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S&L Failures and Regulations

November 09, 1994

Paul Craig Roberts' Column Right ("June Bonds Draw Junk Justice," Oct. 25), blaming a federal regulatory law passed in 1989 for the collapse of our savings and loans, ignores these incontrovertible facts: Records of the FDIC show that, from the 1950s through 1981, our banks and S&Ls failed at an average rate of 10 or fewer per year. Then came the deluge, and by 1986, the number had grown to 145: a 14-fold increase. By 1988 it reached 221.

Obviously, a law passed in 1989 did not cause a debacle that had begun several years earlier. Equally obviously, something needed to be done to ensure that S&Ls maintained a saner mix of risks in their investment portfolios.

As to Roberts' glowing report on the track record of junk bonds since September, 1989, this ignores a multitude of bond issues that had gone into default before them. These were a prime cause of the spate of failures noted above.


Los Angeles

* Roberts' concluding paragraph states: "The charges against (Thomas) Speigel are the trumped-up charges of a corrupt government desperate to hide its responsibility for the collapse of the S&Ls at great taxpayer expense."

I have trouble with several parts of the above paragraph:

* "Trumped-up charges"--I thought under our system we let a court of law decide the validity of charges.

* "A corrupt government"--if Roberts has provable evidence of corruption and will name names, there are plenty of lawyers who will be happy to prosecute.

* "Desperate to hide its responsibility"--why should the present government be desperate to hide anything that was initiated by a prior government?


San Gabriel

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