Enclosed please find a copy of a letter mailed April 12, 1989 to Senator Bradley regarding the S&L bailout problem. Copies of the letter were also sent to a number of area Congressmen at the same time.
While not offered as a panacea, I thought it a pretty good step in the right direction. Obviously from your column Senator Bradley doesn't think so. As a matter of fact, he didn't even deem it worth a reply, not even a form letter (you know the type - "I am always interested in your viewpoint and have taken the matter under study....etc."). No answer from any of the Congressmen's offices either. Is it possible that tax relief in any form is just so inherently abhorrent for any Democrat that he is struck dumb by even the mere suggestion? Did you ever get the feeling your electoral support was being taken for granted?
Enclosed also is a copy of the cover letter mailed to Congressman Pallone.
It was good to see you on Saturday at the commercial fisherman's picnic. You certainly seemed to be enjoying the food. I know they appreciated your coming.
Enclosed is a copy of the letter to Senator Bradley we spoke of. As you read it, don't get hung up on any specific numbers (i.e. $10,000, 50%, etc.). The important thing is the concept. Given the skittish sensitivity of the financial markets, even the mere announcement of such an amendment to the bailout bill will ease strains on the system. I recognize that as a freshman Congressman you have to tread softly, but perhaps this could help to establish your credibility. Even if eventually not politically viable, it shouldn't offend anyone in the meantime.
For what it's worth, as a constituent I am registering my disgust at the Speaker of the House - (Jim Wright) the emperor's wife and all that.
As a trader in the retail futures market I can without reservation assure you "front running" trades is prevalent and morally, if not legally, dishonest. It is certainly not the worst abuse in the stock market, but one that can be relatively easily brought under control.
Whenever you want advice on a fishery matter, feel free to call on me. You can be assured I will give as unbiased an evaluation as I can. I am no longer associated, other than friendship, with the industry and have no tangible interests. However I will say my knowledge and experience with both the industry and fishery management is as extensive as anyone's in or out of the government. At the very least you'll get a different perspective.
Given the current attention the Savings & Loan crisis is commanding in the Senate right now, I am moved to send along a suggestion that may be helpful.
It seems the most severe problem the viable thrifts are suffering right now is a hemorrhage of funds due to withdrawals by savers alarmed by all the recent negative publicity combined with a very low savings renewal rate. This is pushing otherwise healthy institutions into difficult straits and may well force many of them to become part of the so called bailout problem, compounding the eventual cost to the taxpayer.
I propose a RESTRICTED income tax exemption for interest earned in a Saving & Loan. The restrictions would be along the following lines:
Given the limited tax exemption a participating S&L should be able offer mortgage rates several points below prevailing interest rates, making home ownership available to many now excluded because of high rates. Furthermore lower home mortgage rates will have a depressing effect on other rates, maybe even reducing federal deficit debt service.
Initially, the capital asset requirement (a minimum percentage of single family home mortgages) may have to be phased in over a number of years because of the current practice of "mortgage bundling" for resale in a secondary market. Of course, under this proposal that practice would no longer be practical. S&L's would have to return to their original mandate, i.e. providing entry into home ownership for the less affluent of the community as well servicing those mortgages.
Bundling (and any other practices financial in nature and unrelated to home ownership) would be essentially proscribed. Perhaps a requirement during the phasing in period that ALL new mortgages written be in single family dwellings. You could even go further and specify target areas (i.e. inner cities or individual purchases of public housing units, etc. which would further reduce the overall general tax burden).
Political resistance can be expected from the commercial banking community raising cries of "unfair advantage", but should be effectively muted by the capital requirement. After all, banks are seeking to broaden their base of operations and to the extent they do, they distance themselves from the community homeowner. The same people who taught farmers about "leveraged land", lent huge sums based on projected $35-$50 per barrel oil in the southwest, are participating in "junk bond" underwriting for leveraged buyouts, lent (and renewing) huge sums to "LDC's" and "UDC's", and so on...... All with no regard for repayment ability. It seems those fellas would rather make a loan based on a high interest rate on paper rather than ability to repay or recover. As long as bank can renew and enlarge a problem loan enough to pay up past due interest, it looks good on their balance sheets (when the problem finally gets out of hand they just go to Uncle Sucker wringing their hands how they tried to help Mexico/Uganda/Haiti/Brazil/... but now they are in so deep that Uncle will have to help out to prevent a collapse of the Banking System. Hence we get Brady Bonds, MAC Bonds, Dofus Bonds, none of whom will ever get paid off but backed by Uncle and who will pay the interest from here to the final collapse). Frankly I believe there is some room to question their credibility, certainly their common sense. Not their fiscal acuity though- anyone ever see a broke banker?
Political support can be expected from FSLIC, S&L's, building trades, real estate interests and probably the FDIC, who will see it as a relief for FSLIC and from assumption of FSLIC obligations.
I wish you well Senator Bradley and expect one day to vote for you as President (which will be the first time I EVER voted for a Democratic President, would have for HST but was too young).