European Stars And Stripes (Newspaper) - February 1, 1989, Darmstadt, Hesse                                Page 10 the stars and stripes Donald e. Burns lest we forget reforms triggered so mess the search for scapegoats Over the Thrift Industry debacle has targeted current and previous Federal and state regulators greedy acquirers of insolvent thrifts incompetent and or criminals a managers Congress and the presi Dent. While there certainly is enough blame to go around nowhere does one see any references to what started the slide Down the banking Industry re forms of the mid-1970s. The modern savings and loan Industry was created As a source of relatively cheap Loans to enable the average person to own a Home. The benefits of Home ownership to the owner the building Industry the building Trade unions and the scores of businesses that thrived on it Are too obvious to describe at length. But it is important to understand the Funda mental reasons the Industry did such a Good Job for so Long. In addition to account insurance by the Federal savings and loan insurancecorp., regulation by the Federal Home loan Bank Board and the states Federal regulations prevented Banks As Well ass is from paying Market rates of inter est on their deposits. This enabled a Leto offer mortgage Loans at lower rates than would have been possible in a free Market. In other words predominantly older Well to do account holders subsidized mostly younger Homeowner Bor rowers. In the Wake of Post Vietnam inflation Short term interest rates soared Over 20 percent consistently Well above what Banks and a is were legally Able to pay to most depositors. Billions flowed out of these financial intermediaries into direct Market instruments such As Bonds and to Bills and into Money Market funds which combined High rates and easy accessibility. When these funds were paying Over 15 percent Little wonder that the smart Money deserted the intermediaries then paying Little . Rosenthal More than 5 percent to most depositors. At the same time Congress and the Carter administration came under in creasing pressure to lift the ceilings on interest rates that could be paid to Small accounts in Banks and a is. This pres sure came significantly from the elderly who often maintained substantial bal ances in federally insured accounts but could not qualify for the Market rates being paid by Banks to depositors with More than $100,000 in their accounts. Doctrinaire economists within an outside the administration added their voices arguing that the free Market should decide Levels of interest rates. Controlling the rates paid by Money Market accounts to ease the outflow from banking institutions was consid ered As a strategy and abandoned. The sequel was predictable. Gradually interest ceilings were taken off Banks an savings and Loans. Banks with sources of income mainly Short term commercial Loans that could quickly adapt to their changing Cost of funds survived. Savings and Loans with Long term fixed rate mortgages As their main asset base had to change. Faced wit paying higher interest or losing their depositors they had to increase their in come. Part of the problem was addressed by a gradual switch to variable rat mortgage Loans which allowed their in come from such Loans to slowly and imperfectly track interest rates As they Rose and fell. But eventually a is had to move away from what they knew mortgage lending and what justified their existence in the first place into areas that offered higher returns faster. Is it so surprising that these higher returns involved higher risk made even riskier by the fact that the lenders were often not experienced in these types of Loans when you add to this what seems to have been an extraordinary amount of chicanery and an unwillingness on the part of both Federal and state administrations to allow regulators to hire the staff required to police this dramatically changed Industry a collapse of some dimensions should have been no Surprise. This regulatory myopia is All the More reprehensible because the funds to hire staff Are 100 percent Industry financed. Widespread criticism of the folic s year end sales of insolvent a is usually focused on the tax write offs and commitments of folic funds to purchasers with Little at risk. The fact is however that the losses exist. They Are merely being recognized. The alternative to transactions such As occurred last month would be huge payments of Federal Cash instead of the folic notes that were is sued with Little or no backing. In a year where extremely optimistic projections of interest rates and economic growth were necessary to project meeting the Gramm Rudman Defi Cit reduction requirements one cannot criticize the administration too harshly for seeking an alternative to a pay out of $100 billion or More in this budget year. In fact no knowledgeable lawyer would risk his malpractice coverage on an Opin Ion that the folic notes Are backed by the . Government. It May be that the rescuers Are the ones who will be left holding the bag when Congress declines to Honor the folic funny Money at face value. In the Rush to Pillory the Federal Home loan Bank Board s chairman m. Danny Wall for making a valiant at tempt to bail out insolvent institutions we should not forget How it was that he was stuck with the current mess. Donald e. Burns is a former Secretary of the California business and transportation Agency and assistant Gener Al counsel of the Federal Home loan Bank Board the opinions expressed in the columns and cartoons on this Page represent those of the authors and Are in no Way to be considered As representing the views of the stars and stripes or the United states government. Press can do a Beffer Job on self improvement every major news office in the country has been going through a transition period of its own. It happens after every presidential election. Assignments Are changed reporters Are often promoted out of the White House or into it new teams take Over on Capitol Hill and self examination time is at hand. Did we cover the last administration Well at least Well enough to satisfy ourselves most news people Are really not like the vulgar ans we see on to or read in print who ask a Mother How she feels about her child being burned to death or a politician whether he has Ever committed adultery. They Are usually talented enough to be sensitive and sensitive enough to have a healthy measure of self questioning. They Are also professionally ambitious which Means always reaching for something not yet with in reach. So the answer almost always is no we did not do Well enough to satisfy ourselves. Editors and reporters try to figure out How to do better. That is a wonderful thing about the Good life of journalism you always get another Hance every Day or every week. Books of political memoirs and press criticism come out after every administration considerably less charitable toward the press than we Are inclined to be ourselves. Many Are ideologically motivated the pres was too hard on Nixon or too soft on Nixon or too subservient to Reagan or out to get Reagan. Whatever the motivation most have interesting Case histories. The press is so much a part of National life that there is material to prove any Point anybody wants to make. The same thread runs through Many of these books if Only the press had covered events As the authors thought they should have been covered his tory might have been changed. Why did t the press do it pressure from the outside anti administration conspiracy or pro administration cowardice within. Fairy tales. Americans knew enough from the printed and to Media about the Reagan administration for instance to justify a vote against his vice president. They knew about the deficit the Slaughter of marines in Lebanon missiles to Iran. But they also knew enough from the Sam press about lowered inflation and unemployment and a successful foreign policy to persuade the majority to vote for a Man they expect not to change course. The american press is not nearly As Good As i should be. But the major press problem is neither conspiracy nor cowardice. Those theories Are often conjured up by people unconsciously holding up a Mirror to their own faces revealing How they would behave themselves. It is something far different Many newspaper publishers and network executives Are unwilling to put up the Money for enough space or air time to give their customers a full report. Americans get the news if they want it Button much conies from too few original sources a relative handful of newspapers to programs wire services and news magazines. Information yes diversity no. But editors reporters and commentators can do great Deal themselves to make them happier with their own Craft. Such As editors can give americans continuity of coverage without which news is garble. Central Ameri Ca for instance is abandoned by most of the pres when the fighting wanes like a stadium when the game is Over. Reporters and editors can use the Anonymous source decently. It is an essential tool for protecting whistle blowers. Without it the press would not get important information distasteful to government business or powerful politicians. But sickeningly often the Anonymous source simply provides a mask for improbable and unanswerable attacks and Defa mation. Reporters and editors can prepare now for the next election. Less emphasis on polls More on foot reporting. More to time for real interviews less for Public relations news snippets. Commentators can think if Only for a few moments before shooting off our Mouths or word processors. A couple of to news people usually Intelli gent announced flatly that president Bush s warm but careful inaugural speech was a rejection of Ronald Reagan. That will be a Nasty Surprise to the majority of american voters and the Republican party to say nothing of Mikhail Gorbachev. News people can do All these things without waiting for the government or press critics or the auditor. That s another Fine thing about the Good life of journalism you can do it yourself. . Rosenthal is former executive editor of the new York times