bailout you guys are being crazy he put in regulations Congress gutted those regulations so Congress is the Cobblers got rid of gray right exactly they were doing I knew him yeah he was the only honest guy no and they brought in a crony insider in the industry Danny won’t Danny Roth we start this program by talking about the Southwest plan which was hatched up by Danny wall who had been the replacement for Edwin gray as head of the Bank board the infamous Southwest plan which was an enormous giveaway I had that word well after a 8687 when the industry was falling apart the bank board was going in and taken over all of these insolvent thrifts I mean they were they were losing money daily ten million dollars a day was pouring out so it behooves the industry to take over these thrifts but when they did they had to pay off the deposits they had to pay off the interest and so forth now the according to the charter of the FS LIC the insurance corporation all thrifts paid insurance premiums into a pool and that pool was rapidly depleted in 1987 a boost to that pool was passed through Congress of 11 billion hey the federal government just put the money in till they loaned it to the to the FSL SC and by the way of Jim Wright resigned over machinations of this 11 million dollars but anyway that’s another story and Coelho also resigned us because he was compromised by the SNL uh-huh okay fine yeah that’s right that’s right with Columbia savings and it was also a good friend of Mike Milken span again that’s another story so uh with the bank board taking over all these threats all the money disappeared real fast now it’s 1988 there are 197 looting savings and loans and the Southwest mainly in Texas they’re hemorrhaging money out it’s a and the insurance fund is broke so Danny Walters now the head of the Bank board decides that what he’s going to do is work out a deal with wealthy capitalists around the country to buy up these banks so that the bank board won’t have to take him over so he’s got to convince these guys to buy these losing propositions okay so here’s what he did first of all we packaged them up uh you know 10-year 20-year and he went to these wealthy folks Robert Bass one of the Hunts a guy named the Pearlman Ron Perlman’s head of Revlon Corporation and James failed who we’ll talk about in a minute and all of the deals although many of them are still secret they all as far as we can tell shared some common characteristics and here’s the way they went down the bank board would go to the investor with a list of the assets the investor would choose the assets that he would take responsibility for obviously the performing loans the the ones that were worth a lot of money and so forth all of the bad assets the defaulted loans the REO there was no good and so forth he still owned because the bank board couldn’t take it they didn’t have any organization or any money to do it bad Bank said we will guarantee those so if you’ve got a non-performing loan don’t worry about it we’ll pay it and we’ll give you a promissory note right here from the federal government okay for ten years we’ll pay off all of those bad assets to get insurance policy Wow you know what the investors say the potential investor said no dude we want to make some profit on our money Danny well said no sweat we’ll give you 2 percent profit on everything all the badass will not only pay him off we give you 2 percent you guys said land I don’t know uh you know I’ve got to chase these people I’ve got to hire lawyers I had to litigate this stuff no problem we’ll pay the lawyers fees whether they’re successful or not we being the federal government federal government that’s right and how much money did he have to do these that’s the well where did you get it well he didn’t get it you go ahead you buy the right track oh yes I’ll use well the original value of the notes and of course there were very optimistic expectations about some of these people picking up payments even though they hadn’t paid for two years and this kind of stuff and so the estimate by the bank board at the time was twenty four point five million dollars to close these these thrifts or to sell them right now it’s close to fifty billion and most experts give a range of seventy-five to a hundred billion for just this these there were fifteen transactions and this is just in the southwest the Southwest Brides called the Southwest plan now that’s what they were saying the entire bailout bill was going to be a few months ago exactly no now catch this one guy who’s been in the news quite a bit lately as guy named James fail he’s a he’s a insurance guys and insurance companies and in 1976 one of his companies was convicted of a felony fraud and he was indicted but he copped a plea and got out of it but he was barred from selling insurance in the state of Alabama he’s also been barred from several other states for various mal practices so he comes along and he buys as part of the Southwest plan fifteen failed savings and loans he packages them together calls it blue bonnet savings and he goes into business well how did they let him do that if he was such a bad guy well that’s funny you would mention that he hired a lobbyist guy named Robert Thompson now Thompson is an interesting guy because he’s a close friend of Prescott Bush jr. George Bush’s brother and in fact in 1979 this lobbyist Thompson was actually on George Bush’s campaign staff when he was gone for presidency and in 1980 when Bush became vice president Thompson became a legislative aide a liaison between Congress and the White House so he got to know everybody and in 1983 you quit his job he goes into the lobbying business and the first thing does he sends out promotional Flyers on Thompson and company stationery that says he has breakfast once a month with George Bush so he had successful lobbying business souther 1988 James fail comes along since I want a piece of the Southwest plan action can you help me the guy says no problem Thompson and Thompson takes all of the documents