X had lent $36.6 million in insured deposits to a developer who had used the money to acquire ninety-nine acres of land, including thirty-one acres under water. From most indications, it looked as if the only thing you could do with the land was park submarines. An appraiser said the ninety-nine acres was worth only $12 million. But X had approved the $36 million loan assuming that the land would rise in value once the developer used it for a lake and a resort that would include 170 condominiums and a hotel. The $36 million loan earned X huge fees. But it was like lending someone $300,000 on a house worth $100,000 and gambling that the thing would more than triple in value once it was remodeled.Or this:
Confused as how such a debacle could occur, and understandably irate, American taxpayers started demanding some scalps, and the politicians who had willingly taken all of that campaign money graciously offered Y’s. A vigilante atmosphere evolved in which demagoguery and demands for harsh punishment flourished. Y faced an unsettling prospect: He might become a victim of the very scandal he helped create.Or this:
Z is far more than a financial crisis; it is a political crisis of the first order. It represents what happens when a nation’s political system becomes rotten with self-interest, when raising money to stay in office becomes more important than the common trust, and when the average citizen becomes insulated from reality, be it by deposit insurance, ignorance, or indifference.
The common thread, of course, is greed. But if you think these quotes are in relation to the current economic crisis – be it the decline of GM and Chrysler or the unprecedented failures among US banks and banking interests, you’d be off by about twenty years. These quotes are from James O’Shea’s book The Daisy Chain, which outlines the savings and loan crisis of the mid 1980s, a crisis that cost the American taxpayers hundreds of billions of dollars and was caused by people wanting to get a hold of that brass ring and give it a lick, just like poor Gil Gunderson.
O’Shea’s is the first book I’ve read on the S&L crisis. (The “Z” in the third paragraph; X refers to Vernon Saving and Loan, a Texas S&L at the heart of O’Shea’s book while Y refers to Don Dixon, the guy who drove that particular S&L into the ditch.) What I appreciate the most about the book is it’s balanced approach. Rather than providing scalps or scapegoats, O’Shea details how nearly everyone involved in the situation, from the S&L officers to investors to politicians to the public at large, contributed to the problem and how they ought to share the blame. It’s an excellent lesson that we all should be learning, especially in the light of our current banking crisis. We ought to be looking less for scalps and more at what we can do as citizens, politicians and organizations to get our houses in order and keep them that way.
O’Shea’s treatment of the material is amazing. While he blames Reagan-era deregulation of the S&L industry as a catalyst for the crisis, he has no sacred cows, blaming Texas and federal officials for making the crisis at Vernon worse than it could have been otherwise. He points out that this crisis, like many others we face and may face, are really crises of personality, in which strong personalities bully through the pumpkin patch and get what they want, while weaker personalities either sheepishly do what they’re told or encounter obstacle after obstacle in trying to do what’s right that they either give up, are forced out of authoritative positions or simply fade away. There’s also ample room here to indict both Republicans and Democrats, Republicans for insisting that the free market is all good and holy, and Democrats for believing that politics ought to play before rationality.
Oddly enough, reading the book makes me want to pay more attention to how things go at work. We all have the authority to question what’s going on, and to actually stop work if we believe things are proceeding in an unsafe or unethical manner. Not that I have had much occur in my little area that needs questioning, but at least reading this book is a reminder that I do have that ability.
No comments:
Post a Comment