Subject AMERICA'S BANKING CRISIS Written 428 pm Feb 25, 1991 by christic in cdpchristic.ne

Subject: AMERICA'S BANKING CRISIS
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 Written 4:28 pm Feb 25, 1991 by christic in cdp:christic.news 


   AMERICA'S BANKING CRISIS: COMING SOON TO A BANK NEAR YOU 

  Project Censored: Nomination for the "Ten Best Censored Stories of 1990" 


  A new nationwide financial crisis is brewing and, thanks to the 
disinterest of the mainstream media, Americans will be just as surprised by 
it as they were by the massive failure of the Savings and Loan Industry with 
its huge 500 billion dollar price tag. The bill for a decade of federal 
deregulation, wild financial speculation in the private sector, and the 
Reagan Administrations's immense military expenditures is about to come due, 
and it's not going to be a pretty sight.  

  "The looming crisis highlights the fragility of the debt-plagued financial 
system in the United States," writes John Miller, Professor of Economics at 
Wheaton College. The same economic conditions that led to the demise of the 
savings and loan industry have been eating away at commercial banks, and, 
according to Dan Brumbaugh, a Stanford economist and expert on the S&L 
debacle, the same kinds of accounting gimmicks that hid the S&L crisis are 
now being used to cover up the commercial banking crisis. Brumbaugh thinks 
many of the country's banks, including some of the largest-- Chase 
Manhattan, Chemical, Manufacturers Hanover, Bankers Trust, and even Citibank 
and Bank of America--are nearly insolvent, with the true market value of 
their assets inadequate to pay back their depositors and other creditors. 
The banks' records say otherwise, he asserts, only because of manipulation 
of their books in areas like non-performing loans to bankrupt Third World 
countries, for example.  

  Because of a record number of bank failures this year, the Federal Deposit 
Insurance Corporation (FDIC) which insures the $2.7 trillion deposited in 
U.S.  commercial banks, has lost money for the third year in a row. It now 
holds only 60 cents per $100 of insured deposits, which is the lowest level 
in its 57-year history. In 1988, the FDIC, for the first time in its 
history, paid out more than it took in. Bank failures soared from an average 
of ten per year in 1981 to more than 200 per year by the end of the decade. 
In the fist half of 1990 alone, 112 banks failed.  

  In a reciprocal cycle of cause and effect, the deteriorating status of the 
commercial banking industry contributes to the recession many economists say 
is fast upon us, and, it, in turn, will make the bank crisis even worse. 
Even now, at a relatively early stage, more banks--almost 1000 - have failed 
in the last five years than in the previous 51 years of the FDIC fund 
combined.  

  The bag the taxpayers will be left holding in the case of a bank failure 
of the S&L variety, is a big one. The effects will be equally severe and we 
will pay--as we have been paying--as taxpayers, citizens, borrowers, and 
workers.  The looming crisis in the FDIC highlights the fragility of our 
debt-plagued financial system. With an increasing number of bank failures, a 
record number of savings and loans insolvent, major student loan funds 
strapped, and junk bond dealers and real-estate tycoons bankrupt, the bills 
are finally coming due for the financial speculation that dominated the U.S. 
in the 1980s.  

  It is unfortunate that a trusting public, which is going to end up paying 
those bills, hasn't been warned by the mainstream media.  

  SOURCE: DOLLARS & SENSE, October 1990, "If You Liked the S&L Crisis ...  
You'll Love the Banking Crisis," by John Miller, pp 10-11.  


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