No more tribute for the S&L bailout!

Why should we pay?

(The Workers' Advocate, Vol. 20, No. 7, July 1, 1990, p. 5)


. As homelessness mounts, as health care vanishes, as more plants close, as layoffs grow and unemployment spreads like a plague through many big cities, what is the government doing? Bailing out the bankers of course.

. In June, the Democratic Party's Chairman of the House Ways and Means Committee, Dan Rostenkowski, told a conference of big-city mayors, "The peace dividend, and quite a bit more, has already been invested in our savings and loans. We need to slash spending and raise taxes merely to get to ground zero."

. Virtually every month, the cost estimates for bailing out the savings and loan banks (S&L's) grow higher. Last fall, it was claimed that over the next 40 years the bailout would cost about $100 billion, maybe more. In April we were told the bill would run up to $325 billion, maybe more. In June, it was declared that the cost would probably grow to $500 billion, and perhaps more.

. And who is to pay for the wild financial speculation and outright looting of the S&Ls by the rich? The working masses of course. When Rostenkowski says "slash spending" he doesn't mean to cut the spending for the S&Ls. Oh no, it is cuts for Medicaid and Medicare, for welfare and food stamps, for jobs and so forth. And now that Bush has agreed to raise taxes, you can be sure the tax burden will continue to fall mainly on the working masses.

. But why should the working masses pay? Well, the government says the bailout is necessary to save the small investments of ordinary people. Hog-wash! In fact, the bailout has been organized in such a way as to benefit the corporate billionaires. Collapsed S&Ls are being turned over to financial profiteers like Ford Motor and Revlon for a song, and often with guarantees they won't lose money if the S&Ls continue to hemorrhage. And billions more are being paid the banks and other wealthy investors in interest payments on loans to finance the virtual giveaways of these S&Ls. It's the capitalist billionaires, not the working masses, who are profiting from the bailout.

. But then we are told that the masses must sacrifice to save the financial system, elsewise the entire country will go into crisis. But this bailout is hardly solving the growing financial crisis. It is like putting band-aids on someone who's bleeding to death.

. Since 1981 over 870 S&Ls have gone under. Another 500 are presently insolvent. And it is estimated that in the long run 1,700 of the present S&Ls, 60% of those in existence today, may have to be liquidated. At the same time, it has been reported that the S&L crisis has spread to the commercial banks. The crisis in bad real estate loans, coupled with the crisis in third world loans and bad loans for leveraged buyouts and other speculation, has led to talk of the commercial banks being the next to need being bailed out. Meanwhile, these crises have brought on a "credit crunch" that is helping to undermine home construction, basic industries, and other sectors of the economy.

. The bailout is not solving the underlying problems -- problems tied to the system where nothing is built or developed unless it means profits for the capitalists. They are just postponing an economic collapse, at the expense of preparing the ground for an even deeper crisis in the future.

. The S&L crisis was caused by capitalists. And the bailout is being organized to profit capitalists. The workers should not pay for it. Instead, the workers must organize to defend their immediate interests -- to fight for jobs, health care, housing, and so forth. And in this fight they must defend their broad class interests and build up a revolutionary working class movement aimed at overthrowing this system of legalized looting and free the economy to meet the needs of the masses. This is a fight for workers' socialism. Not the state capitalism and shortages in Russia and Eastern Europe. Nor the crisis-ridden "free market" of the West. But a system run by the working class for their own benefit. <>

Why no 'war on crime' against the bankers?

(The Workers' Advocate, Vol. 20, No. 7, July 1, 1990, p. 5)


. President Bush put on a big show June 23 against the S&L criminals. "We will not rest," he vowed, "until the cheats and chiselers and charlatans have spent a large chunk of their lives behind the bars of a federal prison."

. But then what about his own son, Neil Bush, who was caught in the swindle of the Silverado Banking, Savings and Loan Association? It seems the President's son will go scot free.

