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Inside Job: The Looting of America's Savings and Loans
Outlines the reasons for the crisis in the savings and loan industry and discusses what deregulation could mean for the rest of the banking industry
578 pages, Paperback
First published January 1, 1989
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Displaying 1 - 14 of 14 reviews
July 22, 2023
This book was published while the S&L crisis was being investigated and still going on (1989). This was a decent book but I would have liked a little more perspective and thoroughness. Very good on the start of the scams and crimes—and it is mostly criminal looting enabled by the US Government. Congress started the ball rolling with deregulation of strict guidance emanating from the Great Depression era; the Reagan administration encouraged deregulation and wasn’t interested in hearing about problems; federal agencies were lax, incompetent or failed to coordinate among various competing fiefdoms; law enforcement was spotty—bank fraud wasn’t sexy, didn’t grab headlines and took a long time to trace the fraudsters; the S&L officers were not exactly the brightest and were easily taken advantage of, scammed or pushed aside; the crooked operators moved too fast to catch and had many ways to hide their scams; the mafia and shady characters were all over this new opportunity to both rob the banks and launder money from their various ongoing criminal enterprises. The speed of the looting and the amounts are staggering.
It was really simple to understand. After WWII, home ownership is one of the top goals of the “greatest Generation”. The boring local Savings and Loan (S&L) was a 3-6-3 organization. Borrow local people’s money at 3%, lend it out locally for homes at 6%, tee time at the golf club at 3 P.M. Think of “It’s a Wonderful Life” movie, like that. And then the politicians get involved…they just want to help the average person get ahead…! The inflation caused by the LBJ’s Great Society and the Vietnam War began to worry the pols. They passed a restriction on S&L interest rates, limiting the amount they could pay out on deposits to 5 ½ %, figuring that would limit what the S&L would then charge for a loan. Shortly thereafter, inflation roared to over 13%, but the S&L could only pay the 5.5%. Financial entrepreneurs invented the money market fund, and other financial institutions had instruments that would pay the market rate. People pulled their money out of the S&Ls, searching for higher returns (exactly what is going on this year – pulling money out of small/regional banks paying 0.1% on deposits and searching for much higher rates. Add in the internet, laptops, smartphones and banking apps and you can move $$ anywhere in minutes). Some deregulation of S&Ls started but in 1982, the floodgates are opened:
-Interest rate cap is removed; S&Ls can provide money market funds with no withdrawal penalties.
-“Full faith and credit” of the USG insures depositors up $100,000 per deposit account. Now the “entrepreneurs” and the scammers/cheats” can gamble with insured money—no risks. They lose it hand over fist.
-S&Ls can invest anywhere, no longer restricted to local area. S&Ls used to have a requirement for local focus and need.
-S&L no longer requires 400 investors (with no one owning more than 25%) to put up money to start up, 1 person can start an S&L and no longer requires 100% cash. “In-kind” assets, like land can count as equity.
-S&Ls can invest up to 40% of assets in commercial property anywhere
-S&L can provide 100% financing, investor(s) doesn’t have to put any money at all for a down payment
-“goodwill”—defined as customer loyalty, market share, and other intangible “warm fuzzies”—could count up to 40% of assets
-Few considered the age-old greed and dishonesty that could infest these once staid organizations.
-Regulators faced with 30-year mortgage on a local house suddenly had to assess a multi-million deal across the country—they had no chance of keeping up with the cheats and high-flyers.
The authors first see the local thrift explode after a “smart” guy takes over. They watch the rise and fall of this first S&L and go on to investigate many others. The vast criminal element is rampant. The mob, drug dealers, others are laundering their money through the S&Ls in so many creative ways. The criminals blow through millions and billions before the law can catch up.
Read this book to see the seeds of the 2008 financial crisis and the current banking crisis. One thing is very clear, never trust the “experts”. Strangely I have some sympathy for the banking regulators that were so clearly outgunned. I prefer strong competition and fewer rules. But this book makes an effective case for strong regulations in some areas. Banking is one of those areas. I also think the S&L crisis and government bailout really started the now assumed responsibility of the “government”, i.e., other taxpayers, to bailout any stupid organization or individual.
4 Stars for a still relevant story.
It was really simple to understand. After WWII, home ownership is one of the top goals of the “greatest Generation”. The boring local Savings and Loan (S&L) was a 3-6-3 organization. Borrow local people’s money at 3%, lend it out locally for homes at 6%, tee time at the golf club at 3 P.M. Think of “It’s a Wonderful Life” movie, like that. And then the politicians get involved…they just want to help the average person get ahead…! The inflation caused by the LBJ’s Great Society and the Vietnam War began to worry the pols. They passed a restriction on S&L interest rates, limiting the amount they could pay out on deposits to 5 ½ %, figuring that would limit what the S&L would then charge for a loan. Shortly thereafter, inflation roared to over 13%, but the S&L could only pay the 5.5%. Financial entrepreneurs invented the money market fund, and other financial institutions had instruments that would pay the market rate. People pulled their money out of the S&Ls, searching for higher returns (exactly what is going on this year – pulling money out of small/regional banks paying 0.1% on deposits and searching for much higher rates. Add in the internet, laptops, smartphones and banking apps and you can move $$ anywhere in minutes). Some deregulation of S&Ls started but in 1982, the floodgates are opened:
-Interest rate cap is removed; S&Ls can provide money market funds with no withdrawal penalties.
