[speaker001:] now we have to talk about the savings and loans scandal
[speaker002:] oh my goodness
[speaker001:] yes do you have any strong opinions on that
[speaker002:] oh absolutely
[speaker001:] uh what are yours
[speaker002:] I I think uh it's all Congress' fault
[speaker001:] well I think there's a lot to be said for that point of view I I really think that congress turned on the taps and then there were lots of people there to carry away the water
[speaker002:] yep and I think the real problem wasn't the regulation which I supported but that they failed to similarly deregulate the insurance
[speaker001:] um
[speaker002:] I mean I think that was the real mistake they should have seen that coming it's that was like giving away free money oh sure we'll continue to insure insure you cheaply but you can you know do whatever you want with the way you loan the money
[speaker001:] well right
[speaker002:] and it should've been do whatever you want with the way you loan the money and by the way when you buy insurance you know they're going to be looking at how you do it
[speaker001:] he'll pay for it absolutely
[speaker002:] right and then the guys who want to spend it that way sure they'll pay more for insurance
[speaker001:] that uh-huh I think that would've been a much smarter way to handle it and the another thing that would've helped a lot would be to make certain that the people who were going to use the money that we were providing
[speaker002:] yep
[speaker001:] should've had there own at stake they should've have a lot more of their own capital on the line
[speaker002:] um-hum
[speaker001:] when they can leverage just a very small investment into millions of dollars worth of tax payers money and it's turning out to be a lot more than that
[speaker002:] right
[speaker001:] and they have absolutely no incentive to uh treat it prudently they just uh hand it over to anybody who walks in and asks for it
[speaker002:] absolutely absolutely because I mean their return is guaranteed
[speaker001:] um-hum they have nothing to lose and everything to gain you see you know can keep lending and keep growing
[speaker002:] yeah right
[speaker001:] then they can take the big salaries and have the all the perks and uh entertainment and so forth and then
[speaker002:] um-hum um-hum
[speaker001:] oh if people don't pay them back it's no skin off their nose they just
[speaker002:] sure in fact they've got a strong incentive to uh you know guarantee your money your deposits at six percent and go ahead and invest it in you know the junkiest bonds possible where the theoretical rate of return is high
[speaker001:] um-hum
[speaker002:] uh because if they win they win big and if they don't who cares they don't loose right
[speaker001:] yes they don't they don't lose anything well uh I don't know what could've been done other than the uh insurance regulation but I certainly think that was a mistake and the um I also think it was a mistake to reimburse all depositors over a hundred thousand dollars when they were told up-front that that was was was the limit
[speaker002:] yep yep I agree with you there too uh
[speaker001:] because uh the promise is
[speaker002:] this this the whole concept of too big to fail it's just silly
[speaker001:] yeah the promises don't mean anything now
[speaker002:] yep
[speaker001:] when the uh people put millions of dollars in some shaky operation
[speaker002:] right
[speaker001:] uh they figure the tax payers will bail them out because they have
[speaker002:] that's right and I also think the first thing they should've clarified was that the tax payer would give you a hundred thousand maximum I don't care how many accounts you've got
[speaker001:] hm absolutely uh I would've been in a little danger of uh you know I would've had to be very careful about where I put my money but I certainly would have
[speaker002:] right
[speaker001:] been alert and I would not have just been chasing the highest percentage return
[speaker002:] that's right and I mean it would've put these money brokers out of business
[speaker001:] on a CD yeah uh I don't think that'd be any great loss we could do without a few of those they don't seem to be providing very much useful uh service to people
[speaker002:] which I mean certainly contributed um-hum yep um-hum I mean if you invest in stocks or whatever you know it's it's not just the responsibility of the broker it's your responsibility you know to know what you're investing in and the kinds of risks you're taking and it seems to me if you're going to put more than a hundred thousand dollars or whatever the limit's going to be
[speaker001:] absolutely
