[speaker001:] okay
[speaker002:] all right uh feelings on what caused the S and L crisis I guess I don't have a real technical knowledge for what happened I gather that there where large numbers of situations where loan were made that appear to be a good loan but in a speculative since and with have little regulation going on because of deregulation during the Reagan eight years uh more and more S and L simply began to take riskier and riskier loans and then when they began to collapse one after the other I think almost like an avalanche of of property values devalued
[speaker001:] um-hum kind of like a domino's effect
[speaker002:] right I don't have a a field for whether or not this is the equivalent of what was called the teapot dome
[speaker001:] no
[speaker002:] uh scandal are you familiar with that from your histories lessons or whatever
[speaker001:] no no
[speaker002:] uh I vaguely recall but I've never gone and done any study on it since the S and L thing that teapot dome scandal is when I think during the Hoover years where gobs of land was was sold at really inflated prices on the theory that there were natural gas beneath it and that that appeared to be corruption within the Hoover administration I don't have a real since of of like corruption that caused S and L all though I have a feeling that people look the other way when things began to go sour
[speaker001:] um-hum no I don't think it was really corruption that caused it
[speaker002:] maybe
[speaker001:] or within I think people just started you know not not being as careful with the loans that they were making whenever you you know whenever they gave them out
[speaker002:] uh-huh
[speaker001:] I think maybe they didn't check into them enough or maybe because everyone else was doing they figured they would just go ahead and approve it also so
[speaker002:] yeah
[speaker001:] yeah
[speaker002:] it it seems like there were on awful a lot of people making loans and business decisions on a get rich quick is is the wrong phrase but if it captures some of the the feeling I have from the people making business decisions that if they failed it's sort of well no skin of my back I'll move on to this other company or
[speaker001:] um-hum um-hum
[speaker002:] I I just since that they didn't have a commitment to the stability of the organizations they were were making the decisions for and I don't know whether that's because they had other opportunities to which they could move
[speaker001:] um-hum
[speaker002:] you know that it was that easy for them to find new work that they didn't weren't stuck to where they were and as the things begin to collapse they just moved on
[speaker001:] I'm not sure
[speaker002:] or whether they had extracted enough money in a percentage base such that they didn't they didn't care any more I I just I'm rather puzzled about the whole thing
[speaker001:] um-hum I know well I'm um I know a little bit about it but I don't as much as I should know about it I'm a finance major here at Clarion
[speaker002:] it okay
[speaker001:] and um I do know that one of the reasons that caused it is the fact that the federal reserved backed any loan that the Savings and L made with a a hundred thousand dollars so they were kind of insured with that hundred thousand dollars and I think that's kind of why they they were making the riskier loans because they were like oh well we have a hundred thousand dollars insurance on it
[speaker002:] well they didn't they didn't have a since of risk
[speaker001:] no I don't think so
[speaker002:] oh okay
[speaker001:] and uh plus where the fact where they were allowed to make loans in any almost any type of loan and like some banks you know they're limited to the types of loans that they're allowed to make
[speaker002:] uh-huh
[speaker001:] and I think the S and L's were more open with the types of loans that they were allowed to make
[speaker002:] okay
[speaker001:] and I think if they would be more bound to certain loans and not as high of insurance by the reserve then I don't think this would have happened
[speaker002:] well do you think we there's a final accounting yet not in the since of pennies and nickels but do you think there's accounting on an ordered of magnitude or that that they really do understand how much money it is for awhile it seemed like every time I opened the paper up it was escalating in terms of the damage uh did is your since that we now understand how bad it is
[speaker001:] um-hum
[speaker002:] or is there more to be heard yet
[speaker001:] um I think that people just basically got tired of hearing it and it wasn't making it was wasn't as good news as it was I think it's still adding you know adding up and I think it will be for awhile
[speaker002:] so you don't think necessarily they don't have a complete grasp yet or whether or
[speaker001:] no I don't I don't think they do I don't think how I don't think how they could find that big how much was really lost or how much they were going to lose because there still are some S and L's still open
[speaker002:] uh-huh
[speaker001:] and it's and it's very possible for them to go down in the future because of this
[speaker002:] to be caught in the land slide
