The Great American Bailout

TV Hub

Robert Krulwich investigates the rising cost of the Savings and loan crisis

Transcript

00:00Frontline is a presentation of the Documentary Consortium.

00:07So now it's time to go.

00:10It's time to say goodbye and good luck to my many friends in the banking world.

00:15Last week, when William Seidman stepped down from his post as the nation's chief banking regulator,

00:21he left behind the massive savings and loan bailout

00:24that could eventually cost American taxpayers more than $700 billion.

00:30I wish you all the best. You've been great. Thank you.

00:36It is the biggest giveaway I have seen in the federal government.

00:41Tonight, Frontline investigates government mismanagement and a political cover-up in the SNL bailout.

00:47We believe that there was a conscious effort by Chairman Wall to distort the numbers,

00:52and then we've been told that we were right.

00:55Correspondent Robert Crowlech examines evidence the administration

00:58shivered up the problem during the 88 election.

01:00My only response has been, no one ever told me.

01:05Tonight, the Great American Bailout.

01:08With funding provided by the financial support of viewers like you

01:18and by the Corporation for Public Broadcasting,

01:24this is Frontline.

01:29This program is a co-production with the Center for Investigative Reporting.

01:38Additional funding provided by these and other funders.

01:41You may have guessed why we're here, obviously.

02:01This is the Center Savings Association of Arlington, Texas.

02:04Today, it's being taken over by the United States government.

02:07It just simply says, receiver is taking possession of the association.

02:12Center Savings has just been transferred to the control of the federal SNL bailout agency

02:17and will now be run by government employees.

02:20If you go ahead and do all three of them.

02:22This is the 639th institution nationwide that's being taken over,

02:26the 134th in the state of Texas alone.

02:28Once the takeover notice is posted, a team of examiners arrives

02:33to find out how much money Center Savings has actually lost.

02:38I'm Larry Long, and I'm from Resolution Trust Corporation.

02:42I've been appointed as managing agent for Center Savings Association, F.A.

02:46That will be your new name.

02:48We've expected it for months, but you never really expect it.

02:52It's like it happens to someone else, but not to you.

02:54Several actions have taken place today that affect this institution.

02:59I would like to take a few minutes to explain.

03:02Please remember that these actions was initiated primarily for the protection

03:06of the depositors and taxpayers.

03:10We had an account opened up yesterday, and the gentleman came in with an RTC check,

03:14and he said, I've just been through the worst experience of my life.

03:16I'd like to open a new account here.

03:18And then he looked at us and he said, you aren't about to go under, are you?

03:21I saw the paper on the front door there when I walked in.

03:25I just came here yesterday, and I saw that paper on the front door,

03:28and I thought, here we go again.

03:30But depositors at Center Savings won't lose their money

03:33because all S&L deposits are insured by the government for up to $100,000.

03:39Do you have a key to this talking over here?

03:41A minute.

03:42Well, yeah, we'll probably need to lock up things at night.

03:44Now that the government has taken over,

03:46the bailout team's job is to recover as much money as possible from Center Savings.

03:52But there won't be enough money to cover all the insured deposits,

03:55and the government will be stuck with the bill,

03:57including the cost of the man changing the locks.

04:00Two outside doors, these two inside doors.

04:03Appreciate it, sir.

04:04Okay, sir. Thank you much.

04:06All of us as taxpayers now own Center Savings and its losses.

04:11Add the losses from Center Savings

04:13to the losses from hundreds of other S&Ls that have already failed

04:16and hundreds more projected to fail,

04:19and you can begin to grasp the scale of this disaster.

04:23Well, this is the mother of all government mistakes.

04:25It is absolutely the largest single mistake

04:30that you can identify the government has ever made

04:33in terms of financial costs.

04:35It is colossal.

04:38For the past two years,

04:39William Seidman was chairman of the government agency

04:42in charge of the S&L bailout and its runaway costs.

04:45If you had the money today and paid it,

04:47it would be close to $200 billion.

