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Payoffs for Depositors

June 24, 1988

The lead story on the front page (June 7) was about the closure of two Orange County insolvent savings firms by federal regulators, and the immediate payoff of all depositors with balances under $100,000. The article goes on to say that while the Federal Savings and Loan Insurance Corp. was able to handle this occurance, there are many more savings and loans that are failing and that the FSLIC does not have nearly enough money to cover the depositors in all of them. The conclusion is that the good old U.S. taxpayer will naturally be stuck with the bill, which will be in the neighborhood of $20 billion!

I, for one, do not intend to take that bit of new without venting a little righteous indignation.

I would not object to being tapped for a few hundred dollars to bail out the needy, but it hurts to have to cough it up to save the greedy! Why should the taxpayers contribute to the welfare of self-confessed "rate-chasers" who made up most of the depositors that were paid off in Orange County? These are people and institutions that make it their business to find saving and loans that are in precarious financial shape and therefore have to offer exorbitant interest rates in order to attract money.

These rate-chasers know full well that their money is at risk and the only reason they invest in these shaky concerns is because of the knowledge that the FSLIC will bail them out and if the FSLIC goes bust the good old U.S. taxpayer is always available.

It's not fair that the taxpayer, which includes a lot of hard working, honest little people, should have to pay the deposits of a bunch of fat-cat rate-chasers who are trying to milk the last penny of interest out of their investment funds.

The FSLIC is being abused, in my opinion, and the only remedy for it is to increase the amount of regulation by the government of all insured savings institutions. The saving and loan industry was given the opportunity of functioning without government regulation and they flunked the course! If the FSLIC and, as a last resort the taxpayer, must back up these institutions, then they must accept government regulations which, hopefully, would keep them from making so many foolish business loans.

I am a firm believer in a free and unregulated economy. However, if you are going to have the benefits of deregulation you cannot also have the benefits of government insurance against loss, and expect to have an efficient, well-run industry.


Sherman Oaks

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