University Dally Kansan / Thursday, February 23, 1989
5
Your move
Members of the KU Chess Club, Robert Prestridge, Overland Park senior, and Sean Campbell, Chapel Hill, N.C., senior, play a friendly game of chess in Alcove A at the Kansas Union. All are welcome to play chess there from 7 to 9 p.m. Wednesdays.
Prof wants S&Ls to close
Bank closings will lessen taxpayer's losses, he says
by Steven Wolcott Kansan staff writer
A KU business professor has advocated that at least 250 U.S. savings and loans should be closed immediately to minimize taxaver losses.
"It is a remote possibility that leaving these institutions open will cost the taxpayer less money in the long run," the professor, Jack Gaumnitz, said. "If you want to minimize budget deficits and hold to Gramm-Rudman rules, you should close them now."
The Gramm-Rudman law was passed in 1985 by Congress to reduce the federal budget deficit.
Kim Gronnier, public information officer for the Federal Home Loan Bank of Topeka, 200 S.E. 6th St., said it was the bank's policy to go in and try to clean up problem institutions, not close them down.
The Federal Home Loan Bank of Topeka is responsible for regulating savings and loans in Kansas, Oklahoma. Colorado and Nebraska.
"The problem institutions will be
put under joint Federal Deposits Insurance Corporation, and Federal Savings and Loan Insurance Corporation conservatorship." Gromiger
"The conservators will limit the thrifts' growth, control their speculative activities and try to minimize losses while conducting business as
Groninger said the conservators would try to make sure the problems that caused the savings and loan crisis didn't occur again.
Gaumnitz said recent moves by the Federal Reserve Board to restrict the money supply would cause more problems for thrifts. Restricting the money supply boosts short-term interest rates, he said.
"Now savings and loans must pay even higher rates on their deposits while they're still stuck with low-rate mortgage loans," Gaumnitz said. "This further squeezes their margins, giving them less money to pay operating expenses and means more losses."
He admitted that there were non-economic reasons for keeping the thrifts open.
"If the institution is the only one in the community, that might be a reason to keep it open," Gaummitz said.
He said there were many reasons why the savings and loan industry got out of hand.
"You can blame deregulation," he said. "Congress completely deregulated the industry without realizing the consequences. But most of the blame must be placed on the managers of the failed institutions."
Deregulation in the early 1980s made it possible for thrifts to expand into investment areas such as commercial lending and credit cards.
"There was some fraud, but mainly it was bad management decisions and strategy." Guarnitz said. "They took risk looks, and they didn't work out."
Gaunnitz said that those savings and loans that followed a conservative strategy had survived the high interest market and had grown.
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