Since this stuff was made and sold by just plain old folks, then these plain old folks would make more money off of the taxes that weren't collected from the rich, than they would have made if they had gotten the tax breaks themselves. Does this sound familiar? and profoundly stupid?
That is because it is stupid, (The United States has debunked this faux-economic theory FOUR TIMES or more including 1999) but many economists (rich economists that wanted tax breaks I bet) kept hammering and hammering away with these economic theories.
The Good Ol' Glass-Steagall Act of 1933 just sat there watching the players and the regulators (referees) using the regulations (rules). Everything was working rather well. (Oh No!)
As always, in these good times as the numbers of people that went through the Great Depression grew smaller and smaller and the ever-expanding new people that did not experience the Great Depression began to finance their purchases and invest in stocks.
Americans were now ready to make money, even when they were at work making money. People forgot about the Great Depression because not only were they not hungry, each family now lived in a house.
Even the bankers and the "Wall Street Scoundrels" were slowly replaced by the younger bankers and "Wall Street Scoundrels" who didn't remember the Great Depression either.
Their industry was learning all over again the advantages of using OPM (Other People's Money like Danny Devito's character defined it) and relentlessly continuing to try to move over and get next to the commercial banks "blind trusts" which is my name for checking and savings accounts.
After World War II people in America grew happier and richer and owned more stuff than they ever had. They bought homes and cars and radios, up until 3 days before I was born and then they could buy televisions and such too.
By the early 1970s, it was no longer bad to think about supply-side economics. President Reagan really opened Pandora's box with his "Reagan-nomics" "Trickle Down" theories. Which actually did look like this:
I'm not sure if it was ever written down in Washington DC anywhere or if all of the congressmen just used the cartoon poster. But when looking at this four-prong plan, be sure and read that Reagan wanted to make "CUTS" in all of these four areas.
1. Lower government payroll and such,
2. By spending less government money he could cut taxes on the rich folks because rich folks needed money more than the government or its less rich citizens
3. Cut regulation on businesses (once again meaning to deregulate the banks) and cut the expansion of money supply.
4. you are going to have to "Google" number 4, because once again there is no room in this short article.
Trickle-down was a short term used to explain to us, the people that (again?) if you lower the taxes on the rich then they are the smartest guys and you can prove that is true because they are rich.
So, if they pay less tax then they will have more money and they will be wise and spend more, hire more, make more, employ more so that everyone from top to bottom will have more money. It was undeniable.
So, in his term as president, there was a good deal of deregulatin' that went on. But, he didn't mess with Glass-Steagall. Good or Bad doesn't matter because we are not yet to where I am heading this allegedly short article.
The country moved on and there were good times and bad. Then, Congress jammed in the "Thin Entering Wedge" when in the early 1980s Congress passed two laws with the intent to deregulate the Savings and Loans industry.
These two laws, the "Depository Institutions Deregulation and Monetary Control Act of 1980" and the "Garn-St. Germain Depository Institutions Act of 1982" deregulated a sort of safe side of banking which was very regulated and protected, the thrift lending institutions which were local lending institutions later mostly known as Saving and Loans institutions.
The S&Ls maintained safe commercial checking and savings accounts. The two Acts of Congress I mentioned above specifically allowed letting the inexperienced Savings and Loans industry take their depositors' money (OPM) and run "amuck. (not a legal term).
They then did truly run wild as directed. They took their OPM family savings to faraway states and built hotels and apartment complexes.
They then did truly run wild as directed. They took their OPM family savings to faraway states and built hotels and apartment complexes.
The new Acts allowed rich people to declare the passive income losses of depreciation on their personal tax returns. Which is not really that bad. But the Congress found a way to blow the Savings and Loans to kingdom come. Which really is....bad.
This really got some people thinking. This thinking helped these guys to figure out how to to put folks together into limited partnerships which included one entity called the General Partner of the limited liability partnership who gathered up some people with money to invest and they called them the limited liability partners.
They were either guys wanting to make a $gazillion dollars and be rich or they were rich guys that wanted the loss of the real estate depreciation on their tax form to keep them from paying the rich people kind of personal income taxes.
Everyone wanted to keep buying more shares which, as we know, was purchasing more loss. It was legal and as I said not all that bad, except, the Limited Partnerships began to design the real estate projects to lose money and sell the loss and later after the depreciation period (usually 25 years) when the property would then be sold at big profit and anyone who wasn't dead would be richer.
It was the S&Ls running wild with OPM that caused the Hullabaloo. You could write ten books on what comes before or after this sentence, but this is supposed to be a short article and I'm not yet to my two points in the title. So.