-“Full faith and credit” of the USG insures depositors up $100,000 per deposit account. Now the “entrepreneurs” and the scammers/cheats” can gamble with insured money—no risks. They lose it hand over fist.
-S&Ls can invest anywhere, no longer restricted to local area. S&Ls used to have a requirement for local focus and need.
-S&L no longer requires 400 investors (with no one owning more than 25%) to put up money to start up, 1 person can start an S&L and no longer requires 100% cash. “In-kind” assets, like land can count as equity.
-S&Ls can invest up to 40% of assets in commercial property anywhere
-S&L can provide 100% financing, investor(s) doesn’t have to put any money at all for a down payment
-“goodwill”—defined as customer loyalty, market share, and other intangible “warm fuzzies”—could count up to 40% of assets
-Few considered the age-old greed and dishonesty that could infest these once staid organizations.
-Regulators faced with 30-year mortgage on a local house suddenly had to assess a multi-million deal across the country—they had no chance of keeping up with the cheats and high-flyers.
The authors first see the local thrift explode after a “smart” guy takes over. They watch the rise and fall of this first S&L and go on to investigate many others. The vast criminal element is rampant. The mob, drug dealers, others are laundering their money through the S&Ls in so many creative ways. The criminals blow through millions and billions before the law can catch up.
Read this book to see the seeds of the 2008 financial crisis and the current banking crisis. One thing is very clear, never trust the “experts”. Strangely I have some sympathy for the banking regulators that were so clearly outgunned. I prefer strong competition and fewer rules. But this book makes an effective case for strong regulations in some areas. Banking is one of those areas. I also think the S&L crisis and government bailout really started the now assumed responsibility of the “government”, i.e., other taxpayers, to bailout any stupid organization or individual.
4 Stars for a still relevant story.
September 26, 2011
I don't think I've ever read come across a form of medium that has ever clearly explained to me the ins and outs of the economic crisis back in 2008. This book changed everything. 10 pages into it, I couldn't possibly put it down.
"Inside Job" gives a perfect insight into the not-so perfect world of Corporate America, blatantly under the influence of Gary "Hank" Paulson, CEO of Goldman Sachs. One of the most remarkable things about this book is how calmly Stephen Pizzo basically puts the blame on specific individuals, specific upper class CEO's and other important political figures, for ruining the Capitalistic "hierarchy" even more.
I recommend this book to anyone who's not only interested in Economics and Finance, but to anyone who's tired of not knowing what really happened in 2008. What really happened to Lehmann Brothers, Freddie Mac, Fannie Mae, etc etc..
5/5 to Stephen Pizzo, for finally allowing someone my age, to fully understand just how powerful Wall Street's influence really is.
"Inside Job" gives a perfect insight into the not-so perfect world of Corporate America, blatantly under the influence of Gary "Hank" Paulson, CEO of Goldman Sachs. One of the most remarkable things about this book is how calmly Stephen Pizzo basically puts the blame on specific individuals, specific upper class CEO's and other important political figures, for ruining the Capitalistic "hierarchy" even more.
I recommend this book to anyone who's not only interested in Economics and Finance, but to anyone who's tired of not knowing what really happened in 2008. What really happened to Lehmann Brothers, Freddie Mac, Fannie Mae, etc etc..
5/5 to Stephen Pizzo, for finally allowing someone my age, to fully understand just how powerful Wall Street's influence really is.
October 14, 2012
Will make you mad. Also see the video called Inside Job as it summarizes the crimes from S&L until right now. America needs to wake up, both parties are in total corruption with the financial industry and the deregulation that started in the 80's and continues now is the cause of this mess. Lots of other books out there to read too. US should pay close attention to what happened in Iceland. Total deregulation is not a good thing.
March 1, 2008
Skip this and read S&L Hell instead for a good popular account.
Want to read
November 3, 2010It's my understanding that as a percentage of GDP, this bailout was larger than the one in 2008. We'll see.
November 20, 2019
Not my usual reading fare, but I am trying to branch out. Three stars may seem like a lacklustre rating, but in truth it's no reflection on the quality of the journalistic research here, which is absolutely excellent. The three authors appear to have done substantially more than a lot of the government and regulatory agencies trying to investigate these crimes. However, as those authors point out, white collar crime is frequently pushed aside in favour of more "obvious" criminality - given the havoc these people cause, though, with their pathological greed, that is deeply unfortunate. And, frankly, counterproductive.
