No, by my logic, “Do Nothing” BO did nothing to PREVENT the economy from tanking.

Nothing!

NO insisting on reasonable audits of Fannie Mae and Freddie MAC.

NO proposals to PREVENT disaster.

Thanks for the assist Beebop.

But on the whole, it is easy to argue that EVERYTHING Reagan did, he did with the firm belief that it would help the country, he wasn’t motivated by personal or political concerns. Placing the country he loved first is what made Reagan a great President. And using that simple calculus, Obama is the antithesis of Reagan.

Many thanks for your long and informative posts. I usually don’t have the time or inclination to provide a history lesson every time I write something like “Reagan rocks, Carter sucks”, I just believe it’s a given. When I tell my children to keep their hands out of the fire or they’ll get burned, I don’t think it is necessary at that point to instruct them about the chemical process of combustion.

The economy started tanking while he was a do nothing Senator,

So by your own statement, he would have had even LESS to do with the tanking economy.

You guys should take the afternoon off to sort out your logic.

S&Ls nonetheless wanted to get into the commercial real estate loans and lobbied to do so. That was Jimmy Carter and Burt Lance. The Savings and Loans people wanted in on the “junk bond” craze but were prohibited by law from doing so. They gave amply to Carter’s election coffers, and Carter rewarded them by removing those inconvenient restrictions. Burt Lance (a banker from Georgia and close Carter friend) lobbied for that with Carter, as well. Congress was ruled by Democrats then, as well, and they went along with it.

The S&Ls picked a bad time to get in this market with their inexperience. During the Carter years marginal rates were so high, almost everyone invested in tax shelters and huge amounts of money went into REITs. Most REITs were able to invest only in commercial real estate and so they built new buildings right next to the empty ones they built last year. Commercial real estate collapsed at one point the entire S&L industry had a negative net worth.

The deregulation of interest rates was part of a comprehensive reform of the fundamental way the FED did business. No longer would FED operate according to a “trade-off” of unemployment/interest rates but would measure and manage the money supply for growth.

So, to recap:

1) S&Ls always had much more than 5 or 10 % of their loans in residential.

2) FED allowed them to maintain 5% Capital, because they had made bad loans and were losing money fast. The FSLIC could not withstand the losses of so many see Keating Five.

3) It was Commercial Real Estate that crashed, and due to Carter’s high rates.

4) Deregulation has been a good thing for financial markets allowing rates to rise and fall with market conditions. Think of this the same as when Reagan ended price controls on energy, resulting in more production, lower prices and the end of gas lines.

5) In Capitalism, the weak fall to competition, and the S&L’s were created to require a crutch even at the beginning. The failure of many of them allowed better institutions to fill the void, and more robust growth.

Reagan might have made errors, but S&L and deregulation wasn’t one of them.