European Stars and Stripes (Newspaper) - September 22, 1990, Darmstadt, Hesse                                $500 billion bailout by Robert Dvorchak associated press Donald Janke of Milwaukee wis., has worked for 40 years in savings and Loans taking in government guaranteed deposits and lending them to homeowners As mortgages. His Marquette savings and loan and the Midwest As a Region still make a profit with these non glamorous transactions. Wisconsin s a amp a Trade group even ran a series of ads last year saying Quot we dare to be  but although Janke and others in America s heartland had nothing to do with the freewheeling deals and bungling behind the a amp a fiasco they re still liable for the bailout. Quot the Guys who made prudent investments and Are running an honest shop Are paying for the sins of the Guys who ran off with the loot. It just in t fair Quot said James Grohl senior vice president of the 2,400-member . League of savings institutions. Janke said a amp a failures elsewhere Cost him an extra $80,000 a year in operating costs higher insurance premiums triple the Cost of Federal oversight cuts in Stock dividends. And he s also lost face. Quot i really Don t like to Tell people what i do anymore Quot he said. Quot i Tell them Lam a  there Are millions of people like Janke a people who do not work for a troubled savings and loan and do not have accounts or Loans with one people who do not live in towns where real estate values have plunged because of a amp a problems people whose businesses have been unmolested by the crisis. But every single one of them will suffer because of what what . Rep. Jim Leach a Lowa and a member of the House banking committee Calls a Quot fiscal Vietnam Quot and Quot the biggest Public Gaffe of the Century in terms of  Leach figures the a amp a bailout will Cost the average american family $20 a month for the next 30 years. It would Cost from $147 billion to $203 billion to set everything right if a Check were written today according to various estimates. The latest government estimate is $160 billion plus $340 billion in interest to pay it off Over 30 years for a total of $500 billion. Quot people have a hard time comprehending greed at so Large a scale Quot Leach said. So what do these monumental numbers really mean the $500 billion Tab is enough to give $2,000 to every Man woman and child in the United states a or $100 to every human on the planet. With just the $160 billion Uncle Sam could pay for the next 53 years Worth of the governments aids research education and care. He also could just about wipe out the Federal budget deficit estimated at $169 billion for 1991. But let s make this easier and focus on a trifling $1 billion. Even Donald Trump could appreciate $1 billion which was the Cost of his opulent Taj mahal Casino in Atlantic City. A Mere $1 billion would cover the $450,000 monthly savings amp loan scorecard allowance outlined by his creditor Bankers for the next 185 years. And if the courts approve the $25 million divorce settlement with his wife Ivana Trump could afford 40 failed marriages he also could buy a $40,000 Cadillac every Day for the next 72 years. Of course $1 billion is pennies compared to what some economists say the Tab ultimately could balloon to $1 trillion a Only one segment has deep enough pockets to make Good on the Money a that s the . Taxpayer a said James Barth former chief economist for the office of Thrift supervision and now a finance professor at Auburn University. Quot the Money spent on the a amp a bailout is Money that could have been spent on education travel Home food. It just Means people will have less Money Quot Barth said. Quot it s a redistribution of a Good part of their income in ways they  ordinarily want to Quot some economists Don t believe a tax increase will be needed because the government will cover the damage Over time. But that does no to mean the crisis will have no trickle Down Impact Quot in the Long run you might see slightly higher interest rates Quot said Robert Litan a senior fellow with the Brookings institution. The bailout s Price tag has prompted the rumblings of a regional War roughly Between the rust Belt and the Sun Belt. Not Only will taxpayers have to bail out the a amp a bungles but the Northeast and Midwest will have to bail out the South and West. Edward Hill a professor at Cleveland state University calculated that 37 states and the District of Columbia will be net losers because they la have to ship Money to 13 states who come out ahead. A the bailout will result in a massive geographic Transfer of wealth to the Southwest As Well As a Transfer of wealth from taxpayers to savers Quot Hill said. Assuming a bailout Cost of $203 million Hill figured that residents of Connecticut will be hardest hit each paying out $1,237 More in taxes than they receive in Money from the bailout. Texas residents will Benefit by $4,775 per person. Other big winners Are new Mexico $4,349 Arkansas $4,106 and Arizona $2,143. A Bill sponsored by the 18-state Northeast Midwest congressional coalition would shift a greater share of the bailout to the South and West a particularly Texas. Quot this Bill is saying that any state which helped create the 10-gallon hateful of trouble for the rest of the country must be held accountable Quot said . Rep. Olympia