Having been born fifty years after the Great Depression, my image of bank failure pretty much comes from It's A Wonderful Life and the Savings and Loans scandal in the 1980s.
IndyMac Bank apparently went into conservatorship today. I do not live in a small Texas town, so it's a great surprise to me there was a $2 billion run in the last week on a bank with a branch a few blocks away and headquarters in the neighborhood. It occurs to me that I was walking by that same headquarters nine days ago, just when they probably were making the last ditch effort to save the bank.
I also note that the IndyMac headquarters shares its building with eHarmony. I expect a story on the personal lives of federal banking regulators to appear somewhere. Don't disappoint me, dear Fourth Estate.
As for Freddie Mac and Fannie Mae, they were names much referenced in my household when I was growing up. I have no opinions on their capitalization at present, except to note that banks seem to be failing these days at a greater than normal rate.
3 comments:
I've been waiting for this given the shakiness of things at the moment. But we need less regulation? Why is it, I can remember so very well the S&L scandals of the 80s, though a child, and yet it seems on the whole we've forgotten that whole fiasco when it so well illustrated precisely the need for regularions? We really are a short-memory nation. And if memory serves, S&Ls were founded as a New Deal response to collapse of banks in the 30s.
We need more regulation in terms of practices and information provided to investors but less regulation in terms of government investment in the banks when they go shaky. Banks, for instance, should not be allowed to carry investments off their balance sheet as Citigroup has been doing lately (~$1 trillion...).
Clearly, there is a belief in banking now that if you go make risky investments, the government will protect you if you are large enough. That could hurt the sovereign credit rating of the nation and makes the present national debt more difficult to service and definitely will hurt our ability to make the kinds of investments to face the big problems before us.
You know I really could have a laissez-faire attitude to the economy if I believed the majority of those at the heights of finance and industry were honest and competent and there were serious legal and social consequences for the bad actors. But I don't.
Indeed. I just can't get over calls for less regulation over all. Our memory is so short. It seems every time regulations are lowered on an industry, we end up with malfeasance. I also think with the bank industry in particular that malfeasance in terms of investment should have serious consequences because of the pledges we have made to cover banks.
You know I really could have a laissez-faire attitude to the economy if I believed the majority of those at the heights of finance and industry were honest and competent and there were serious legal and social consequences for the bad actors. But I don't.
Indeed. I personally like the "social market" concept of the Germans and Scandinavians.
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