For over 2 decades now, the banking system and financial investment companies have known that they’ll get away with looting the American people and foreigners through the entire world. Any moment (every time) something goes wrong and the banks begin to get rid of money, typically after making obscenely unethical profits by partnering with governments, the federal government steps in again to rescue the banks and prevent failure.
But every time that the federal government steps into rescue banks from poor foreign or domestic investments, it’s individuals who purchase these mistakes while bankers learn how to improve their abilities to loot the taxpayer. Since at least the 1980s, banks have been practicing how to inflate bubbles, create malinvestment, take the easy profits, lose a bit of money, and threaten to freeze credit markets until they’re bailed out.
The Savings & Loan crisis of the mid to late 1980s was arguably an outfit rehearsal for the subprime market crash. Typically, the failure of the S&L industry is caused by the deregulation that began at the federal level and continued at various state levels. But the most important regulation increased; namely, the federal government insurance on deposited funds in thrifts was raised.
This ensured that depositors, both big and small, will be protected by the federal government if the S&L failed. Thus, thrifts began to expand rapidly using large deposits from Wall Street investment firms which they obtained through deposit brokers who promised large accounts for the greatest interest rates they could obtain from the S&Ls.
Obviously, this is an invitation to disaster, as financial firms only wanted the greatest interest rates they could receive. Deposit brokers knew that the funds were federally insured and could put them into any thrift that could promise a high rate of return. What the S&L did with the money after which was your choice of the lender president and the directors.
Unfortunately, your choice often involved corruption, fraud, and sweetheart Calgary mortgage property deals (usually predicated on fraudulently appraised properties) that never were never developed. Small-time criminals and even the Mafia became involved in numerous S&Ls, taking in brokered deposits to be able to increase reserves, then making huge loans that have been never paid back. If the mob was able to take control of the lender, it may raid it entirely (in a so-called “bust-out”); or even, it really took whatever was offered and then moved onto the following bank.
Once the thrift had been thoroughly looted, it was left to fail. The regulatory companies often stepped into the picture to declare the S&L insolvent and then had to pay out on the insured deposits, costing individuals hundreds of an incredible number of dollars. Because the deposits were insured, the S&Ls could actually attract huge deposit accounts and then create fraudulent loans on these accounts, trusting that the feds would stick individuals with the bills.
Although the little banks were permitted to fail in large numbers, the financial power centers that had initially gathered the large deposit accounts were quite protected by the federal government. They knew never to invest more compared to the highest insured amount in any one account, so virtually all of their money was recovered, even as they provided the easy money fuel that the criminals through the entire country used to loot the little banks.
Deregulation was not the basis reason for the problem, even though the S&L industry was deregulated in 1982 with the passage of the Garn-St. Germain Act. Insurance was increased from $40,000 per account to $100,000 per account, and the agency in charge of thrifts, the Federal Savings and Loan Insurance Corporation (FSLIC), was presented with the “full faith and credit of the U.S. government.” Increasing existing regulations was the problem and it became an invitation to mobsters and criminals to loot the industry.