04:49Since you don't have, and you're going to pay interest,

04:52it's probably closer to $600 or $700 billion.

04:54$600 or $700 billion.

04:57When you look at history books,

04:58and you see Teapot Dome,

05:01and you see scandals in the Grant administration,

05:03and you see the Depression,

05:05and you see all these problems,

05:07how does this one rank in 200 years of bad deals?

05:13I don't know what you can compare it with.

05:14All the rest of the things you've just mentioned

05:18wouldn't add up to 10% of this.

05:22Many critics say the whole scandal began

05:24with the deregulation of the thrift industry in 1982.

05:28That permitted savings and loans

05:29to move away from their traditional role,

05:32lending money for homes,

05:33and into a new era.

05:34This bill is the most important legislation

05:37for financial institutions in the last 50 years.

05:40It provides a long-term solution

05:42for troubled thrift institutions.

05:44For the first time,

05:45savings and loans were allowed to invest depositors,

05:48federally insured money,

05:49into everything,

05:50from commercial real estate

05:51to high-risk securities.

05:53All in all,

05:54I think we hit the jackpot.

05:56Unfortunately,

05:57that jackpot would attract

05:59a new breed of entrepreneurs,

06:00including real estate speculators

06:02and outright crooks,

06:03who turned some SNLs

06:05into their private piggy banks.

06:07Deregulation was the fatal flaw,

06:09but more importantly,

06:10is then we compounded the problem

06:12by not putting the examiners,

06:15by not putting the examiners out in the field

06:17to police it.

06:18Roger Martin served as a member

06:19of the Federal Home Loan Bank Board

06:21that regulated the nation's SNLs

06:23during the first phase of the bailout.

06:25We never should have deregulated

06:27the way we've done.

06:28But once we've done it,

06:29we certainly should have put

06:30the cops on the beat

06:31to watch it.

06:33But we didn't.

06:34The biggest SNL losses

06:36were caused by risky real estate loans

06:38in Texas and all over the Sun Belt.

06:41When the boom went bust,

06:43hundreds of SNLs went broke,

06:45draining Fislick,

06:46the government's SNL insurance fund.

06:48With little cash,

06:50the question was,

06:50how could the fund handle

06:52these growing losses?

06:53We had decided in November of 1987

06:56that we were going to institute

06:58what we called the Southwest Plan.

07:00Danny Wall was chairman

07:01of the Federal Home Loan Bank Board.

07:03His Southwest Plan

07:04was designed to rescue

07:06hundreds of sick SNLs

07:07by turning them over

07:08to the private sector.

07:10The government had a loss.

07:11The government said,

07:12we've got all these losses

07:13all over the landscape.

07:15We're going to provide an incentive

07:16to bring the private sector

07:17to manage these assets.

07:19The incentive Wall used

07:21to attract investors

07:22was a huge tax break

07:23and generous government subsidies.

07:26But Wall had a deadline.

07:27He had to complete the deals

07:28by the end of 1988.

07:30That's when many of the tax breaks

07:31would expire.

07:33He had to sell

07:34and they didn't have to buy.

07:36When you're in that position

07:37and you want to accomplish something,

07:39you're going to have to be

07:40very, very generous

07:42and in order.

07:44And of course,

07:44the bottom fishermen

07:45were rushing by this building

07:47to his building up the street

07:48and you could see them.

07:49I mean,

07:50the best of the bottom fishermen,

07:52you know,

07:52were there

07:52because they smelled the situation

07:55and went for the bait.

07:56The largest SNL in Texas

07:58to go broke

07:59was Gibraltar Savings.

08:01Danny Wall's bank board

08:03sold it with a few others

08:04to an investment group

08:05headed by Revlon's

08:06Ron Perlman.

08:07As part of the deal,

08:08Perlman's group

08:09invested $315 million

08:11and received tax breaks

08:13worth as much as $900 million.