. Neil Bush was put on Silverado's board in 1985 when George was vice-president, an obvious move for influence-peddling in the government. When Silverado went into crisis, government investigations were put off for two years. When regulators recommended that Silverado be shut down in 1988, they were ordered to wait two months -- until after election day.

. The eventual takeover cost the government a billion dollars. Much of the losses were due to looting by Silverado heads. And Neil Bush took an active part in the swindles. For example, he pushed for loans to his business partners in the JNB company, Kenneth Good and William Walters. Of course he did not mention that they were his business partners. When they couldn't pay back some $11. 5 million in loans, Bush voted for a deal in which Silverado accepted a mere $3 million payment and wrote off the rest. Apparently in payment for these services, Neil Bush received a $100,000 loan from Good, which he was not required to pay back. As well, Good and Walters raised his JNB salary to $120,000 and gave him a $22,000 bonus.

. Neil Bush ripped off a bundle, yet there arc no criminal charges against him. In fact, regulators even dropped their original proposal to ban him for life from serving as an S&L executive, as was done to other Silverado executives. Instead, they are now suggesting that he only be barred from future conflict-of-interest infractions. But wasn't he barred from that all along? At any event, this is sure a far cry from spending "a large chunk of their lives behind the bars of a federal prison" that President Bush promised.

. And if Neil Bush gets off, who else will? The Democrats can't really make much noise about this since a number of their top senators and congressmen have been caught in similar scandals. Little wonder that few of the S&L robbers have been, or will be, prosecuted. While poor people are being tried every day for supposedly stealing pennies from welfare, the billionaire looters tied to the Republicans and Democrats arc being politely asked to be good boys. <>

Ford Motor getting rich off the S&L bailout

(The Workers' Advocate, Vol. 20, No. 7, July 1, 1990, p. 5)


. After capitalist looting put the S&Ls in crisis, the government is helping other capitalists loot the S&L bailout. Take the Ford Motor Co. deal, for example.

. The government allowed Ford to take over and merge the Silverado, Columbia, and Cardinal S&Ls for a mere $96 million in recapitalization. And they made this deal even though other capitalists had offered to pay up to $200 million. The government also sold Ford Silverado's $600 million mortgage residual portfolio at a $180 million loss. As well, the government provided Ford a series of tax incentives to sweeten the arrangement.

. After this deal, the merged company recorded in 1989 a profit equal to 52% of Ford's investment. And it is reported that after adding the tax benefits that the government gave Ford, it will probably realize a first-year return on investment "in excess of 100%." (Detroit Free Press, June 20)

. Not a bad bargain for Ford. But for the masses who have to pay for this bailout, it's another giant swindle. <>

Banking crisis in the making

(The Workers' Advocate, Vol. 20, No. 7, July 1, 1990, p. 5)


. The July 2 issue of the U.S. News and World Report suggests that the latest bailout of Donald Trump's $2 billion debt "signals the potential acceleration of a banking crisis brewing for two years that now threatens to break out on a national scale."

. The Report states that "Since the early 1980's, lenders have struggled with the Third World debt hemorrhage, the oil bust, a farm recession, a spate of overleveraged corporate buyouts and the savings and loan debacle." The current crisis in bad loans to the real estate capitalists "adds to that stack of IOUs."

. And as banks collapse from the crisis the FDIC, which insures bank deposits, is going into crisis. The Report indicates that the FDIC is way underfunded. Its reserves are only $13.2 billion, down from $18 billion two years ago -- "a meager $1 million to cover all depositors at each of the 13,000 FDIC-insured banks." And Budget Director Richard Darman projects that the FDIC will lose at least another $2 billion this year. With further problems, the Report declares "the federal government would have to replenish the till to prevent the system from crumbling."

. So we are threatened with a banking bailout on the heels of the S&L bailout. Obviously this system is terminally ill. Let's get rid of it and build a system which feeds the masses instead of the financial speculation and profit-grabbing of the rich. <>

Back to main page, write us!

Last modified: February 16, 2009.