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Bankers’ Hours column: 21 years separated the S&L debacle from the 2008 crash

We’ve briefly watched the savings and loan (thrift) segment of the U.S. banking business implode. It didn’t take long: The dominoes began teetering in 1987, and it was all over by 1990. A major segment of the U.S. banking business had effectively ceased to exist after 175 years of financing housing for Americans.

Some 550 thrifts failed, and 403 S&L execs were convicted of fraud. The remaining institutions scrambled to distance themselves from the carnage and stigma of having been in the thrift business. Institution names were changed to “savings bank,” or simply “bank.” But the thrift charter, effectively the license to do business issued by the federal deposit insurers, stayed the same. And that charter had, and still does have, one feature that played a part in the coming of the Great Meltdown in 2008: It allows a thrift to load up on home mortgages. The biggest bank failure in U.S. history, Washington Mutual (WAMU), a thrift, occurred in 2008, a result of home loans gone bad.

The closure of the failed thrifts was by no means the end of the saga, at least for the hapless U.S. taxpayer. To dispose of billions of dollars worth of property and real estate loans, the government formed the Resolution Trust Corp., an entity charged with marketing everything from failed banks to typewriters. This federal entity was staffed by a combination of banking regulators and employees of failed institutions. The inefficiency of its operation was notorious, and the source of some great stories, if you find big governmental boondoggling risible. There have some very good books written about the RTC, but these two examples will probably give an idea of the sausage being made by the outfit:

In one instance, a builder tendered a bid to the RTC on some land for development, which was rejected. He reworked the presentation, and offered less. It was accepted; who knows why. Maybe the first RTC analyst had moved on to a new job in banking.

And the following incident was typical of the RTC marketing acumen:

The office building of a failed thrift in a resort community, even back then a very valuable piece of real estate, was put on the market. In a matter of days, the winning bidder had flipped the property for an embarrassingly healthy profit, which went into the pocket of the seller, not the U.S. taxpayers.

Laws were passed. Among them, the Bank Bribery Act and the big dog legislation, the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA). It was a wide-ranging piece of legislation that, among other things, set down civil money penalties for bankers, and laid out strict guidelines for real estate appraisals. It was the Dodd-Frank Act of the 20th century, designed to make certain nothing like the collapse of the S&L industry ever, ever should happen again. As we now know, it was no more effective in that role than the Treaty of Versailles was in preventing World War II, and probably as successful as Dodd-Frank will be in obviating the next banking crisis.

Because you can’t legislate away human nature; you can’t regulate greed and hubris.

But it didn’t matter, because the seeds of the Financial Crisis of 2008 were planted and thriving. The secondary mortgage market had been around for a long time. The Government National Mortgage Association (Ginnie Mae), a U.S. government enterprise, had been packaging VA guaranteed loans into securities since 1946. Fannie Mae, which specialized in buying and securitizing FHA and VA loans, and, later, Freddie Mac, which was formed to make a market for conventional mortgages, those not guaranteed by the U.S., were well on their way to becoming massive conduits of paper backed by this nation’s home mortgages. Beginning in the late ‘80s, private banking operations such as Merrill Lynch and Bear Stearns began buying and securitizing single family residential mortgages. It was very profitable for the producers and exceptionally attractive to investors.

For the perception was that there simply was no investment that could compare to these securities in safety and yield. This view was underscored by the reputation of Fannie and Freddie, which was so solid that regulators actually permitted insured financial institutions — banks, thrifts and credit unions — to count the stock of the two enterprises as cash on an institution’s balance sheet.

The worldwide appetite for U.S. mortgage-backed securities was ravenous, and all hands turned out to satisfy the hunger, including Fannie and Freddie. It didn’t really take very long for the banking business to drive off the bridge; only about 21 years separated the S&L debacle from the 2008 crash. Exactly the same time between the two World Wars.