So, no issue with the research, or with the conclusions. It's just with the best will in the world I can't get that interested in business. It's a steep learning curve, a book like this, and one that's not helped by the overdose of acronym on every page. Depressingly, it seems to repeat, too, in great detail, a number of extremely similar stories. Greedy Bastard from (insert state here) bilks everyone around him, having essentially bought off enough politicians and other sorts to clear his way, and ultimately slinks back into the crony network of Greedy Bastards because they all support each other. I mean the weight of evidence is impressive, but it's just so bloody depressing. Not gonna lie, it's also pretty stodgy and took me literally months to read; I had to do it a little at a time. One of those books that is highly admirable, but I can't say that I come away with a genuine liking for it. Like vaccination, really - absolutely worthwhile, but the needle is still no fun.
So, no issue with the research, or with the conclusions. It's just with the best will in the world I can't get that interested in business. It's a steep learning curve, a book like this, and one that's not helped by the overdose of acronym on every page. Depressingly, it seems to repeat, too, in great detail, a number of extremely similar stories. Greedy Bastard from (insert state here) bilks everyone around him, having essentially bought off enough politicians and other sorts to clear his way, and ultimately slinks back into the crony network of Greedy Bastards because they all support each other. I mean the weight of evidence is impressive, but it's just so bloody depressing. Not gonna lie, it's also pretty stodgy and took me literally months to read; I had to do it a little at a time. One of those books that is highly admirable, but I can't say that I come away with a genuine liking for it. Like vaccination, really - absolutely worthwhile, but the needle is still no fun.
September 11, 2019
I loved this book. But be prepared to be FURIOUS. I've read several books on the MBS/Subprime from the last blowout, this was the first book I've read on the SNL crisis of the 80s and let me say without a doubt, THIS ONE WAS MUCH WORSE! Worse in the amount it cost taxpayers (we're probably going to pay 13 BILLION in interest on this FOREVER. And worse in the sense that the majority of the spoils went to so few people. There were probably around 500 people who made off with hundreds of billions of dollars. At least in the mortgage crisis in 2008 we all knew someone who got to enjoy a house they couldn't afford or were even forgiven a load they couldn't afford but 95% of the fun went to the guys running this SNLs. Hardly anyone did serious time, that should have been a warning of what would happen even worse in the next one.
Now that I know how much money people stole and didn't have to pay back, especially in CA and TX, the two states I've lived all of my life, I can't help but wonder which rich people in those states acquired their wealth from their parents or grandparents robbing bank thrifts in the 80s.
One last night the authors predict dire consequences if Congress went ahead and deregulated banking (this went to press early 90s) and boy where they right.
Now that I know how much money people stole and didn't have to pay back, especially in CA and TX, the two states I've lived all of my life, I can't help but wonder which rich people in those states acquired their wealth from their parents or grandparents robbing bank thrifts in the 80s.
One last night the authors predict dire consequences if Congress went ahead and deregulated banking (this went to press early 90s) and boy where they right.
January 6, 2022
- The Law of unintended consequences: S&L had a huge survival issue due to regulatory mandate that S&L can't offer interests over a certain percentage for depositors. The thinking is that when they offer low interest deposit, they will also offer cheaper loans for borrowers. Of course the world doesn't work this way: borrower simply move to other venues for their deposit
- Too extreme of anything is a bad thing: soon regulators seeing the collapse of S&L industry due to lack of depositors, completely dropped regulations (while retaining the $100,000 government insurance), encouraging risky behaviors of S&L industry
- With the prospect of having backing of the government while have no regulation of risk, S&L industry attracted many cons who lure the money in with high interest rate, self delt and took in massive amount of bad investments
- Too extreme of anything is a bad thing: soon regulators seeing the collapse of S&L industry due to lack of depositors, completely dropped regulations (while retaining the $100,000 government insurance), encouraging risky behaviors of S&L industry
- With the prospect of having backing of the government while have no regulation of risk, S&L industry attracted many cons who lure the money in with high interest rate, self delt and took in massive amount of bad investments
July 18, 2020
I read the 2011 edition where the author analyzed why the 1999 Glass Steagel act repeal laid the foundation for subsequent bank collapses in 2008. I could connect the events to the fall of DHFL (Indian mortage lender) where issues like skin in game, posssible mafia linkage and commercial real estate lending made the institution fall. Unlike India, the fit and proper requirement relaxation for those entrusted with dealing with guaranteed money, made S&L crisis, and is a stern reminder to regulate federally guaranteed banks and executive compensation etc
January 6, 2024
I read this book over the course of a few airplane trips, and I found it to be an incredible look at the Savings and Loan crisis. To me it was a good mix of the criminal, political, and economic analyses of the situation. If there was one thing I wish it had, I would’ve appreciated an appendix or insert of pictures from the lavish scenes described during this period of excess.
October 11, 2017
It was a well written book that gave a very detailed accounting of the event. I felt it was too in depth and took away from the enjoyment of reading it.
December 27, 2020
Informative, but the narrative could be more compelling
September 2, 2021
Absolutely brilliant, attention to detail and research are evident. I would recommend this book to everyone, and I will be buying a few copies for Christmas presents.
July 11, 2016
Neither an easy nor a pleasant read. It is important to understand potential criminal opportunities that arise due to changes in government regulation because many of the criminals, especially organized crime, will understand and take advantage of them before we know it. This was a colossal financial heist!
Displaying 1 - 14 of 14 reviews