To be brief:
The S&Ls began to lose the money of their friends and neighbors on investment stuff in faraway lands (mostly in the sunbelt states) and now Congress saw that they had gone too far when they once again deregulated another financial industry and fired all of the referees (regulators).
So, they passed the 1986 Tax Law Act (in, of course, 1986). The main effect was that it did not allow all of the doctors; lawyers; baseball players; movie stars; and rappers, and other rich people to buy the passive loss (depreciation) from limited partnership shares and use that loss on their personal income tax in that same year, because now it was called "passive income".
But really, they didn't lose it, they just couldn't use it as a loss in the year it was declared. They had to wait until the real estate was sold (in 25 years or so) and use the loss which now would be offset by the profit and they would pay taxes and they would wish they were dead.
Well now, once that law was passed the demand for purchasing loss shut off like the water spigot in the Reagan Trickle Down Chart above.
The value of real estate dropped instantly by 1/3 all over the country. Many, many S&Ls lost all of their friends' and neighbors' money (OPM). But, there was some good luck after all. Along with the FDIC, the bank insurance for depositors money, there had also been invented by the smart guys the FSLIC or the Federal Savings and Loan Insurance Corporation.
But there was no plan for what happened next. Unplanned was the fact that the FSLIC did not have enough money to insure so much OPM that had been snuck away to faraway lands and they had not planned for so many lending institutions to go broke (fail) at the same time. The FSLIC its own self went broke (failed) instantly also.
Well now, this was a real emergency. The government had no choice but to fix this fiasco and fast. They knew it would be messy and horrible and that some people would be hoppin' mad, but it had to be fixed. They formed the Resolution Trust Corporation (RTC) to "just do whatever it took". It was a really bad scene for them and others (I was one of the others).
They sold everything of value that they could get their hands on and paid as much as they could to debtors and paid the depositors as the FSLIC was designed to pay.
As always the Federal Reserve (which is not part of our government) printed the money to pay what the sold stuff couldn't pay for which caused inflation which is actually a burden on the taxpayers. If you think it all through you will see that this means, we the taxpayers had to pay off a big part of this mess without anyone actually making a speech to inform us about it all.
Once again the taxpayers were going to pay for all of the "running amuck damage". Use your right to vote wisely readers. It gets worse.
Congress also did something remarkable. Possibly Devine. They put about one thousand bankers, from mid to high level in jail. That's right, no paying fines while denying wrongdoing. If you were participating in wrongdoing they sent you to jail. This may be the last of my good news. Which would be better news if I wasn't involved in what happens next.
It was such a mess that I lost $1.2 million in equity in over one thousand Promissory Instruments. I had no idea at that time what a Savings and Loan (sometimes still called a thrift) even was. I guess I was a non-combatant participant.
I had borrowed 70% of the value of the instruments from a Hartford, Connecticut Conduit lender called Security Capital Trust Co. (turned out to be a misnomer), so I assumed that I borrowed from a life insurance company.
The arrangement was that when the 70% was paid off on each then I would get the instruments back with a 30% balance free and clear. This would have begun to come back to me around 1990. In the summer of 1988 this company from Hartford, which I no longer believe was connected to a life insurance company, stopped answering their phones when I called.
About a month later their phones were disconnected. So, logically I began searching for my now lost stuff worth more than a million dollars. About ten months later I traced it to Benjamin Franklin Savings and Loans. But, my money wasn't there. In fact, Benjamin Franklin Savings and Loan wasn't there. The RTC had beat me to my stuff. There was nothing but the bones of bankers laying around a big charred hole.
It turned out that Benjamin Franklin Savings and Loan was the first and the largest Savings and Loan to go broke (failed) of the whole Savings and Loans Crisis. I did what anyone else would do.
I went into boat racing. Unlimited Hydroplanes in fact.
In Part 3 I am going to get to the big event. The trigger that nearly broke the world because the leaders of our country did not learn a thing about why the Savings and Loans went broke (failed) or what caused the crash of 1929. You know what I have been yapping about, what happens when banking is deregulated.
In my "true story" they will, once again listen to the begging of the Wall Street Scoundrels and the rest of the "Usual Suspects" who are once again screaming that the country would be just fine if we could only further deregulate (throw away the playbook) the finance industry and fire the referees (regulators).
If you have a short attention span you should really read Part 3 first. But really, I guess I should have suggested that before the end of Part 2. But, come on, this is no short article anymore. This is now a mystery novel.