08:16Do you get at all uneasy

08:17that somebody like,

08:18say, Ron Perlman,

08:19who's one of the richest people

08:20in the country,

08:22invests $315 million

08:24and gets some billion dollars

08:27in government assistance,

08:28that there's something just

08:28structurally odd

08:30about that arrangement?

08:32Well, it is very unfortunate

08:35for the taxpayer

08:35that we get the taxpayer

08:38who is really on the other side

08:39of this deal

08:40in the position

08:41where all the chips

08:42are in the other guy's hands

08:45and all the good cards as well.

08:48And, yes, it's sad.

08:50It shouldn't have happened.

08:52Perlman's investment group

08:53took Gibraltar Savings

08:54and the other four failed thrifts

08:56and reopened them

08:57under the name

08:58First Gibraltar.

09:02But the way the bailout deal

09:03was put together

09:04three years ago

09:05is still costing some Americans

09:07a lot more

09:08than their tax dollars.

09:09Before it failed,

09:12Gibraltar Savings

09:12had loaned nearly

09:13$100 million

09:14to build a housing development

09:1615 miles north of Austin.

09:18It's called

09:19the Circle C Ranch.

09:21This planned community

09:22promised everything

09:23from a daycare center

09:24to soccer fields

09:25to an Olympic-sized

09:26swimming pool.

09:27The project

09:28is something

09:29over 4,000 acres

09:30to give you an idea

09:31of the size.

09:32The man who built Circle C

09:34was Austin developer

09:35Gary Bradley.

09:36And how many people

09:37are going to live there?

09:378,000 to 10,000 homes

09:40ultimately.

09:41So that could be

09:4240,000, 50,000 people.

09:43Yes.

09:44You're basically

09:44building a new town.

09:46Yay!

09:48The community

09:49is laid out.

09:50There's sidewalks.

09:51There's cul-de-sacs.

09:52There's places

09:53for the kids to play.

09:54Susan Hoover

09:55and her family

09:55bought their

09:56three-bedroom home

09:57for $125,000.

10:00It was beautiful.

10:01It was in the country.

10:02It looked like

10:03a great place

10:03to raise a family.

10:04It was appealing to me.

10:06It was something

10:06that I wanted

10:07to participate in.

10:08I wanted to buy

10:09into this dream.

10:10Ken Rigsby

10:11and Susan Hoover

10:12are among the 500

10:13homeowners who moved

10:15into the Circle C Ranch.

10:17But once Ron Perlman's

10:18new bank,

10:19First Gibraltar,

10:20took over,

10:21things began to change.

10:23Initially,

10:24I'd say mostly

10:25through most of 89,

10:26it just seemed that

10:27things started

10:28slowing down a bit.

10:30But the homeowners

10:31in general

10:31were sheltered

10:32from what was going on.

10:35What did you see,

10:36if anything?

10:36Well, people were

10:37wondering about

10:38the Child Development Center

10:41and what was happening

10:42with the Child Development Center.

10:44There seemed to be

10:44fewer people coming out

10:45to look at things.

10:46What happened was

10:47First Gibraltar

10:48decided not to finish

10:50the project.

10:51They cut off loans

10:52to develop other homes,

10:53to build the preschool.

10:54They wouldn't even finish

10:56the nearly completed

10:56public golf course.

10:59The Circle C homeowners

11:00found themselves trapped.

11:02With the project stalled,

11:04their homes were losing value.

11:06And if the other houses

11:06didn't get built,

11:08they would be stuck

11:09with the electric,

11:10water, and sewer assessments

11:11for the whole development.

11:12If the development

11:13doesn't go forward

11:14and the people

11:17who lent the money

11:18for the municipal

11:19utility districts

11:20to be built out here,

11:22someone has to pay

11:22that bill.

11:24And if there are only

11:24a few people here,

11:25they have to pay

11:25a big bill?

11:26Yes.

11:26And that big bill is?

11:28That big bill

11:28could be as high

11:29as $24,000 per home.

