Maxwell Newton, “Criminals’ hands grip, strip U.S. banks,”
New York Post, June 2, 1988, p. 44.
Among all the hand wringing and high-level theorizing about the reasons for the collapse of the U.S. thrift industry, particularly in the West and the South West, one item has not been mentioned much.
The collapse of the thrift industry represents probably the most massive and unprecedented example of widespread criminal fraud by the managers and owners of thrift and other insured banking organizations.
After all, it makes sense, doesn’t it? If you own a bank and you know that, whatever happens, the federal government is going to pay your depositors, irrespective of what you do, then why not go ahead and loot the bank?
Listen to the words of Federal Reserve Governor Robert Heller, speaking to the Senate Banking Committee on May 25:
While structural and regional economic problems are major factors in explaining the high level of bank failures, we find that mismanagement, insider abuse and criminal misconduct have played a role in many bank problems.
To address these problems, the banking agencies have worked with the law enforcement agencies to improve our ability to detect improper banking practices, and to identify, refer, investigate and prosecute instances of white-collar crime involving commercial banks. This program has resulted in more enforcement actions and criminal referrals.
Due to the benevolent and utterly stupid federal insurance programs introduced under the Marxist New Deal back in the 1930s, there was virtually no financial risk attached to the looting of banks.
On May 19, the General Accounting Office, in testimony to the Senate Banking Committee, listed savings and loan investments which have got the industry into trouble, including:
- 100 percent financing of land development projects.
- Purchases of shares in real estate and other securities.
- The widespread practice of S&Ls relying entirely on the loan originator for project evaluation.
As savings and loans began to increase their investments in areas in which they formerly lacked expertise, they began selling their mortgages and eliminating a stable source of income.
“High fliers used their S&Ls as private piggy banks to finance lavish lifestyles and engage in speculative business activities,” GAO Director of Accounting Frederick Wolf observed to the Senate committee.
Insider loans and placement of much of the thrifts assets with a single risky project became commonplace.
Many S&Ls became geared to the inflationary growth of regional economics.
Such abuses of government privileges are widespread in the Communist world. In Yugoslavia, recent examples of massive fraud by government official have put that nation into a position where it has had to go begging to Western banks for enough cash to permit the continuance of something resembling a normal business life in that country.
Banks in Texas, Oklahoma, Louisiana and Colorado (where 66 percent of U.S. bank failures originate), having abused, looted and defrauded the people of the United States, are now going to be given upward of $60 billion of federal money to pay the depositors who have been defrauded and looted by the managements of insured banks.
This may turn out to be the greatest ripoff in U.S. financial history.
Certainly, it is the greatest single example of the folly of guaranteeing, with government money, the actions of private businessmen who should have been allowed to go broke as a result of their greed and fraud. The New Deal was a terrible idea. Just how terrible, we are now finding out from the criminals who have taken over U.S. banking.
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