through the approval process where they’re supposed to look and see if this guy’s have been by felons and whatever and some of the forms disappear the dead boxes don’t get checked ride and son-of-a-gun fail ends up with Bluebonnet savings now Bluebonnet savings has three million three billion dollars in total assets Jay 1.85 is guaranteed those promissory notes from the government okay now fail paid 70 million dollars to get into that deal so he got three billion dollars for an initially had to put in his own capital 70 million dollars well that 70 million he borrowed some of it from his own insurance company what he actually put up out of his own pocket was $1,000 he got thirty billion and I read that three billion for $1,000 I wouldn’t give them 2,500 you know why don’t they talk to me so interestingly enough in 1989 just to finish this story Bluebonnet savings was the single most successful most profitable thrift now thrifts are there to make loans guess how many loans Bluebonnet savings made in 1989 thousands for big ones perfect one of three of which I don’t know about one was to a lobbyist named Robert Thompson three hundred and fifty thousand dollars no kidding so Phil got his his banks even though he wasn’t eligible because of his previous history Thompson got his path and got his head plus he got two percent of the profits from Bluebonnet in the first several years who fell this the law yes yeah two percent now as Thompson in jail yet no a wouldn’t you kidding he’s a good friend to Prescott Bush well how does breakfast with George Bush every my real how did he get the two percent of the and profit I was just part of the doubles part of the deal yeah Oh take 2% so that’s the Southwest plan and that’s considered to be one of the most egregious offenses in this whole nasty story and this was this particular part came from the regulators so this was a Danny wall arranged the message of all this seems to be that every time Congress tries to do something to deal with this SNL crisis they do something that makes things worse and when the federal regulatory apparatus sticks their hand in the pie and they try to fix up clean up the mess they make it even worse has this been the accelerating story of the worsening of the crisis of the S&L this is the way your story sounds to me exactly now if you think about it there were three real strong players here there’s there’s Congress and the legislative apparatus including the White House and then you’ve got the regulatory apparatus here and then you’ve got the savings and loans suppliers to players and if you listen to the play to the players and the SNL’s they’re blaming the regulator’s the regulators are blaming Congress Congress is blaming the SNL guys sounds like didn’t you any a blame to go around everybody’s however however some of the regulator’s were in bed of course we talked about interacting in bed with the industry but the good guys the regulator’s who were taking their jobs seriously and we’re trying to keep things under control like Edwin gray who was head of the Bank board Congress kicked him out and the bank examiners in California who were trying to to make Keating toe the line with Lincoln Savings they were stomped on by the boys higher up fives right yeah people were trying to investigate Florida and some of the problems down there and they were given a hard time by both Congress and the people they were trying to investigate exactly and he goes even further than that Edwin gray in 1984 when he realized he started to see what was going on he said first of all they slashed the budget of the regulator’s slashed it by more than half over the previous few years so he had minimal staff it was two three years before they got back into a bank after an examination between examinations to three years sometimes and the salaries were incredibly low all of the good people had been sucked out and gone into other organizations like the FDIC for example and what they had was a bunch of people that just got out of college we were looking for job you know they got something twenty six thousand a year or something like that and they were the ones responsible for trying to figure all this stuff out in fact I was talking to one of the executives at Lamar during this period and he told me about a regulator now this is a guy you know he’s been in the business 20 years and a regulator 26 years old comes in he’s got six months experience he’s sitting there and he’s going through these folders and his eyes are crossing and the executive is is pointing things out and saying right now don’t forget to look at this here and see this year and here’s the list for due diligence over here you know so the now gray went to he was his apparatus was controlled by OMB the Office of Management and Budget so gray called David Stockman who was in charge at the time and he said David help I need more people I need better salaries I gotta have some money and Stockman said wait a minute you mean you want more regulation this is the era of deregulation you want more regulation that’s tantamount to treason and he wasn’t kidding they were talking he’s an ideologue he was a hardcore deregulation we’ll solve all problems exactly and and Ed gray for all his the goodness of spirit was derisive Lee known in Washington and as the great reregulate er that was the label that they they stuck on him because deregulation run amok the situation got nothing but worse a bush comes into office and he presents a bailout package this is 89 now this is 18 early 89 and now his first actions as president exactly 28 days or something into his presidency and a lot of the package was based in what he had learned in 1984 when he was head of the White House task force to oversee deregulation and they had proposals then that they chose not to present but some of them were incorporated into the bailout bill of last summer which was called phi rhea the federal institution recovery Reform and Enforcement Act you gotta have an acronym or exactly is that you’re