Word: thrifts
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Dates: during 1980-1989
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...takes less than usual to spark testiness in Texas these days, especially on the subject of the state's beleaguered savings and loan industry. Last week Governor Bill Clements got into a shooting match when he described the Government's system for regulating thrift institutions as an "absolute fraud." Concerned that U.S. funds are insufficient to protect deposits at Texas' 49 insolvent thrifts, Clements contended that the Federal Savings and Loan Insurance Corporation might be able to reimburse depositors in failed institutions to the tune of only 30 cents on the dollar, along with a Government IOU for the rest...
BANKS. Until deregulation gave them relief in 1980, banks and thrift institutions were rapidly losing business to competitors ranging from Sears to Merrill Lynch, whose money-market funds could legally offer much higher yields than the 5 1/4% maximum savings-account rate. But the Depository Institutions Deregulation and Monetary Control Act gradually abolished limits on interest, enabling banks and thrifts to offer lucrative accounts like Super NOW checking. The new law was a boon for savers, since it touched off interest- rate wars among financial institutions competing for consumer deposits...
...latest round of the thrift fiasco began in 1980, when Congress last tried to make life easier for the savings institutions. At that time the industry was still reeling from the inflationary spiral that sent interest rates soaring and left the thrifts with billions of dollars of low-interest 30-year mortgages on their books. Congress tried to remedy the situation by allowing the thrifts to expand their business far beyond those traditional instruments into stock and bond investment as well as business loans, particularly in commercial real estate. At the same time, thrift deposits continued to receive federal guarantees...
...reform that allowed the thrifts to expand their business proved a major disaster in the Southwest, where a sizable number of thrifts stampeded into risky real estate loans and other questionable investments. In many cases the institutions also succumbed to old-fashioned peculation. A spectacular case in point was the Vernon Savings & Loan Association of North Dallas, which was shut down in March with a deficit of more than $350 million. Vernon was purchased in 1982 by Don Dixon, 48, a North Dallas real estate developer. In six years Dixon pushed Vernon's assets from $82 million to $1.7 billion...
...close down the worst of the remaining money-loser thrifts would cost tons of money -- by one estimate, perhaps $23 billion. FSLIC resources have long been inadequate to the task. Hence there has been considerable pressure in Washington for the past year to add not merely $5 billion but $15 billion over five years to FSLIC capitalization. But there has been strong opposition from the thrift industry itself, mostly from the healthiest 60% of the institutions. Reason: the cash infusion would eventually have to be paid back by the thrifts, which are already paying about $3.5 billion a year...