(The Workers' Advocate, January 1, 1990, p. 4)
. The number of bank failures has grown throughout the 1980's as the debt crisis continues to threaten a collapse of the banking system.
. Bank failures, including the savings and loans, averaged 45 a year for the first half of the 1980's. This was up from the post-World War II average of six a year. By 1985-87, the bank failures had leaped to an average of 147 a year. By 1988, one out of every six savings and loans institutions had gone bankrupt, and the crisis with commercial banks also continued to grow.
. In the third quarter of 1989 alone, the big East Coast banks reported a total loss of $5. 5 billion. The huge losses came because the Bank of New York, Bankers Trust New York, Chase Manhattan, Chemical Bank, Manufacturers Hanover, J. P. Morgan, and others were forced to boost their reserves to cover expected losses on third world loans.
. But the debt crisis did not end with the loans to the third world. Banks were also hit by problems with a number of loans for leveraged buy-outs (LBO's), when companies that were taken over through enormous debt were unable to squeeze enough profits out of their workers to make their loan payments.
. As well, the collapse in real estate speculation has hit a number of big banks. Huge loans were given out to real estate developers with the hope of turning a quick profit. But far too much high-priced housing was built and now luxury condos stand empty through much of the East Coast and the loans go unpaid. The "super regional" Bank of Boston just recorded a $125 million loss for the third quarter, after setting aside S370 million to cover a mounting pile of troubled loans due to its speculation in LBO's and real estate. It is little wonder that the bank's chasing of a quick buck has also landed it in trouble for handling large sums of money for reputed big-time drug dealers.
. The banking failures have already bankrupted the FSL1C, the federal fund insuring deposits in
the savings and loans. But far from solving the crisis, the Bush bailout of $100 billion plus is
only handing over billions to financial profiteers like Ford Motor, Revlon, and former Treasury
Secretary William Simon to take over the collapsed savings and loan institutions. Often, even
guaranteeing they won't lose money if the savings and loans continue to hemorrhage. And even
though this bailout has barely begun, there is already talk of the need for a second bailout of the
savings and loans. <>
Last changed on February 16, 2009.