not done something deport nine the bureaucrat to Bush bail out that’s what I call it anyway there was an interesting provision in the bush bailout that I want to bring up here now remember we had the Tax Reform Act of 1981 and then the Tax Reform Act of 1986 that reversed all of those changes and effectively cut the industry down now in the bailout bill there was there’s a little clause that says goodwill is no longer valid okay now goodwill was something that the bank board had offered during the time when all the when the SNL’s were starting to ash again they were looking for ways to shore up insolvent SNL’s without putting any money in because lots of during lots of that period there was no money in the insurance fund so the regulator’s worked out deals if there was an insolvent thrift let’s say there’s a thrift that had was 50 million in the red they would go to a nearby thrift and they would say we want you to buy that bad thrift and that’s a well that’s crazy why should I do that I’m going to lose 50 million bucks and then I’m insolvent the bank board said no sweat we if you buy that thrift we will give you something called goodwill 50 million dollars worth you can put it on your books and so your books will be balanced and you’ll help us out and you’ll get that other thrift and when the bank examiners come along they have to add in this 50 million on the profit side so that you know your books aren’t crashed by this insolvent Savings and Loan so there were all these institutions around the country who had bought up other insolvent thrifts to help out the Bank board and they have taken on goodwill in good faith now the bailout bill comes along in 1989 I remember the bailout bill bailing out approximately 275 to maybe 300 badly insolvent trips fifty billion dollars run then in the bailout bill it says goodwill is no longer valid so this thrift it had a 50 million dollar-plus suddenly it’s gone evaporated and it’s insolvent out there insult and so if you remember six months after the bailout bill suddenly they announced that oops another 500 thrift couldn’t meet the capital requirements they were going to go down that adds why it was the damn goodwill so it made it worse so every time that there’s a government action is it intensifies in a qualitative way mushroom exponential works better yeah exactly I mean something like this is just I mean that’s why at the beginning of the program I said something about conspiracies I mean it is so obvious that you’d think that it’s intentional I saw an article that the in the Dallas newspaper that the regulators are wanting to renege on the Southwest plan and make that retroactive now is this part of what you’re talking about well there’s that something ii renew to them well it’s it’s a slightly new development part part of this has to do with james fail the blue bonnet savings guy because they’re saying that he obtained his Southwest plan deal fraudulently because the papers that were submitted weren’t clear about his past history which would have barred him from participating so that’s one aspect of why they’re going to renege on his deal but in addition what they’re saying is you remember the deal was that all the bad assets that the investor the buyer chose not to take control the government said they would guarantee and that agreement with those are called yield maintenance agreements they would maintain the yield on this loan even if it was defaulted on okay so in other words you’ve got you loan out some money the guy defaults he’s not giving you any payments anymore and the investor fail Houston for example has to take that loan as part of the Southwest plan and the government said we’ll make the payments see that’s what the guarantee is we’ll make the payments will give you 2 percent profit and we’ll pay your legal fees okay and we’ll give you 2 percent profit on the legal fees yeah ok don’t forget that so what the government is saying now is that those agreements means that if effectually the government bought that loan and it belongs to the government okay so now they’re going to say yeah all of those guaranteed loans and all those guaranteed assets are ours wasn’t that just as just as well with guys like fail because they don’t have those bad loans there’s none or is it bad because they’re not getting the exactly the government well nipple the sucker remember that fails Bluebonnet savings was the most successful savings alone and the reason was that he got his first guaranteed payment from the government of two hundred and seventy five million dollars so that’s why you make any loans the government gave it $275 our two hundred seventy five million dollars to make up for those bad loans okay so that’s where the money’s going government saying wait a minute we got the Resolution Trust now we have a place to put things and we’re just going to take all that stuff back we’re not going video those guarantees anymore Rob what is the effect of this of the government reneging on the Southwest plan going to be for other people like fail that depends on the specifics of each of the deals in other words there were 15 transactions okay so 15 wealthy investors took over a total of 197 SNL’s [Music] some of them got incredible sweetheart deals here’s an example Ronald Perelman he got to write off all of those bad assets that the government guaranteed even though the government was paying him for it and he was making a profit on him he got to write him off as a tax break we got a one and a half billion billion dollar tax break okay on those savings and loans now in addition he got the government to agree see he wasn’t making that much profit on the savings and loans so he had more tax break on his savings and loan company first gibralta and he did on any of his other holding companies so he got the government to agree that he could float that tax break throughout his other holding companies so if he made 500 million on this company back here he just suck off five hundred million dollar tax break from the savings