[speaker001:] um-hum um-hum um-hum
[speaker002:] do you think to possibly is that it'll happen with the regular banks
[speaker001:] I I don't know I think I think it would be harder but I think there are some regular banks that will go down with it
[speaker002:] it seems that I recall reading for the last oh let's say starting three years ago but not so much in the last year of bank risks of relative to the loaning funds to third world countries like Mexico Venezuela
[speaker001:] um-hum
[speaker002:] uh and Argentina based on oil loans and then the price of oil had had gone south resulting in those loans being very risky and I guess I read articles of various banks that have done the right thing to contain their risks given that they had made multiple billion dollar loans I have this vague since that that could happen that that there are still monies loaned out to third world countries that could end up being totally lost
[speaker001:] oh yeah um in some of my classes now I was just reading I think it was in Venezuela I can't remember what company it was but they just wrote off like millions of dollars because they know they will never get it back
[speaker002:] um-hum
[speaker001:] you know and they just they just wrote it right off I think I think we've lost a lot of money and you know like we every never going to get it back it's impossible to get it back
[speaker002:] and so you think that it's just gone
[speaker001:] um-hum um-hum yeah because we're we're you know we're talking about some peens that have just like even gave up on getting it back they're even trying any more
[speaker002:] okay
[speaker001:] they just totally wrote it off their book
[speaker002:] do you think it is necessary to have the federal guaranty program like my since is that was there to try to protect small investors but it ended up protecting big investors
[speaker001:] hum
[speaker002:] which I don't think what it was meant to do so I guess it I feel like as long as we have the possibility for this large numbers of people to be protected the possibility exists for for these sorts of of problems
[speaker001:] um-hum um yeah I think is it necessary to have um the backing um it it's it's just for you know safe purposes you know in case something would happen um yeah as long as there's enough little companies we're going to have to ha ve something
[speaker002:] um so your since is that the that uh the the loan guarantees which really were accounts guaranties so the so that the account holders that if something went wrong they would have their money
[speaker001:] um-hum right
[speaker002:] and given that the S and L's have had disasters then those account holders are are their money is still being protected
[speaker001:] um-hum
[speaker002:] and that is it's million of people with anywhere from thousands to tens of thousands I guess of
[speaker001:] um-hum
[speaker002:] of dollars being protected it it seems like um there was a lot of money being protected in multiple accounts uh it's if if you take ten million people and protect ten thousand dollars it still only a hundred billion billion dollars and we're taking about monies way in access of that now so it's obvious that we've protected large accounts
[speaker001:] um-hum
[speaker002:] and perhaps multiple people in multiple S and L's and and it seems like maybe that needs to be thought about rethought
[speaker001:] yeah
[speaker002:] you know that the for I guess I'm content with the need to have protection on on accounts but I feel likes it's on an individual basis someone whose got
[speaker001:] um-hum
[speaker002:] accounts in thirty five different S and L's or thirty or forty thousand dollars and they're all protected by the government seems to me like they've gotten around what was intended to be the issue there
[speaker001:] uh-huh
[speaker002:] I guess I don't have a personal sense of vulnerability on it since I was not a heavy user of any S and L's and and let alone any of them that went bankrupt
[speaker001:] um-hum
[speaker002:] and I guess that means that from my perspective it could happen again because that means I'm not worried enough
[speaker001:] I think it could happen yeah
[speaker002:] uh it's kind of thing where maybe we'll survive and then I then it will happen again because we don't pay attention to those kinds of things
[speaker001:] um-hum I think it'll happen again but I think it'll be a long time in the future before it does happen again because I think like the bank people and any kind of people like that are gonna be worried about it and not to let it happen again in the near future but I think later on they're gonna start and forget about it and start making some of the riskier loans I mean you're gonna have to take some risks and as long as they're backed I think they're still gonna you know start taking on riskier loans and I think there is a chance it could happen again but not until you know late you know in the future
[speaker002:] uh-huh well perhaps if there are regulatory um constraints put back in place
[speaker001:] um-hum
[speaker002:] it will protect that maybe we have learned a little bit of a lesson here about what happens if you remove a little of the regulation uh