As in the case of the thrift implosion, the cause of the Great Meltdown was just too much money on the table, always the major underlying illness that puts banking on a ventilator and eventually into oblivion. But this time the money people and adjunct professionals, such as Realtors, appraisers and loan originators, had help: borrowers.

That’s right. There was so much loot available for the taking that homeowners got into the act and became unindicted co-conspirators.

Next: The Great Meltdown, proving that we Americans can achieve almost anything when we work together. Don’t miss the Grand Finale.

Pat Dalrymple is a western Colorado native and has spent more than 50 years in mortgage lending and banking in the Roaring Fork Valley. He’ll be happy to answer your questions or hear your comments. His email is pdalrymple59@gmail.com.

 

 

Personal Finance column: Financial curiosity opens doors

My granddaughter, Zaylee, is almost 3 and talking up a storm. “Why?” tumbles out of her mouth like water flowing over rocks — continuously. Experiencing that deep quest for understanding the world is refreshing. I also admit it’s at times humorously taxing as her questions are insatiable. As a parent or grandparent — can you relate?

Curiosity can wane as we put life under our belt and experiences in our back pocket. Financially speaking, we acquiesce to our days — bringing money in, spending it, sharing it, growing it and protecting it. What if we were to pause and ask why around the financial tools, temperaments and techniques we have put in place and take for granted? Dig in, drill down on the purpose, reason or motivation of our cash causalities. I contend that by asking questions we will make better decisions around our dollars.

Why do I have this career?

Why do I want to retire?

Why draw money out of this account versus a different one?

Why do I have this life insurance policy or these employee benefits?

Why did I make that purchase?

Why do I give to these causes?

Why do I own these stocks?

Why can it be difficult to discuss money?

If your why doesn’t address current tax environment, legislative policies and the economic season, you may be missing out on opportunities. If your why doesn’t align with your integrity or core values, you will probably experience some financial or relational angst somewhere down the road. If you don’t ask why, money will leak out of your life like a slow, unnoticed drip under your sink. It will cause damage, and the sooner you discover it, the less costly it will be. Asking why questions around money will lead to more questions, unveiling hopes, joys, fears or regrets.

Let’s play this out. Q: Why do I own this stock portfolio? A: Because I want to make money in the markets. Q: Why do you want to make money? A: So I have security for the future. Q: Why do you want security? A: I don’t want to be burden on my family or community.

Attention is followed by intention. When you pay attention to the why of your financial life, you will be increasingly intentional about the who, how, what and where details of your dollars. You will make subtle yet poignant shifts in your monetary mindsets or modalities.

Why do I own this stock portfolio? Your answers could head in a multitude of directions as you unpack the how, what, who and where questions. You may find yourself digging into tax efficiencies either in the vehicle you are utilizing (401K, SEP, IRA) or as you manage tax loss gain or harvesting techniques. It may lead you to look at your cash flow needs and how it is being produced in our current economic climate. This same question could start conversations with family members or friends around what you want your fall season of life to look like. It may facilitate a discussion around what does security look like or how much is enough. You could also head down the path of investing in or staying away from certain companies as a matter of principal. Everyone’s why answers are unique and warrant investigation.

Asking why is about taking responsibility for your financial choices — small or substantial. Asking why builds on your financial agency as you do the best you can with what you have. You let go of blame — of the government, the markets, others and yourself. You embrace possibilities and potential. You take steps to move forward on your financial journey.

Try it: With the enthusiasm of a 3-year-old and the sophistication of an adult — embrace financial curiosity and start asking “why.”

Danielle Howard is a CFP® and CKA® with Wealth By Design LLC in Basalt. Check out her retirement podcasts and blogs at daniellehoward4u.com.

 

On the Fly column: What should I do today?

Lesley Wreyford holds a Fryingpan brown trout.
Glenn Smith

Besides hiking, golf, cycling, kayaking and all the other distractions this valley has to offer, fly-fishing can be a very relaxing way to spend your day. Even if you’ve never fished the Roaring Fork Valley, there are a bunch of great places to explore and wild trout to meet out there during the summer months.