and loan side and dump it over here and he wouldn’t have to pay any tax on that company either okay so now he’s got a sweetheart deal add the expense of the government the tax payer know exactly I mean when is it mild taken from the tax fund exactly and that’s where my checking account is my withdraw my 230 dollars Roy no Pearlman now some of the other Southwest plan deals have not been quite as successful there’s one bought by a company called Lone Star Technologies I’m not sure it was involved personally the names but Lone Star and they haven’t been doing quite as well they didn’t get the great tax break they chose they were a little more responsible they chose to take on take responsibility themselves for more of the assets and they haven’t done quite as well so they actually lost money so the the reports I read say that it depends on how well you negotiated your Southwest Southwest plan fales is going to be terminated the others it will again they’ll have to renegotiate such a strange this whole thing is in gambling it’s like sort of a gambling thing where the rules keep changing and there’s but and because the rules keep changing and because uh there’s there’s so much turmoil and so much money those who are in the know make make big bucks and if you’re a little slow if you’re not right in the heart of it or you don’t have the right connections I mean that’s the other thing you get killed I’ll give you an example okay first Gibraltar was a big savings and loan in Houston it was going down there were several stockholders major stockholders two of them were named Robert Strauss and Rickie Strauss Oh Robbie Bob Strauss the big guys in the Democratic Party right okay now they were big stockholders in first Jeff Alton they were the also the only two stockholders to sell off their stock and get their money out before first Gibraltar went down now Robert Strauss is a partner in a law firm in Dallas called Aiken and Gump Aiken and Gump was Ronald Perelman’s Law Firm when he took over first to Volta so what I reconstruct is that first two brothers in trouble it’s going to be part of the Southwest plan Danny wall goes to Ronald Perelman and says hey you got money you want to take over these thrifts and they negotiate well akin gump is the law firm that helps those negotiations Robert Strauss is a partner in a canon gun but he’s a big stockholder in first Gibraltar so he hangs his money out then to do the deal everybody loses money except straps anyway to estimate the extent of the financial disaster here or is it is it just changing so rapidly that it’s really effective it’s it’s a it’s changing rapidly in the one of the reasons is that remember that a lot of this money was lost because of those that hyper inflated equity there was an inflated equity now the boom is dropping out of all of those projects all those developments all the lungs and so the appraised value the market value of the assets that were loaned against keeps dropping and so you lose more and more money so we won’t know until the real estate market drops their stops dropping till it bottoms up so all the all the extra amount that was as a result of all this land flipping which was fictitious and just fake value is going down to where it should we shut it out with but remember we’ve got another problem now all of these assets enormous number of assets are in the Resolution Trust Corporation that’s the bailout right so now the Wall Street Journal says that the Resolution Trust will do for real estate what the silos did for the value of the price of corn in the Midwest remember we started stockpiling grain and subsidizing find out prices are way down that’s right and it’s controlled now effectively the real estate market is controlled by the resolution corporation so there’s not going to be much new construction because there’s so much over exactly instruction a land prices are going down but there’s a catch here this sounds like it’s good for the consumer for the house buyer if the prices are going down that means more people will be able to buy houses or office buildings but the catch is they’re having more trouble borrowing money for these houses or for buying development projects because of the tight restrictions now well that’s lungs that’s exactly right correct that’s what everybody or something called a credit crunch and part of this there are several parts to to what you’re talking about first of all remember that the banking industry particularly the what’s called the thrift industries and although it’s a question whether it’s gonna survive has been concentrated once again we have a concentration into fewer and fewer hands so the thrift industry is no longer mom-and-pop independent entities in each little town okay for example here in Texas and CNB is the big bag now enormous Bank what is really worth Carolina it’s from North Carolina okay so they come into Texas now you’ve got somebody to bought a house four hundred thousand dollars it took out an $80,000 note real estate prices are dropping now their house is worth sixty thousand but they’ve got an $80,000 now so NC NB says hey wait a minute I don’t know I want to stop that deal so they foreclose they just say hey we’re going to stop it now before the price drops anymore we lose more money so they’re throwing people out of their homes for example many people in the Boone time took out what they call mini mini perm mortgages there were many permanent there were short-term mortgages to be rolled over and renegotiated after three years or five years oh I remember that I thought my god who who but a fool would do that well as you’re never telling what’s going to come up yeah that’s right if you don’t come up because you got to come up with a amount of money to for the rest of them for the whole thing at the end of this term five years or whatever that’s right and that’s what’s happened if you bought a hundred thousand dollar house and you put make payments for five years then at the end of that five years you’ve got to come up and pay