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...centerpiece of Beebe's empire was AMI, his company based in Shreveport, La., which invested in banks and thrifts, insurance companies, motels and nursing homes. Beebe and his colleagues at one time or another held control of nearly 40 banks and S & Ls, through which they allegedly made insider "back- scratching" loans to finance one another's high-risk moneymaking schemes. Their tower of debt collapsed in 1986, brought down by the energy bust and tenacious federal investigators. Having pleaded guilty to two counts of fraud in 1988, Beebe, 61, now washes laundry in a federal prison in Texarkana, Texas...
American Savings (assets: $30 billion), which was once the largest thrift in the U.S., had got into the same trouble as many other go-go S & Ls. During the early 1980s its maverick chairman, Charles Knapp, furiously pumped up the company's growth with brokered deposits and high-risk loans. When the thrift suffered a run on deposits in 1984, the Federal Home Loan Bank Board seized American and installed fresh management. But the new team gambled and failed in a multibillion-dollar investment in mortgage-backed securities. When the Bank Board went looking for help again, it eventually decided...
Last week President Bush came forward with a long-awaited bailout plan in which he sought to spread around the unhappiness in an evenhanded way. Said Bush: "Nothing is without pain when you come to solve a problem of this magnitude." His program will require taxpayers and S & Ls to share the burden of a rescue that will cost an estimated $126 billion during the next decade. The taxpayer portion would amount to about $60 billion, which would be contained in the federal budget over the next ten years. The Government would borrow $50 billion by issuing 30-year bonds...
...spirit of professionalism and independence in the Home Loan Bank System and in the FSLIC ((which insures S and L depositors)) certainly had something to do with the weaknesses of the supervision and the regulatory effort. You can argue that's all great -- that we gave the S and Ls all this opportunity to go out and do it in the interest of entrepreneurship and a bright new financial world. But I think we've lost a little sense of balance. Hey, look at the Pentagon, which spends $300 billion a year. Are they doing a good job? And they...
Federal regulators are bound to fight the defection in order to discourage other healthy S and Ls from attempting to follow suit. A mass desertion could bankrupt the FSLIC fund and saddle taxpayers with the expected $50 billion to $100 billion bill for rescuing the savings industry...