If you are visiting and don’t have any gear, most fly shops from Glenwood Springs to Aspen offer rental gear as well as top-notch guide services to maximize your time on our rivers, streams and lakes.

The possibilities are endless when it comes to where and when to go, as you can choose between intimate small streams, high country lakes, world-famous gold medal waters or floating the big rivers in a dory or raft. Any shop in the valley would love the opportunity to spread out a map on the counter and show you their favorite haunts, including what to use and how to fish the flies they recommend. Finding great water is easy here, and getting a license for the day or the week is even easier.

If solitude and wild cutthroats or brook trout are your speed, be sure to check out the upper Crystal River, Avalanche Creek or Rocky Fork Creek while here in the valley. If it’s all about dry fly hatches and gold medal water, this is the time to be on the Fryingpan with a few pale morning dun, blue winged olive, and midge patterns in your vest. Most of us shop types love to float the bigger sections of the Roaring Fork and Colorado rivers, and hatches on these waters are as good as they get, anywhere in the Rocky Mountain West.

Even if you have never fly-fished, I guarantee (with the right advice and/or guide) you can have a blast on our rivers and lakes. Bring along some sunscreen anda few flies, and take in the gorgeous scenery we love to call home. You won’t regret it.

This report is provided every week by Taylor Creek Fly Shops in Aspen and Basalt. Taylor Creek can be reached at 970-927-4374 or TaylorCreek.com.

Doctor’s Tip: Broccoli can help with autism symptoms

Autism is defined as “a complex neurologic and developmental disorder that affects how a person acts, communicates, learns and interacts with others.” It’s more common in boys, 1½% of American children are diagnosed with it, and the incidence appears to be increasing.

Scientists don’t know exactly what causes autism, but according to Dr. Greger in a recent video on nutritionfacts.org, this much is known:

• When autistic children develop a fever, the symptoms disappear as long as the fever lasts. This is thought to be due to “heat shock proteins” that are released by the brain when body temperature rises. These proteins improve the synaptic transmission from one brain cell to the next, which is abnormal in autism.

• The brain is vulnerable to harmful oxidation, and excessive oxidation is present in the brains of autistic children.

• The power centers of cells, called mitochondria, are dysfunctional in autistic children.

• Autistic kids have excessive brain inflammation.

Currently there are no medications that help autism. However, there is a group of plant foods that help: cruciferous vegetables, which include cabbage, kale, broccoli, cauliflower, Brussels sprouts, bok choy, arugula, collard greens, mustard greens, radish, turnip greens and watercress. Broccoli sprouts in particular have been shown to increase heat shock proteins and improve synaptic function in the brain; increase Nrf2, the master regulator of antioxidant production in the body; restore metabolic balance to mitochondria in cells; and reduce brain inflammation.

A group of autistic kids was studied. Half were given placebo capsules and the other half similar-looking capsules containing broccoli sprouts. At the end of the study, the placebo group showed no improvement in symptoms but the sprout group demonstrated significant improvement. Why sprouts? Because sprouts have 10 times the micronutrients as mature broccoli.

The compound in cruciferous vegetables, like broccoli, that causes improvement in autism is sulforaphane. Cruciferous vegetables contain a precursor, and conversion to sulforaphane requires an enzyme called myrosinase, which is destroyed by cooking. Therefore, cruciferous vegetables should be eaten raw, or, if cooked, one of the following three strategies can be used: 1) Eat some raw cruciferous vegetable before eating the cooked. 2) Chop up the cruciferous vegetables at least 40 minutes before you cook them, which allows the enzyme to release the sulforaphane. 3) Eat the cooked cruciferous vegetables with a raw one such as horse radish, wasabi or mustard.

Interestingly, broccoli in powder or supplement form isn’t effective. As is so often the case, only the whole plant food works.

