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Thrifts Under Siege: Restoring Order to American Banking Thrifts Under Siege: Restoring Order to American Banking
By R. Dan Brumbaugh
1999/12 - Beard Books
1893122395 - Paperback - Reprint -  235  pp.
US$34.95

Category: Banking & Finance

This title is part of the Business Histories list.

Of Interest:

American Commercial Banking: A History†

Bailout: An Insider's Account of Bank Failures and Rescues

Full Faith and Credit: The Great S & L Debacle and Other Washington Sagas

The Failure of the Franklin National Bank: Challenge to the International Banking System

The Rise and Decline of the Medici Bank: 1397-1494

The Story of Bank of America: Biography of a Bank

The Tumultuous History of the Bank of America

Thrifts Under Siege: Restoring Order to American Banking

Interesting exploration of the thrift crisis and how it was mishandled.

Publisher Comments 

This absorbing book thoroughly explores the thrift crisis and the danger it posed for the nationís federally insured depositories, revealing how legislators and regulators mishandled the crisis for more than a decade. The author forcefully argues that regulations designed to shield weak thrifts from closure greatly expanded the extent of the crisis.

No book review available

R. Dan Brumbaugh, Jr. is a Senior Fellow at the Milken Institute. An expert in banking and global financial markets, Brumbaugh has consulted a wide range of financial service firms and industries.

Brumbaugh was a senior research scholar at the Center for Economic Policy Research at Stanford University during 1989-90. From 1986 to 1987, he was president and CEO of the California-based Independence Savings and Loan. Brumbaugh was deputy chief economist at the Federal Home Loan Bank Board from 1983 to 1986.

Brumbaugh is the author of several books and numerous professional journal articles on related subjects in which he has expertise, he has testified frequently before congressional committees and has been quoted extensively in the media.

Brumbaugh received his Ph.D. in economics in 1986 from George Washington University.

List of Figures xiii
List of Tables xv
Preface xix
Acknowledgments xxiii
1 Thrift Institutions in the U.S. Economy: Evolution Leading to Revolution 1
How to Distinguish Contemporary Thrift Institutions and Commercial Banks from Other Financial and Nonfinancial Firms 2
Origin and Specialization of American Thrift Institutions 3
Early Financial Crises and Thrift Institutions 8
Post-Depression Growth, Rising Interest Rates, and the Beginning of the Modern Thrift-Institution Crisis 13
Organizational Form in the Thrift Industry 16
Trade Associations and Thrift-Industry Influence on Regulatory Policy 20
Summary and Conclusions 27
Notes 28
2 The Modern Thrift Crisis (Part One): A Precipitous Increase in Failures Accompanies Sharply Rising Interest Rates 31
Weaknesses in the Regulatory System Make It Vulnerable to the Unexpected Increase in Interest Rates in 1980 31
Monetary Policy Changes in October 1979, Interest Rates Soar, and Failures Mount 36
Regulatory and Congressional Responses to the Crisis 40
The Inundation of the FSLIC 49
Transition to Part Two of the Modern Thrift Crisis 56
Notes 56
3 The Modern Thrift Crisis (Part Two): Gambling for Resurrection 59
Not All Insolvent Thrifts Are Closed 59
The Perverse Incentives Created by Insolvency and Augmented by an Overwhelmed Insurer 64
The Contamination of Solvent Thrifts by the Survival Tactics of Insolvent Thrifts 70
Regulators Attempt to Constrain the Risk-Taking Activities of Thrifts 74
The FSLIC's Recapitalization Plan: Once More, Too Little, Too Late 79
Will We Relive the First Part of the Crisis? 84
Notes 86
4 How to Resolve the Current Thrift-Industry Crisis 89
Finding the Funds to Close Insolvent Institutions 90
Triage Until All Insolvent Thrifts Are Closed 97
Cost-Avoiding Strategies Available to Surviving Thrifts 107
Notes 111
5 How to Avoid Another Thrift-Industry Crisis 113
The Role of Minimum Capital Requirements for Insured Depository Institutions 114
In Troubled Periods, Do Not Lower Capital Requirements--Increase Examination and Supervision 117
Raise the Minimum Required Capital Level to 6-Percent GAAP Net Worth and Raise It Now 119
Explicitly Empower the Bank Board to Close Barely Solvent Thrifts 123
Develop More Accurate Market-Value Accounting and Appraisal Practices 128
Notes 133
6 Regulation of Thrifts and Banks 137
What Justifies the Existence of Thrifts and Banks? 137
Runs: The Major Modern Regulatory Concern 139
U.S. Government Regulation of Thrifts and Banks: Reaction to Crises 141
Early Regulation of Thrifts: Precursor to the Modern Crisis 145
Government Regulation of Thrifts in the Turbulent 1970s and 1980s 150
Implications for the Future Regulation of Thrifts and Banks 158
Notes 160
7 Beyond the Thrift-Industry Crisis: The Redesign of Thrift and Bank Regulation and The Rollback of Deposit Insurance 161
Mortgage-Backed Securities Have Forever Blown Apart Thrift Balance-Sheet compartmentalization 162
The Role of Government Subsidies in Mortgage-Backed Securities 169
Any Congressional Subsidy of Housing Finance Should Be as Direct as Possible 170
A Comprehensive Framework for Regulatory Reform of Insured Depository Institutions 171
Rollback of Deposit Insurance and the Role of the Federal Reserve in Closing Insolvent Institutions 175
Summary: Increasingly Better Information Spells Accelerating Volatility for Depository Institutions 178
Notes 180
Appendices 183
A Organizational Form and Charter-Type Data for FSLIC-Insured Institutions by State 184
B Concentration of Assets within the Savings and Loan Industry as of December 31, 1986 186
C GAAP Net Worth for FSLIC-Insured Institutions by State 187
D Net-Worth Requirement or Capital Requirement for Savings and Loan Associations as of February 1987 190
E Major Depository Financial Institution Legislation 192
References 199
Index 209
About the Author 215

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