11:31What the homeowners

11:33couldn't figure out

11:34was why

11:34First Gibraltar

11:35seemed so content

11:36to let the whole development

11:37go to seed

11:38instead of selling it.

11:41So they did some

11:42investigating of their own

11:43and discovered the document

11:45that helped answer

11:46their question.

11:47Here is the assistance agreement.

11:49What that document revealed

11:50was that the government

11:51had promised to pay

11:52First Gibraltar

11:53a fat fee

11:54every year

11:55for the next 10 years

11:56as long as it held

11:58on to the property,

11:59regardless of its condition.

12:01But if First Gibraltar

12:02sells Circle C,

12:04it would lose millions

12:05of dollars

12:05in government subsidies.

12:07The assistance agreement

12:08runs for another

12:09eight years.

12:10I don't know

12:11when this nightmare

12:12will ever end.

12:13I mean,

12:14obviously First Gibraltar

12:15is acting in their own

12:17selfish best interest.

12:19They are going to maximize

12:20their management fees.

12:22That's a certainty.

12:23So you're suggesting

12:24that they have no incentive

12:26to sell the property?

12:27No, I'm not suggesting that.

12:28They have a huge disincentive

12:30to sell it.

12:32They will not sell it

12:33unless someone makes them.

12:35With the project on hold,

12:36the Circle C residents

12:37believe their homes

12:38and futures are at stake.

12:41We're American citizens.

12:42We're taxpayers.

12:43We're being damaged down here

12:45by a contradictory policy

12:46of a federal agency.

12:48And the agency

12:48doesn't want to talk about it

12:50and nobody else does.

12:51Now, what would that

12:51make you think?

12:52This is amazing.

12:56Amazing, Mr. Chairman.

12:58In the final weeks

12:59of 1988,

13:00Wall's Southwest plan

13:01committed the government

13:02to billions of dollars

13:04in tax breaks

13:05and assistance payments

13:06to some of the richest

13:07investors in America.

13:08In the final waning moments

13:10of 1988,

13:11the bank board left us

13:12with a New Year's present,

13:14the true nature of which

13:15is even now unclear,

13:16but the magnitude of which

13:18is staggering.

13:19In the short span

13:20of seven days,

13:21the bank board

13:22spent more than

13:23$28 billion,

13:25all of which

13:26was charged

13:27to the credit card

13:28of Joe Pugh Public,

13:29all done

13:30in the dark of night.

13:32It is

13:33the biggest giveaway

13:34I have seen

13:35in the federal government

13:36since I have been here.

13:38The growing SNL crisis

13:44had been conspicuously absent

13:46from the 1988 campaign,

13:48and now it was George Bush's turn

13:50to preside over the biggest

13:51financial scandal

13:52in U.S. history.

13:53Because of the accumulation

13:55of losses

13:56at hundreds of these

13:58thrift institutions,

14:00additional resources

14:01must be devoted

14:02to cleaning up

14:03this problem.

14:04President Bush

14:05came to office

14:06with his own

14:06bailout plan.

14:08On August 9, 1989,

14:10the Resolution Trust Corporation,

14:12or RTC,

14:13as it's called,

14:14was born.

14:15Thank you all very much,

14:16and now I'm proud

14:17to sign this monster.

14:18And a monster it was,

14:25with two governing boards

14:27and no one individual

14:29or institution

14:30apparently in charge

14:32of this great

14:32American bailout.

14:34In its first two years,

14:36the RTC has grown

14:37into a government agency

14:38with more than

14:397,500 employees.

14:4218 months ago,

14:43there was nobody here

14:44but me.

14:45I was the only employee

14:46in the place,

14:47you know,

14:47and then,

14:48we had 250 institutions

14:51they'd already given us.

14:52And so I looked around

14:53and said,

14:53help, get me some.

14:54William Seidman,

14:55already chairman

14:56of the FDIC Bank Fund,

14:58was also appointed

14:59chairman of the new

15:00Resolution Trust Corporation.

