Originally Posted by sallylou
No, that doesn't have to happen. I worked in commercial litigation after the S&L Crisis. That was still going on in the 1990's. The receivers came in and the shareholders took the losses. The RTC handled everything. The books were relied upon. That was it.
I cannot speak intelligently of the Savings and Load Crisis, but, as I understand it, it cannot be compared to the current crisis. From Wikipedia, "savings and loan or "thrift" is a financial institution that accepts savings deposits and makes mortgage, car and other personal loans to individual members". Based on this, the financial product's incoming revenue was from savings accounts not mortgages, this is not the same thing. In principle, it is money coming and being packaged, but, in the S&L case, there was no legal mechanism forcing people to put money into savings as in the case of a mortgage, correct me if I am wrong. Furthermore, the bonds in the S&L case were repackaged as government backed bonds, correct? And, this was done as a solution to the crisis instead of an actual cause, the failure of the loans? The money being made was through fees much like the Bernard Madoff case.
However, the people with the savings deposits were federally insured while the people who owe mortgages are not.
My point is: Did the S&L scandal arise because of S&L repackaging savings money into a backed security, basically, a savings-backed-security?