They're Demanding
1990 1990-08Read it in the scan (PDF at ETOL), page 6 →
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6 SOCIALIST ACTION AUGUST 1990 JUSTICe insolvent thrifts closed by the end of 1988.
Strangely, however, while hundreds of S&Ls were collapsing, hundreds more were being created. Texas, Arizona, and California spawned new thrifts as fast as the old ones failed.
The federal government, as well as the states, chartered S&Ls. As state thrifts switched to the easier federal charters, California decided to lure them back by making its rules even more lax. Politicians wanted the income and payofis the thrift industry brought in. They also wanted, and got, 100 percent federal insurance.
Lawrence Taggart, the California savingsand-loan commissioner, in effect called on all the sleaze artists in the country to "come and get it." He approved 235 new S&Ls in 400 days. Not surprisingly, more thrifts failed in California than in any other state.
In 1985, Gray asked Congress to authorize a $15 billion bond issue to pay off depositors in the seized. S&Ls. Congress denied Gray the money, arguing that the problem was not so serious. Furthermore, if Gray did not have the money he could not seize all these thrifts, and the problem might go away—-at least till Reagan was out of office.
Hemorrhage of red ink But the problem did not go away. Instead, it grew and grew. Insolvent thrifts, allowed to operate because there were no funds to liquidate them, had. to pay interest to their depositors, even as their borrowers stopped paying on their loans. This hemorrhage of red ink continued at an estimated rate of $35 million a day for two years—all to be added to the cost of the bailout.
In 1987, Gray's term ran out and he was followed by Danny Wall. Here was the thrift industry's own man. He had helped deregulate the industry and thought things were going just fine. He would sell the seized S&Ls to new entrepreneurs, and everything would roll along as before.
But selling the insolvent thrifts meant practically giving them away, often to the same con artists who wrecked them in the first place. One speculator, James Fail, who