j. Snowe. A Maine. In Wisconsin where Only two of 66 a amp is have failed the bailout will Cost $592 for every Man woman and child according to Hill s study. The inequity in t lost on conservative midwesterner like Joseph Sulewski of the Milwaukee suburb of Shorewood a 49-year-old Wisconsin Gas co. Worker who can add the a amp a bailout to his mortgage car loan utilities and other monthly Bills. Quot in t what happened like embezzling but doing it legally its a crying shame Quot Sulewski said. Quot everybody s going to pay for it for years and years. Everybody a going to be hurting for  Here is a scorecard on the savings and loan situation As of aug. 1. Information was supplied by the Justice department Resolution Trust corp. And various other sources. A Cost $500 billion or More Over 30 years. A scope 46s thrifts taken Over in 39 states As of july 30. Of these 211 were either sold or closed. The other 257 Are in conservatorship. A charged 328 defendants indicted. A convicted 231 defendants 5 others acquitted. A jail terms 1.9 years on average. The average term for a Bank robber is 9,4 years. A penalties $56.6 million ordered in restitution including $25 million in civil settlements. A fines imposed $1 million. A actually paid of the $2.5 million ordered in restitution this year in cases prosecuted by the Dallas Bank fraud task Force the Only one for which statistics were available $50 has been paid. In the previous two years $23,700 of $8.9 million ordered in restitution has been paid. A pending 84 civil lawsuits against 48 thrifts in an attempt to recover lost Money. Also pending about 40,000 lawsuits in an attempt to recover Money from Thrift officers. From deregulation to disaster How the Money ran out 1 inflation Stoi in the late 1970�?Ts, the Federal reserves moves to curb Force up interest rates. Savings and Loans set up to cannot compete for deposits because they Are not permitted to offer higher rates on savings accounts 2. To Industry in 19k legislation increases Deposit insurance to $100,000 for each account and begins to Phat a out limits on interest rates in 19s2, additional deregulation allows savings institutions to mate More risky Loans to businesses and real estate developers. 4. Teky growth to pay higher rates on deposits institutions must make More Money pm their investments. They invest in risky new Venturas particularly construction in the booming Southwest. A Tbs Money Chloe savings and Loans offer higher interest rates to attract deposits. Deposits pour in from  and. Money brokers. 7. The Well Street plunge the Stock Market crash in october 1987 Marks a weakening of the Economy and slows the Wall Street deals that kept Many savings and Loans afloat. 8�tte&a lout Industry i cusses mount and Many savings and Loans Bee me insolvent the Gove Ament is forced to Ike Over More and Nore failing Insl iut ions. With each savings account insured up to $100,000, the Oover me nth a losses Are the difference Between fhe value of deposits a and the often far Tower value of i solver t institutions assets. Pago 14 a a a the stars and stripes the a amp a mess continued from Page 13 or even the Stock Market Quot said Leff. Quot i thought a Bank would be  g Gary Homsey did t get in a financial bind because of a amp a borrowing or even a amp a accounts. He runs his own advertising Agency in Dallas that specializes in financial institutions and the a amp a crisis has made for some Tough times. His biggest client Murray savings spent $1 million a year on advertising. But Murray went bust and was taken Over this year by another a amp a which had its own advertising Agency. And As the number of Banks and a amp is shrinks nationwide finding new clients is a daunting task. Quot anytime you lose a big account its Tough Quot Hornsey said. Quot consolidation in the a amp is has made it very a difficult for a lot of Small  a Michael Kay seemed even farther removed from the Thrift debacle. He Sells jewelry at a strip shopping Center in North Phoenix and until recently business was Good. But Kay had to pack up the Gold and jewelry store and move it a mile Down the Street which Cost his business $50,000. His shopping Center fell into the hands of government regulators and lost most of its tenants. No tenants no traffic. Other Phoenix stores in the Chain were growing but Kay saw business decline. Quot the trickle Down process is severe in the a amp a crisis Quot said Kay who had been at the Bell Tower Village four years a these kind of centers Are just  Bell Tower Village is slated to be auctioned saturday septet 5, gambling mid fraud the fast growing savings Industry attracts Crooks and others looking for a fast Buck. They often invest their new pools of Cash foolishly or fraudulently. Federal insurance on deposits Means taxpayers ultimately pay for losses from poor judgment and fraud. Government supervision is lax. 6. The Southwest is we Oil prices plummet hitting a Low of $10 a barrel in 1986. The Southwest led by Texas goes into recession. 