[speaker002:] in a bank that you should be aware I mean it's one thing to have insurance when you're protecting the little guy who doesn't have the time to make or the expertise to make these sorts of decisions but it's another thing to be you know supposedly you would think hope that the big depositors like voters and everybody else are supposed to be educated about what they're getting into
[speaker001:] um-hum yes you would and uh uh I don't see why the for large sums of money why it should be any different from investing in a CD I I mean in a uh mutual fund or a money market fund or something like that
[speaker002:] right absolutely
[speaker001:] uh there are no guarantees on them
[speaker002:] that's right
[speaker001:] you uh you trust that the broker won't sell because certain brokerage houses will guarantee at least up to a certain point the investments in the funds that they manage but uh then you're uh just at the mercy of them because they could go under
[speaker002:] that's right yeah yeah I mean there is like for the brokerage houses there is a degree of insurance that the brokerage won't go bankrupt and you'll lose your money but there's certainly no guarantee that for example uh the commercial paper that the money market you invest in won't become worthless and your and your stock price will go down
[speaker001:] that's right yeah
[speaker002:] and that's fair enough
[speaker001:] um-hum well uh do you think that we're heading for another uh debacle of this sort in the uh insurance industry
[speaker002:] uh yes I mean there's got to be long long term consequences over this you know just because
[speaker001:] and we see
[speaker002:] reimbursing this is going to be a substantial cost the banks are failing because of all their accounts that were these you know savings and loans and stuff right um so I mean this things just got to spread
[speaker001:] um-hum well I don't know how we're going to bail them out because if we're already how many trillion dollars in the hole where's the money going to come from
[speaker002:] um-hum yep
[speaker001:] and yet the we've got this enormous uh first executive insurance company just sailing out here in California and um maybe the people who uh bought term insurance aren't going to lose anything except a few months premium but all those um people who have money invested in uh uh annuities for their retirement are going to be up a creek and I don't know who's going to bail them out
[speaker002:] um-hum um yep it's a problem
[speaker001:] there already there already a few companies that had switched over from their own private plans to the first executive annuities that are not getting their benefit checks this time
[speaker002:] hm
[speaker001:] and the the state governor is saying that we're going to protect those people but how are we going to do that
[speaker002:] um-hu m
[speaker001:] where the state itself is already in hock uh we're running thirteen million dollars no billion sorry thirteen billion dollars in the hole for the next fiscal year and you know we've got to come up with that money because states can't run a deficit the way the federal government can and they're going to have to be laying people off out here in the state
[speaker002:] um-hum
[speaker001:] some of whom I don't think anybody will miss but when it gets down to teachers and cops it make a difference
[speaker002:] yeah um-hum well if only it would help you know pull the usual firemen for a scam right
[speaker001:] well the
[speaker002:] pay more taxes if the firemen go first
[speaker001:] yeah I think that's absolutely they keep all their fancy uh perks in the legislature and they uh still do their and they still have all their
[speaker002:] yeah yeah
[speaker001:] I think it's something like twenty five uh people on the payroll per a legislator
[speaker002:] hm
[speaker001:] yeah I I came from out here to California from Texas and I can very well remember people trying to change the Texas legislature to meet every year instead of every other year as the Texas constitution requires and people
[speaker002:] hm
[speaker001:] consistently voted it down and since they do enough damage every two years think of where we'd be if we let them meet yearly
[speaker002:] that's right yep
[speaker001:] and I really feel that way about the California ones too
[speaker002:] um-hum
[speaker001:] that I I think that if they could all just take about a five year vacation and let things settle down maybe we could figure out what exactly we need and start over
[speaker002:] um-hum
[speaker001:] but anyway
[speaker002:] yep I think constitutional congress would be probably a good idea
[speaker001:] uh-huh yep I I would vote for that
[speaker002:] um-hum
[speaker001:] well it's been interesting talking to you and I think we're in pretty much agreement on this
[speaker002:] yeah it's been good yep I think so too
[speaker001:] thanks for talking uh bye bye
[speaker002:] we'll see you bye