off the rest of it so they’re foreclosing on those now one of the reasons is remember in the southwest plan they could mark off the good assets that they wanted to keep and they dumped the rest on the government and they were allowed to do that for a period of two years after they did the deal so what that means is if after a year and a half they’ve got an asset that stopped performing or as we were saying the value drops and it’s not well collateralized or the people got behind one month a couple times then they just say well we’re not going to deal with this they write it off and there’s you know the person who’s lost their mortgage you lost their home lines of credit that were extended have been shut and and it gets even more ominous I’ve got a friend who’s got small businesses three of them two of them are travel agencies and over the past several years he’s done a lot of work for the government so IRS people need to travel around they use his agency and so he’s built up a big stack of accounts receivable from the federal government he can’t get paid he’s got to keep his business going so he goes to his local bank he’s worked with him for some time and he says can you lend me some money and I’ll give you these accounts receivable from the government as a collateral you know the bank said forget it I was there for the print so if there’s any question at all they’re shutting down and and the reason is it’s not worth it it’s not worth it to them they have no interest in the community they’re huge I don’t care about facial psoriasis I mean they’re just interested in online exactly often no on the other hand you’ve got the Resolution Trust Corporation and that’s stockpiling all of these enormous assets that hangs like a weight over the real estate markets in this country because they have all these properties that can be unloaded that preclude building new ones exactly and now what they’ve just decided to do new policy is they’re packaging huge chunks of real estate and they’re selling them to single investors are two single companies so what we have is in the banking system a concentration and in the real estate a concentration so once again as we’ve seen throughout the 80s now into the 90s this enormous concentration of wealth in a few hands that it’s also a concentration of debt in other words you have the federal deficit building up you have deficits from this SNL making claims on federal monies well that’s that’s something else that’s important I think to look at really what the SNL situation has done is Bob from the future okay because we’re selling the bonds now but it’s our children that will have to pay them off pay the principal off and we’ll pay interest for 30 years those mortgage rally right it’s a mortgage for the entire economy that’s right now the interesting question is who buys the Treasury bonds and it appears that it’s one-third foreign investors and the other two-thirds are split roughly in half financial institutions and corporate capitalists which is again concentrating property in small amounts of people’s exactly I mean we’re subsidizing and it’s like it’s the four terminal and get capital it’s like serfdom I mean we’re tithing a percentage of our taxes which is going to rise it’s already a third of the budget right and the deficit the debt is right so we’re gonna have to make these interest payments and then our kids are going to have to pay it off and they’re going to pay it to those guys the wealthy who benefited from this whole thing to start out with exactly could this be a conspiracy of the rich doctor concentrate capital in there well and try new UI New Jersey we’ve had some Republicans that captured the state in the 1980s and the 1980s to represent the interests of big corporations and big business you don’t think they were putting through policies it might have just been afib them and their friends and the expense to everyone else no no they wouldn’t do that something like that could happen in a great democracy well as I said earlier I’m not going to outline any specific conspiracy theory but boy it sure makes you that’s the effects especially if you have a war with a rock to deflect attention send this kind of thing I mean this brings the whole question of the media and to what extent has de media explained any of this complex story that you’re telling I’ve been getting bits and pieces sometimes from the New York Times and mainly the alternative press but this is one of the most underreported stories of the century I know it’s funny because the savings and loan crisis is a is a vastly reported story but it’s the it’s this it’s a surface look and what details of individual corruption without seeing the structural factors behind this the policy decisions the games people were playing the effects of these games exactly and a lot of people are going to be hurt by this I mean this is just a disaster and you know we’re in pretty good shape here in Texas I mean we have all these empty office buildings that eventually will fill up and you know all that money that was being siphoned off a lot of it was siphoned off into Texas but what’s going to happen in the Northeast or in some other place where the money that wasn’t sent and now of course there’s a focus on the regional effects of the bailout those people are going to be taxed just like us and they’re going to send the money down here to pay off for the wheelers and dealers in this region it’s creating these big gambling debts exactly right and so there’s a Phil Gramm up in the Senate was was booed and hissed last the week before they they stopped they quit for the summer uh because he suggested that they redistribute some community development grants and I mean they were a mad at him they were mad they said some vile things to that guy what effect is all this had on various public institutions or strata such as schools that are to rely on taxes property taxes for there’s all this and all these empty buildings that no tax is coming from them what’s happening well that’s