9. Tighter rules As losses Rise sharply the government in 1989 reorganizes the agencies that regulate the Industry and handle tie bailout. My the Price Teg. The general accounting office estimates that the Cost of the bailout inducing financing Over four decades could be As High As $500 Btitton. Not of by the government this fall. A Jean Shoults the Arlington Texas woman in danger of taking a $25,000 hit on her Home equity Klieves her neighbourhood is beginning to feel the crisis an even newer Way a fallout from government Scissons the fashionable wooded area Parker Oaks has gone to court trying to Block the Resolution Trust corp., the government Agency charged with disposing of a amp a Ope ties from Selling the remaining 108 lots to a tract a Jame Developer. The builder Centex corp., has proposed building Fox Jacobs Brand Homes for $48 to $60 a Square foot Parker Oaks residents say. Most of the Homes in the n High boyhood Are Worth at least $70 a Square foot even today a depressed prices and deed restrictions on e land were designed to ensure continuity throughout 0 neighbourhood. Putting cheaper tract Homes next to larger custom it Mes would depress the value of the larger Homes As Ell As violate deed restrictions the Parker Oaks it me owners thought protected them residents intend. The neighbourhood has asked a Federal court to Block e Sale Etc officials declined comment because of the ending court Case but Fox amp Jacobs president Richard Conyers said his company s plan meets the deed striations and a is fully compatible with what a out  residents disagree and they be added a new decorative accent to their Well to do neighbourhood huge Otest signs and banners attacking the Etc. A it ruins us As far As housing value goes Quot said mrs. Shoults. Quot the biggest investment you make is in a use. This represents just about everything we be  d House Ember Joan Leff took $90,000 a All the monay aha had from a divorce Mettle Merit a and bought a Bond at Lincoln savings a loan in Shorman Oaka Calif thinking it waa Auto and insured. It Wasny to tales of Mega fraud by Robert Dvorchak and Scott Mccartney associated press a Bronze sculpture at the base of a Neon outlined 16-Story office looser in Mesa anz., honors real estate Developer Conley Wolfswinkel s parents Quot without whose Lone and guidance this by i dog never would have been  not exactly. Western savings amp loan association and ultimately the . Taxpayer helped too the now defunct a amp a paid Wolfswinkel $52.5 million a the amount of his loan a for the Tower three years ago government regulators sold the building this summer for $20.3 million. Loss to taxpayers More than $32 million just on that building. Such dealings multiplied Over and Over again across the United states illustrate where the Money went in the a amp a fiasco. First Texas savings and loan loaned $325 million to build Stonebridge ranch a planned Community North of Dallas. First Texas failed and regulators this year could Muster Only $61 million for Stonebridge from a japanese investor leaving taxpayers on the Hook for $264 million. Tales of fraud High living and rip offs dominate the coverage of the a amp a crisis but analysts and regulators say Only a fraction of the Money lost a estimated to run As High As $500 billion a was stolen outright. Most of it was gambled away on risky real estate deals. Quot it was like staking poker players to piles of chips while allowing them to keep any winnings even As the government agreed to pay All the losses Quot said Sherman Maisel former Federal Reserve Board governor. Fraud accounted for about 3 percent of the total being absorbed by taxpayers according to consultant Bert Ely. The bulk of the losses come from devalued real estate and excessive interest rates paid by sick a amp is to attract depositors. Quot the Crook bashing is troubling. They make convenient scapegoats to avoid focusing attention on the failed government policies that caused this Quot Ely said. Quot we be wasted the economic resources of the 1980s on unneeded investments Quot he said. Quot we be already had the Binge. Now we be got the hangover for  Ely estimates the loss today at $147 billion. He figures $28 billion went Down the Drain in property that is Worth less now than when it was financed or bought by a Thrift. The rest was lost in a variety of ways a excess interest paid to attract deposits or just to keep Pace with the High flying thrifts that offered above Market rates to provide More Cash to Gamble. A excess operating costs a exorbitant salaries unneeded Branch offices lavish decorations jets yachts and fancy parties Ely said. A fixed rate mortgages made before 1983 and squeezed by higher interest rates. A interest paid to keep ailing thrifts alive instead of closing them and paying off depositors immediately. Quot its a massive government failure Quot said Robert Litan a senior fellow at the Brookings institution. Quot most of the Money was lost in wild gambles. The government let them do it. There was no  some profited through the whole episode. People who originally sold land made a bundle. Money was paid to contractors developers suppliers and construction workers in a building Boom that went bust when regional economies nosedive. But fraud has generated the biggest headlines even though the . Justice department estimates criminal acts in about 30 percent of the failed a amp is. Quot you be got a lot of creeps in there but criminal fraud did t create the problem Quot said Doug Tillet spokesman for the Justice department. Quot we see an awful lot of stupidity and bad judgment. That s not  22,1990 the stars and stripes a a a Page 15