Newsgroups: alt.rush-limbaugh,talk.politics.misc
Subject: Real estate decline
From: demon@desire.wright.edu (Stupendous Man)
Date: 10 Sep 92 15:01:50 EST
Organization: Demonic Possesions, Inc.
Summary: Note that the RTC scam is restoring the speculators lost money...

In article <BuCHED.En6@eis.calstate.edu>, kmitche@eis.calstate.edu (Kenneth Mitchell) writes:
>  
>> hulsey@dbsun.uucp (hulsey) writes:
>>
>> And since the S & L crisis was basically caused by the
>> collapse of the oil industry, _if_ he hadn't been
> 
> And demon@desire.wright.edu writes:
>  
>>        It was caused by
>>1) Fraud
>>2) The collapse of the real-estate bubble
>  
>>        Oil industry had little to do with it.
> 
> Both wrong, gentlemen; the S&L crisis was caused by changes in the tax
> lasw relating to real estate development. Congress did it. Fraud accounted
> for less than 1 percent, even by the MAXIMUM estimates. 

	Yeah, but what did those tax changes result in?  Real estate
speculation was no longer economically viable.  All those empty buildings could
no longer be used as "junk equity".

> Real estate was a great tax shelter, so lots of people invested in real
> estate. Congress, wanting to squeeze the last nickel out of the economy
> re-wrote the tax laws, making real estate a much more risky, much LESS
> profitable investment. When the risk went up and the profit went down, it
> became difficult to sell real estate (commercial real estate, now; nothing
> to do with single family homes) and so the price plummetted. S&Ls which
> had bet on good returns in lending to commercial real estate were left
> holding worthless real estate that they couldn't sell. Many S&Ls suffered. 
> 
> Congress panicked. They demanded increased regulation and oversight for
> S&L's, which until that time had been guaranteed (by the $100,000 deposit
> insurance) never to lose money. Many S&Ls then invested in "high-yield" or
> :junk" bonds. Along comes congress again, forcing the S&Ls all to sell
> their junk bonds at the same time. With junk bonds a glut on the market,
> the price dropped, and many people got the mistaken notion that "junk"
> bonds really WERE junk. Lo and behold, most of those "high yield" bonds
> have been good, and have paid off; junk bonds have been the best possible
> investments for the past two years running. 
> 
> Anyhow, that's the sordid story of how Congress caused the S&L
> catastrophe. Needless to say, you won't hear it from your congresscritter!

	Of course it was congress, left on their own the speculators would
still be speculating--or at least until enough people had leveraged all their
finances :).

	Even the speculative art market ran out of deep pockets.  And they
didn't have the help of congress.

	But--congress (and to a degree oil and the death of inflation) provided
additional weight to collapse the bubble.  It would have popped anyway, though.

Brett                                                      
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