15:02If you look at an S&L,

15:04on average,

15:05when we take one over,

15:06one that's failed,

15:07half of the assets

15:08will be good assets

15:10worth about

15:11what they're on

15:11the books for.

15:12Those are essentially

15:13one to four family homes

15:15and mortgages.

15:17The other half

15:18will be where

15:18all the problem is

15:19and those will probably

15:21be worth half

15:21of what they're

15:22on the books for

15:23and they will constitute

15:24the empty

15:25shopping centers,

15:27the golf courses

15:28with no greens,

15:30the marinas

15:31with no water,

15:32the windmills

15:33with no breezes

15:34and all the other things

15:35that they got into.

15:36We've got almost

15:37anything you can think about.

15:39We've got a fine

15:40collection of old coins,

15:41we've got a lot

15:42of artwork,

15:42we've had porno libraries,

15:45we've had porno libraries,

15:47anything that anybody

15:49will own money on.

15:50What do you do

15:50with a pornographic?

15:51Sell it.

15:5494.14 at FOB?

15:56Cryer's at 94.14.

16:00This may look

16:01like Wall Street,

16:02but it's actually

16:03an office at RTC

16:04headquarters in Washington

16:05where about

16:06$90 million

16:07in junk bonds

16:08and securities

16:09are sold

16:10every working day.

16:11How are you doing today?

16:12$2,750,000.

16:13Highlands Basement.

16:15The RTC

16:16has inherited

16:17nearly $100 billion

16:18worth of securities

16:20including $7 billion

16:21in junk bonds.

16:22So these traders

16:23will have a job

16:24for some time to come.

16:26Okay,

16:26the bid is in the back

16:28corner there,

16:29at the other end

16:32of the spectrum

16:33the RTC

16:34is auctioning off

16:35everything

16:36that can possibly

16:37be sold

16:37including the office

16:39equipment that

16:39SNL's once used

16:40to buy those junk bonds.

16:42In fact,

16:43most of the items

16:44at this auction

16:45are even warehoused

16:46in a failed

16:46savings and loan building

16:48which is also

16:49up for sale.

16:50What are the stakes

16:51for the American

16:52taxpayer

16:53in how well

16:54you manage

16:55the liquidation

16:56of these assets?

16:57Dollar for dollar.

16:58Every dollar we get

17:00cuts down

17:00the taxpayer's bill.

17:02Every dollar

17:02we don't get

17:03increases his bill.

17:05How you doing?

17:07Well,

17:07we're,

17:08you know,

17:09we have a problem.

17:11No one has ever

17:11tried this before

17:12in the history

17:13of the world.

17:14So it's hard

17:15to find standards

17:16of performance

17:16in which you say

17:17that we're doing

17:18well or doing badly.

17:20And people's

17:22opinions vary.

17:26To see how

17:27the bailout

17:28is going

17:28we went

17:29to Texas

17:29where more

17:30than half

17:30the S&L losses

17:31occurred.

17:33Our first stop

17:34was Austin

17:35which just a few

17:36years ago

17:37was one of the

17:37fastest growing

17:38cities in America.

17:40Just imagine

17:41one day

17:42it kind of

17:43just all happened

17:44all at once.

17:46And all of a sudden

17:47we were riding

17:48the wave

17:49and everyone

17:50was doing great

17:51and all of a sudden

17:52all the banks

17:53started failing

17:54and savings

17:56and loans

17:56started closing

17:57and all of a sudden

17:58you started

17:58going to lunch

17:59and everyone

18:00was losing

18:01their home

18:02or their car

18:03was being repossessed

18:04and then the times

18:05got worse

18:06and they got worse.

18:07Royce Gorley

18:08is an Austin

18:09real estate broker

18:10who still looks

18:11at Austin's skyline

18:12with pride

18:13though he acknowledges

18:14that much of that

18:15growth fueled by

18:16S&L's

18:16was excessive.

