Word: ls
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Dates: during 1980-1989
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...FDIC wasted no time in wielding its new authority over the thrifts. Within a day after the Bush announcement, the Government agency took charge of four insolvent S & Ls and three days later assumed control of six more. The agency intends to take over the 224 most hopelessly insolvent S & Ls within the next month. The FDIC also decided to freeze temporarily all negotiations for the sale of ailing thrifts. Last year the FSLIC completed a flurry of deals -- 34 in December alone -- in an effort to offer investors tax breaks that expired on Dec. 31. Because of the rich...
Seidman said talks with investors will resume after the FDIC takes control of the remaining insolvent S & Ls. But since the FDIC said it would then allow only deals that were supported by the cash of the FSLIC -- a fund that is currently bankrupt -- more Government-assisted sales would seem unlikely. The FDIC might also try to renegotiate some of last year's sweet deals...
...Ls arrive at such a sorry state? Traditionally, running a thrift was a relatively tranquil business. S & L managers used to follow what was known as the 3-6-3 rule: pay depositors 3%, lend money at 6% and tee up at the golf course by 3 p.m. When interest rates remained stable, the strategy worked well. But by the late 1970s, thrifts began steadily losing depositors to the new money-market funds, which were not covered by deposit insurance and paid higher interest rates...
Thrift executives pressured Congress to let them fight back. In 1980 Congress lifted restrictions on interest rates that S & Ls could pay. But regulators waited a year before freeing the other side of the balance sheet by allowing S & Ls to grant adjustable-rate mortgages. The delay left the thrifts in a bind, because interest rates had rocketed from 13% at the end of 1979 to more than 20% a year later. Thrifts were collecting interest rates of around 8% or less on their 30-year mortgages, while paying double-digit interest to new depositors. During 1981 some...
...Interest rates eventually eased, but other problems arose. Congress passed a sweeping deregulatory law in 1982 that permitted S & Ls to make loans for a raft of new businesses. At the same time, some states allowed their locally chartered thrifts to run wild. Suddenly no venture was too farfetched: ethanol plants, wind farms, Las Vegas casinos and commuter airlines. S & L managers who were accustomed to making simple residential mortgages were ill prepared to evaluate the new kinds of credit risks. The great mistake in deregulation was not so much the easing of rules but the failure of the federal...