an interesting question our local tax assessor named Cecilia Burke says that the Resolution Trust of course has to pay the taxes on all those properties it’s part of the carrying costs really yes of course they own it that’s part of the bail out expense the government owns all these knowledge it’s all these non-functioning things they’ve gotta pay taxes on the Resolution Trust has the rough cost of the assets in the Resolution Trust are twenty five percent annually carrying charges just carrying charges to manage to keep track of and pay the taxes and that’s how much a year well if they’ve got what are they got now three hundred billion or two hundred two hundred billion in assets that’s fifty billion a year just in carrying charges that disappears so you’re asking about the total cost there are some folks who are now talking about two trillion and that’s I’m up in that category that’s what I think it’s going to be if you include all these other charges now the problem is that the Resolution Trust according to Cecilia Burke our local tax assessor is a deadbeat and not paying a lot man yep that means is that services schools everything that depends on Roberts all the water designer actual stuff in the communities the federal government is paying the taxes through the Resolution Trust to the local community and if they don’t pay and the funds aren’t there exactly as they would have expected these business and development corporations to pay off that’s right plus you combine that with a credit crunch a contraction of credit and shuts down small businesses people’s homes get foreclosed on the unemployment so the tax base goes out there too I mean you don’t have all this money flowing around so you can’t tax it this sounds to me like a downward spiral oh and this is something worse than the Great Depression is coming it was just based on stock market machination xand and some overinflated you know businesses well the effect this sounds structurally much more is this a middle class is going to disappear more and more and more living in poverty in fact there was a report recently in the paper that 32 percent of the people in this country are effectively living in poverty because their shelter poor when after they pay their mortgage they don’t have enough left for the basic necessities of life as defined by the federal Department field Health and Human Services so that’s 78 million 78 million people in this country are already at the poverty level and we’re just started we’re just starting do you think this is going to be sort of slow attrition or it was going to be a dramatic crash like the stock market crash it took a 1929 that was sort of a dramatic event that led to bank closings and then the foreclosures what do you think this is going to be a slower attrition that will be a little harder to see and to figure out well I think that it’s going to be slow for two reasons number one the financial markets are much better regulated now you know they’ve got these automatic shut offs if the Dow drops so far and they have other kinds of regulatory internal checks on the crashing the other factor is that we’ve got what is called it has been called a rolling recession so the Midwest goes down it bottoms out starts to slide up a little bit and then Texas goes down it’s the bottoms out and then New England starts to goods distributing the depression or recession to different parts of the country I think that the key problems are if there is a big crash it will come from the international markets right now the dollar is still the standard of currency in global markets and the Japanese are harder foot to get off the dollar standard and go to a more independent measure and when that happens our currency is going to be worth less than the Argentine reality they call their money I mean it’s we’re going to be look like third world already a cab ride from the airport in Tokyo cost $250 so it’s like a Mexican peasant coming up here and taking a cab ride trying to pay in pesos and it’s a quarter of his annual earnings all right well now if you go to Tokyo and you take a cab down down 250 bucks well it sounds to me like we need a war with Iraq to describe the tension that of all of these economic woes that this is more entertainment for the people seeing battles in the desert and hostage struggles and this is sort of a popular culture you know good versus evil sandwich we’re good and they’re evil there’s Hitler out there to fight whereas if you look to see who the bad guys are in the savings and loan this whole financial debacle it’s the establishment it’s the Congress the presidency the regulator’s the wheelers and dealers the entirety of the system is implicated in this well you know if you go back and look at economic history like the Great Depression or others that may or may not have been engineered by big bankers like Pierpont Morgan etc so frequently when things happened it looked like economic forces we’re doing it whereas other people who go back and look at it later and they find out hey there were certain manipulations that were going on that resulted in these things and then what happened when the economy would collapse or there was a big depression a lot of people were hurt but the big guys of the top would always prosper because they would go in and buy real estate and other property at very and on various businesses at very low cost so that they would really benefit and there would be more and more concentration of ownership up at the top as a matter of fact I read an article in one of the Wall Street Journal somebody said a lot of the very wealthy people and wealthy and financial institutions have been building up an enormous war chest of extra money so that when the big crash comes they can come in and buy up all all this stuff that will be fire sale there’s my famous quotation attributed to Baron on Rothschild one of the great famous bankers of all time and that quotation is the best time to buy is when blood is running in the streets and that’s where we are