18:18Austin was growing

18:19by leaps and bounds

18:21new buildings

18:21were coming up

18:22and all of a sudden

18:23Austin's office space

18:25doubled within a period

18:26of six years.

18:26But today

18:29many of these

18:30gleaming new

18:30skyscrapers

18:31are only partly full

18:33and because the

18:34government has taken

18:35over so many

18:35failed S&L's

18:36commercial properties

18:37all over Austin

18:38are now owned

18:39by the taxpayers.

18:41In fact

18:42more than 10%

18:43of Austin's real estate

18:44is owned

18:45by federal

18:46bailout agencies.

18:47That makes Uncle Sam

18:48the biggest landlord

18:49in town.

18:51I think you've got

18:52a lot of people

18:52that don't understand

18:54the real estate business.

18:55They're trying to

18:56put a bureaucratic

18:57approach

18:58onto a

18:59very volatile market.

19:01John Lewis

19:02former president

19:02of Austin's

19:03commercial real estate

19:04society

19:05doesn't like

19:06the way the

19:06Resolution Trust

19:07Corporation

19:07does business.

19:08I had a client

19:09who wanted

19:10an office building.

19:11He offered

19:11$4 million cash

19:12no contingencies

19:14closed quickly.

19:16The asset manager

19:18contacted me

19:19and said

19:19we've gotten

19:20your offer

19:20however

19:22we need to do

19:24a second appraisal

19:24and let us

19:26get back

19:26with you.

19:27So we said

19:27okay fine.

19:29We wait around

19:30and two months

19:31go by

19:32three months

19:33go by

19:34finally call

19:35the guy

19:35and I said

19:36what is the

19:36hold up?

19:37And he says

19:37we've had to

19:38order a third

19:39appraisal.

19:40We weren't

19:40satisfied

19:41with the

19:41second appraisal.

