Fast cash loan texas

On a morning radio talk show in this small Texas dairy center about 65 miles southwest of Fort Worth, a brief phone call launches a worldwide financial crisis. An elderly woman tells the show host that she hears the Federal Savings and Loan Insurance Corporation is no longer backing Sunbelt Savings, a local thrift that made a name for itself as one of the biggest conglomerations of bad debt in Texas. Within an hour, depositors flock to withdraw their savings. The panic quickly reads to other thrifts in neighboring towns and up to Fort Worth and Dallas. Local merchants refuse to accept checks drawn on any thrift, regardless of FSLIC guarantees.

Overnight, edgy foreign investors shift dollar balances out of American-chartered banks into banks domiciled in their own countries. Other institutional investors, requesting electronic transfers, precipitate wire runs. By the time markets open in New York the next morning, the dollar has plummeted 30 percent against the yen and the mark, the Dow Jones industrial average opens down 100 points, and lines are forming outside S&L's around the US.

By noon, hundreds of insolvent thrifts close their doors, and even healthy ones limit cash withdrawals. The run then spreads to commercial banks. With the American banking system in crisis, President Bush has no choice but to do what Franklin Roosevelt did in 1933. He declares a bank holiday.

When George Bush gets sworn in January 20, his biggest challenge will not be paring down the budget deficit but avoiding this fictional but all too plausible financial nightmare. Politicians, government officials and banking experts will not talk about it openly, except to make reassuring statements that it cannot happen. But in private they worry mightily about a wildfire bank run. For the first time since the Depression, the U.S. faces a real possibility of a financial disaster brought about by the growing insolvency of the savings and loan system.

Federal savings insurance, the major precaution enacted in the 1930s to prevent such bank runs, is in jeopardy today. After bailing out ailing thrifts and paying off depositors at an accelerating pace over the past eight years, the FSLIC has dug itself $16 billion in the hole, is losing an additional $1 billion a month and still faces what some experts estimate as a $100 billion problem. Congress has yet to back over $18 billion in notes the FSLIC has issued so far to keep insolvent thrifts afloat and underwrite their acquisitions by other companies. Some congressmen are hopping mad about the fire sales and want to pass a resolution specifically disavowing the notes. "I question the [Federal Home Loan Bank Board's] statutory power to have entered into some of these deals," said new House Banking Chairman Henry Gonzalez (D-Tex.), who turned up the heat on the board with a new round of hearings in January.

As Congress and the Bush administration begin negotiating a new fix for S&L's and assessing taxpayers for the damage, it is essential to sort out what happened. Washington's quick fixes in the past, patched together by the push and pull of powerful financial and political interests, have only made matters worse in the S&L industry. President Reagan's chief economic advisers admitted as much in the 1990 Economic Report of the President released last week. "The irony," said Beryl Sprinkel, chairman of the Council of Economic Advisers, "is that federal government policies have led to this debacle." Many experts think the Feds are well on their way to another fiasco. "A rolling loan gathers no loss"

A common perception, shaped by the Reagan administration thrift regulators, generally blames the whole mess on unscrupulous Texas developers who took over mom and pop S&L's around the state in the early 1980s and used them as their personal piggy banks to finance wild deals and even wilder parties. To prove the point, former Atty. Gen. Ed Meese and former Federal Home Loan Bank Board Chairman Edwin Gray, two Reagan friends from California (a state with an S&L problem rivaling that of Texas), launched a massive joint-taskforce investigation into S&L fraud in Texas two years ago. But indictments against key figures have been slow in coming, and so far the Justice Department has lost the only major case brought to trial before a jury.

The prosecutorial sound and fury, besides casting a litigious chill over Dallas and Houston, has distracted attention from a broader story: That the government is as guilty, if not more so, of the same charges of mismanagement and deception it is leveling at high-rolling Texas developer-bankers. "A rolling loan gathers no loss," the fast-buck operators used to joke as they swapped bad loans back and forth, hiding losses from bank examiners. Now, with the loans snowballing all the way to Washington, the government appears to be doing the same thing. With no money to shut down insolvent thrifts and pay off depositors, the Federal Home Loan Bank Board is rolling over the bad debt once more, this time into government-subsidized superthrifts. It says the subsidies cost less than closing the banks altogether. But these shotgun mergers could fail again, sticking the government with even bigger losses in a few years. The risk is this: By propping up what many experts consider an obsolete industry, the Feds are creating a banking pyramid scheme that could imperil the whole financial system.

A hefty chunk of that pyramid is Sunbelt Savings, the biggest bad S&L in Texas, now controlled by the U.S. government. The FHLBB says it resolved Sunbelt's problems under its Southwest Plan last summer, merging the insolvent thrift with a handful of other losers into what is known in the industry as a Phoenix-a combination of bad S&L's that will miraculously rise from the ashes. In fact, there has been no resolution of Sunbelt's case. Unlike scores of other bad thrifts the government bundled up and sold off, the government could not interest outside investors to take Sunbelt off its hands even at giveaway prices. It has yet to take the full hit for the losses; nor has it sold off more than a tiny fraction of the foreclosed real estate the thrift owns, Last summer, the FHLBB estimated it will cost $5.5 billion to keep Sunbelt alive over the next 10 years. But no one really knows what the final tab will be. Reckless growth

For years, S&L's had been the wallflowers of the U.S. financial system, making low-risk home loans with lowinterest savings deposits largely in and around their own communities. But soaring inflation and high interest rates in the late 1970s and early 1980s induced depositors to take their savings to money-market mutual funds and other fancier financial vehicles that paid yields higher than the 5.5 percent passbook rate at S&L's mandated by Washington.

To stanch this potentially fatal outflow of funds, the government deregulated the thrift business and inadvertently steered it on a course of reckless growth. In 1980, Congress passed a law that permitted S&L's to pay whatever interest they needed to compete for deposits and raised FSLIC insurance coverage from $40,000 to $100,000, increasing in one stroke the government's exposure to risk in the S&L business 2 1/2 times. In the summer of 1982, the Federal Home Loan Bank Board removed the 5 percent limit on so-called brokered deposits-fast money that Merrill Lynch and other bigmoney managers package into $100,000 FSLIC-insured blocks and shop around to S&L's that pay the highest rates. That meant that almost any thrift willing to pay high interest rates could call a broker and order up hundreds of millions of dollars in new deposits overnight.

The ensuing rate war among thrifts to attract these funds led to a devastating squeeze on earnings that fast depleted the net worth of many institutions. They were paying double-digit rates for deposits but earning only single-digit rates on old longterm home loans, the bulk of their assets. To help S&L's pay for these new high-cost deposits, Congress obligingly passed another law in November, 1982, permitting them to make high-risk acquisition, development and construction loans, form development subsidiaries and make direct investments, all of which would supposedly give them higher returns than pokey fixed-rate home loans. The Garn-St Germain Act, as this controversial deregulation bill was known, enabled S&L's to enter the high-flying real-estate business in ways denied to even sophisticated commercial banks. They could develop and finance deals, demanding high front-end fees and up to 50 percent equity participations in addition to interest. The federal blessing for such licentious behavior suddenly made the "homely li'l thrift bidness" look much less homely.