40 comments on “Savings and Loan Crisis: Explained, Summary, Timeline, Bailout, Finance, Cost, History”

  1. R3 Marketing says:

    Did they film this at the YMCA?

  2. Hangshai says:

    Nah, they filmed it in my old HIgh School's gym. Those are the old coaches… Ah, the 80s… When manly men wore short shorts and got perms.

  3. breckandy says:

    Deja vu
    History repeats over and over again
    Rob Widdowson = Matt Taibi of today

  4. David Stanley says:

    Savings and loan was a trial balloon to see if Americans would stand up.
    Now they just issue robo bailouts and nobody cares.

  5. derwall2005 says:

    hook nose pedo.

  6. ateslibarut says:

    schlecht

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  8. jessica franco says:

    jjssg

  9. UnCubicle says:

    An impending problem since 1990, is not that much of an impending problem.

  10. andrew loreno says:

    este video e reterdado orrivell idiota

  11. gasem72 says:

    مرحبا بالشباب شسالفه وش تعلقون عليه مرحبا الساع

  12. Evgeniy Antoschuk says:

    1111

  13. Evgeniy Antoschuk says:

    All of Gold Line International peoplegoldline com/ en/

  14. Abu Maher says:

    لااله الا الله محمد رسول الله.من يجيداي لغة يشرح معنها.اي لامعبود بحق الاالله..

