Professional Documents
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The Issue Whose Name They Dare Not Speak.
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Fed chairman Alan Greenspan isn't the banks' only friend. The other is
the man who has said he will do anything to get re-elected, George
Bush. Late in June, his Administration unleashed a bill that would gut
the Community Reinvestment Act (which requires banks to make loans in
their own neighborhoods, including low-income areas), ease
restrictions on loans to a bank's own officers and directors and
postpone the effective date of some tighter regulations contained in
last year's banking law.
If you listen to the R.T.C., its work is nearly done. Even though it
has run through only half its budget, the corporation is shutting
offices and reducing staff. Among the staff being reduced, as Susan
Schmidt has been reporting in _The Washington Post_, are lawyers with
the professional liability section, who are supposed to be going after
the executives and board members who ran the thrift industry into the
ground. With a three-year statute of limitations (running from the
moment institutions are seized), the division needs more staff, not
less -- but the R.T.C. is dismissing experienced lawyers and replacing
them with novices. No one can prove anything yet, of course, but the
likely targets of such liability investigations, aside from bankers,
would be realtors, accountants, lawyers, doctors and others who are
likely to be generous campaign contributors to both parties.
Students of the S&L disaster are reminded of 1988, when the same trio
of co-conspirators -- the executive and legislative branches, assisted
by a lazy or complicit media -- ignored the disaster until after the
election. In early 1989, the thrift crisis was suddenly "discovered,"
only to disappear again in accordance with the quadrennial cycle.
But the problems won't just go away. Bank and thrift balance sheets
are contaminated with billions of dollars of loans that went to build
pointless shopping centers and see-through office buildings. Salomon
Brothers estimates that it will take a national average of twelve
years to fill up existing empty commercial real estate -- ten years in
Los Angeles, twenty-six years in Boston, forty-six years in New York
City and fifty-six years in San Antonio, the national champ.
Aside from increasing the ultimate cost of the financial rescue, the
conspiracy of silence has largely prevented any serious discussion of
why the financial meltdown happened or how we might make the best of
the situation. The government is spending hundreds of billions of
public dollars to restore business as usual. Instead, failed
institutions could be transformed to publicly or cooperatively owned
local development banks, and the government's vast inventory of
near-worthless real estate could be turned over to community groups,
local governments or nonprofit associations for creative use. But some
things are too important to be discussed openly, especially during
election season.
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Doug Henwood is Editor of _Left Business Observer_ (see below)
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Reprinted with permission - granted by The Nation magazine/The Nation
Company, Inc. Copyright 1992
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