Sunday, August 3, 2008

Loren Steffy on Reich

"One of my first assignments as a business reporter was covering the second failure of Dallas' Sunbelt Savings. ... Regulators overseeing the bailout fielded questions from reporters, and the busted thrift's chief executive, Tom Wageman, sat silently in the corner. ... Twenty years later, the government is still shielding the banking industry from tough questions. ... John Reich [OTS head], blasted reporters for 'staking out' banks, interviewing customers and stoking public fears, saying journalists were 'seemingly oblivious to the fact that they could drive otherwise healthy banks to fail and push troubled institutions away from potential solutions toward ruin.' ... Banks shouldn't fail just because someone asks questions. If they do, consumers have reason to be worried, even if their deposits are insured. Maybe he doesn't read his own signs. 'Supervision' is part of his office's name. ... But 20 years ago we [in Texas] were at the epicenter, and the latest banking malaise shows the lessons from that time were largely ignored by both banks and regulators. ... Subprime and its cousins such as Alt-A loans became just another convenient tool with which mortgage brokers could close deals and collect fees, all wrapped in a sales pitch about how rising home prices would make the shaky numbers work. The lenders didn't have to worry if the loans went bust. Their Wall Street buddies had found something far better than brokered deposits: mortgage securities. ... And so here we are, a place not all that different than 20 years ago in Texas. ... And once again, accountability gets passed on, from lenders to Wall Street to the government, and then, ultimately to the taxpayers", Loren Steffy (LS) at the Houston Chronicle, 23 July 2008. Here's a link:

LS's got this right. The answer may be: deny incorporation to any financial institution that holds federally insured deposits. The privatization of profits and socialization of losses should end.

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