Bailing Out Failed Savings and Loans

I have been following the savings and loan story for some time. A short while ago The Times carried a story about the many people who were chasing higher interest rates from one S&L; to another. As, I recall, they were standing in line to draw their money from one bank in order to deposit it in another where an initial deposit premium or a slightly higher interest rate or both were being offered. The safety of their money appeared to be of no concern since these bargain hunters were certain that the government would protect them from loss.

Subsequently, there have been numerous stories of problems in the S&L; paradise of high returns with no risk. But, for those following this story, the Jan. 27 and 28 Times were surely a bonanza. On Page 1 Jan. 27 the headline says “S&L; Rescue Could Cost Average Taxpayer $450.” On Jan. 28 there is a front-page story with the headline “S&L; Deposits Safe, President Assures Public.” Going now to the Business Section on we find more S&L; stories.

It is a dismal picture of greed, incompetence, corruption, fraud and, in many cases, theft. The charters of these institutions have often been taken as licenses to steal.

And throughout they have been aided and abetted by: the public who entrusts money to them knowing there will be no risk except to the taxpayer; reputable accounting firms who are now beginning to admit that they are easily duped; government bank examiners who seem unable to see a bank’s failings until it is completely insolvent and beyond redemption, and finally the executive branch of our government which suggests that a simple tax on savings would be the answer to the whole thing.

There must be a better answer, a simple government bailout at this time seems totally inadequate. It would not teach the investing public a thing about handling their own funds and selecting investments by weighing gains against risks.

And what about the owners and managers of these firms? After the rescue will they just move down the block to another storefront to do business as usual? In many cases crimes were committed. Surely some effort should be applied to meting out adequate punishments.

As to incompetents, I believe that the government can and should play an important role here to protect the public from these people in the future. Perhaps bankers should have to carry malpractice insurance just like the medical profession. Certainly this would make more sense than for the public to pay insurance to protect themselves from the depredations of the bankers.

JOHN B. ONA

San Diego