Bottom line: If you have a child with autism, consider giving him or her one to three cups (depending on age and size) of broccoli sprouts every day. And we should all be eating cruciferous vegetables every day for other reasons: prevention of several kinds of cancer; brain protection; preservation of eyesight; reduction of inflammation; reduction of allergies; and management of type 2 diabetes.

Greg Feinsinger, M.D., is a retired family physician with a special interest in heart disease and diabetes prevention and reversal, ideally through lifestyle changes. He’s available for free, one-hour consultations — call 970-379-5718.

Shop-with-a-doc

Dr. Feinsinger is offering 1½ hour grocery store shopping sessions where he shows how to make healthy food choices. By appointment; call 379-5718.

Torres column: Happiness is the goal

When parents at an elementary school were asked what they wanted for their children, what did they reply? Love? Money? Fame? Recognition? Health? Awards? Happiness? More than 95% choose “happiness,” because happiness is not created by love, money, fame, recognition, health or awards. It’s the result of complex events and interpretations.

I’ve studied many books, by authors like Jocy Meyers, Anthony Robbins, Napoleon Hills, Albert Einstein and Carlos Cuauhtémoc Sanchez, about how to release one’s potential, how to achieve happiness, how to live to the fullest and how to empower one’s life. To achieve these things is complex and involves self-awareness, personal security, adequate knowledge, progress towards one’s goals, a sense of purpose, finding the good things in life and being able to control one’s thoughts.

Since my passion is teaching health and weight loss, I’m going to focus on this aspect of “happiness.” Many develop diseases and have problems with weight gain because of their lifestyle. This often consists of bad food choices and behaviors and an inactive lifestyle. A person’s choices and actions create a negative lifestyle for them, which leads to negative results and situations, which do not contribute to human happiness.

Wonderfully, we have free will in our lives. Sometimes when people notice that their lifestyle is going in the wrong direction, they choose to start making better choices to better achieve happiness. In fact, “Happiness is the Goal” (a book in Spanish that I’m reading) states that happiness is actually not a long-term goal but can be an everyday goal.

“Happiness is the Goal” explains that to achieve our daily goal of happiness we usually have to do some uncomfortable but constructive things. In other words, discipline makes us happy. Odd sounding, I know, but true. The book continues talking about the importance of being fit.

An example of this can be seen at Custom Body Fitness every day. People are in there, knowing they need to exercise in order to lose weight or improve their fitness, but along the way they realize that exercise itself contributes to their daily happiness. The reason is because exercise has many advantages:

• Combats health conditions and diseases

• Improves mood and even sex drive

• Boosts energy levels

• Reduces the risk of dying prematurely

• Reduces the risk of diabetes and helps control diabetes for those who have been diagnosed.

• Reduces the risk of high blood pressure and helps reduce high blood pressure in people who already have hypertension

• Promotes psychological well-being

• Reduces feelings of depression and anxiety

• Helps control weight and lose body fat

• Rejuvenates the body

• Helps build and maintain healthy bones, muscles and joints

• Improves the physical ability to drive a car in older adults

Not to mention that a person who is fit is able to do many physical tasks that the average person can’t.

I used to be a person with no discipline; I let life take its own random course. I thought I was happy, but I was only rationalizing my unfocused, if somewhat comfortable, life. But now, as I work out and try new things in life and in my business, I end up getting out of my comfort zone, and I see that this allows me to achieve many of the long-term goals that contribute to my long-term happiness. Not only that, it has helped me achieve daily happiness. This may sound a bit obscure, since it’s hard to explain to someone who has not achieved true daily happiness. It is like explaining the red color to a blind person. If you experience self-discipline, and find all the good things of life, you may know what I’m talking about.

Don’t let your life vanish, waiting for happiness when you have it in front of you. I encourage you to find what you require to start being happy every day of your life. I suspect that starting to exercise and changing your eating habits for better ones could be a first step towards this happiness goal.

Sandro Torres is owner of Custom Body Fitness in Basalt and Glenwood Springs and author of the books “Lose Weight Permanently” and “Finding Genuine Happiness.” His column appears on the second Monday of the month.