  15. Gale Gallela says:

    Please help my friend and check hes channel and maybe sub. He will sub back 🙂 hes channel is mrdespere1

  16. dan fuerth says:

    One of the most influencial videos I have ever seen in my life watching the first 20 minutes is scaring that crap out of me and has proven my theory because those 20 minutes are what Canada is about to go through dragging a lot of Banks and possibly the world banking system as well. We are sitting at over a trillion dollars mortgage collapse with only 4% bank deposits that banks must have all the shiny new cars ,n new boats, new homes will all be repoed.

  17. Abu Maher says:

    لااله الا الله محمد رسول الله.من يجيداي لغة يشرح معنها اي لا معبود بحق الاالله..

  18. Robby Morton says:

    found this too savingsandloancrisis. com

  19. Nate rusk says:

    huh find out the truth!!!!

  20. Nate rusk says:

    1990 WTF!!!!

  21. errorproxy says:

    Such style with those shorts.

  22. fododude says:

    did they just get back from jogging?

  23. nameofthepen says:

    The best explanation I ever heard re: the S&L debackle, and the ensuing recession

  24. Perry Mathis says:

    Anyone know who these guys are? I saw another vid by them that they was also fantastic and would like to see if they have any others. Thanks!

  25. Eric Lindstrom says:

    http://www.justice.gov/usao/nm/press-releases/2011/2011-12-14_widdowson_pr.pdf

  26. Veskov says:

    i have to watch this bullshit for class lmfao

  27. Simon Eskow says:

    Does Frank Morrow look like Larry David, or am I just profiling white-haired semi-bald white men?

  28. EnergeticWaves says:

    This guy is great. Anybody that doubts that the bankers control everything simply needs to watch this.

  29. OHexpat12 says:

    Talking about the bank conspiracy has consequences: Look what happened to bob widdowson

    December 14, 2011
    FORMER FUGITIVE PLEADS GUILTY TO FEDERAL
    DRUG TRAFFICKING CHARGES
    ALBUQUERQUE – This morning in Albuquerque federal court, Robert Widdowson,
    65, pled guilty to a five-count indictment charging him with manufacturing and trafficking
    illegal drugs in Taos County, N.M. At sentencing, Widdowson faces a maximum penalty of 20
    years imprisonment and a $1,000,000 fine. Widdowson is in federal custody and remains
    detained pending his sentencing hearing, which has yet to be scheduled.

  30. Ree La'star says:

    just subbd; you… sub me back!

  31. Ree La'star says:

    & tell ten billion to tell ten billion! etc.

  32. Ree La'star says:

    nva. edg. n. e. – n.e. – n.e – etc. etc. etc.

  33. Abdessamd Ibriz says:

    the os 3 clsinase lnir 3

  34. Johnny Bates says:

    wow someone clipped out audio of a lot of names.

  35. RStaR RaptoR says:

    17% on a cd?!??!!?!!?? Right now the highest is 1.3%!!!!!!! you old fuckers had it so easy!!!!! Kids have it harder! THEY MADE IT HARDER!!!! Not only the president and congress, but also the PLAUGERAT that is Federal Reserve. The grest depression ended our freedom, we are all enslaved, it's just nondenominational!!!!!

  36. Matias Covarrubias says:

    who is this guy? I study this crisis as part of my academic endeavors and he is on spot on many things.

  37. SERGIO BACA says:

    Holy shit what a great documentary!!! I needed to study this because I'm a real estate Appraiser and damn did I learn something

  38. Patrick Lovell says:

    Holy shit!

  39. Smug Smugly says:

    I'm gonna Visit those foreclosin' son of a bitches down at the Indianola Savings and Loan and slap that cash down on the barrelhead and buy back the family farm. Hell, you ain't no kind of man if you ain't got land.

  40. aaron bedker says:

    Cant believe how well that guy explained the S L scandal. Seems like it repeated in 08. In 2019 with the economy rolling at peak looking for the next fallout.

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