19:42So we wait

19:43and wait

19:45and wait

19:46two appraisals

19:47and eight months

19:48later

19:49the RTC

19:49was finally

19:50ready to deal

19:51but now

19:52the asking price

19:53was $3 million

19:54$3 million

19:55but you'd offered

19:56$4 million

19:57Well we'd offered

19:57$4 million

19:58now they're

19:59telling us

20:00that they'll

20:00take $3 million

20:01we wind up

20:03agreeing on

20:04$2,300,000

20:05You would

20:07however

20:07have given

20:08this institution

20:09$4 million

20:10if they'd said

20:10yes right away

20:11Oh yes

20:12And this is

20:14a story

20:15we heard

20:15again and

20:16again

20:16all over

20:17Texas

20:18This is the

20:19Dominion office

20:19building

20:20on the corner

20:20of Campbell

20:21and Preston

20:22Road

20:22316,000

20:25square feet

20:25that we

20:26represented

20:26the buyer

20:27for

20:27Betsy Sink

20:29and John

20:29McCrocklin

20:30are real

20:30estate brokers

20:31in Dallas

20:31who specialize

20:32in buying

20:33large commercial

20:34properties

20:35from the

20:35SNL bailout

20:36It was one

20:36of the first

20:37big ones

20:37to sell

20:38for the

20:38RTC office

20:39Originally

20:40their clients

20:41offered to pay

20:42$43 million

20:43in a package

20:44deal for

20:44two buildings

20:45the Dominion

20:46and the Madison

20:47but the RTC

20:49apparently

20:49wanted less

20:50They came back

20:52and said

20:52they couldn't

20:53accept a

20:53singular contract

20:54or offer

20:55on both properties

20:56that we'd have

20:57to split it out

20:57into two contracts

20:59one for $21 million

21:00and one for

21:01$20,750,000

21:03and we said

21:04that's very peculiar

21:05because that's

21:06$1,250,000

21:07short

21:08of what we've

21:09offered

21:10and they said

21:11that's fine

21:11that's the

21:12acceptable price

21:13that's what

21:13we want you

21:14to submit

21:14But when

21:15McCrocklin

21:16submitted

21:16the two

21:17contracts

21:17as requested

21:18the RTC

21:19accepted the

21:20offer for

21:20the Dominion

21:21but gave

21:22the Madison

21:22to a competing

21:23group

21:23But when

21:24they finally

21:25closed that

21:25building

21:26and it was

21:27almost nine

21:27months later

21:28they suffered

21:29about a $3

21:30to $4 million

21:31loss from what

21:32we were willing

21:32to pay them

21:33at the time

21:34and I can

21:34document that

21:35and I can

21:35show you in

21:36writing

21:36where time

21:37after time

21:38after time

21:38whether it's

21:39the RTC

21:39or the FDIC

21:40they've cost

21:41themselves

21:42an average

21:42of $3

21:43to $6

21:43million

21:43per transaction

21:44McCrocklin

21:46showed us

21:46another bailout

21:47property

21:48he's currently

21:48trying to buy

21:49the corporate

21:50one office

21:51building

21:51While it waits

21:53to be sold

21:53the fountains

21:54are kept running

21:55and though it's

21:55completely empty

21:56the air conditioners

21:57run as if it

21:58were full

21:58But what's

22:00happened is

22:01that the

22:01government

22:01and the

22:02taxpayers

22:02especially

22:03in this

22:03country

22:04have lost

22:04because it's

22:05cost the

22:06taxpayers

22:06$200,000

22:07a month

22:08to operate

22:09the building

22:09in the form

22:10of operating

22:10expenses

22:11security

22:11property

22:12taxes

22:13insurance

22:13and things

22:14of that

22:14sort

22:15The corporate

22:16one building

22:17may be the

22:17most lavish

22:18but there are

22:19plenty more

22:19office buildings

22:20in Dallas

22:21that are costing

22:21taxpayers millions

22:22of dollars

22:23to maintain

22:24When we first

22:25learned about

22:25all of the

22:26buildings

22:27or apartment

22:28complexes

22:28that were

22:29there in the

22:30RTC's

22:32portfolio

22:33we felt

22:34that we were

22:34going to be

22:35extremely successful

22:36in getting

22:37many of these

22:38properties

22:38Alfonso Jackson

22:40runs the

22:41public housing

22:42agency in

22:42Dallas

22:43He was supposed

22:44to benefit

22:44from the bailout

22:45because one

22:46of the RTC's

22:47purposes

22:47is to preserve

22:48affordable housing

22:49for low-income

22:50families

22:51So when Jackson

22:52heard the RTC

22:53was offering

22:54the Bahama

22:54Glen Apartments

22:55he thought his

22:56agency would be

22:57an ideal buyer

22:58We were absolutely

23:00impressed with

23:01Bahama Glen's

23:02I mean it was

23:02just absolutely

23:03gorgeous

23:04about four and a

23:05half years old

23:06well maintained

23:07and a very

23:09beautiful section

23:09of Dallas

23:10What we did

23:11is we made an offer

23:12for 5.1 million

23:13dollars to them

23:14for Bahama Glen's

23:15Bahama Glen was

23:17owned by a failed

23:18savings and loan

23:18that had been

23:19taken over

23:19by the RTC

23:20Jackson says

23:22that the president

23:22of that SNL

23:23came to Dallas

23:24and agreed to

23:25sell Bahama Glen

23:26for 5.1 million

23:28dollars

23:28Did you shake

23:29hands with the

23:29man on this

23:30deal?

23:30Yes and so

23:31did our consultants

23:32shake hands

23:32saying that we

23:33have a deal

23:34and that we

23:35will consummate

23:35this deal

23:36that they

23:36would get us

23:37the contract

23:37out very

23:38quickly

23:39which they

23:39did

23:40they got us

23:40the contract

23:41out in about

23:41four or five

23:42days

23:42they reacted

23:43very quickly

23:44to this

23:44But before

23:46Jackson's contract

23:47could be

23:47finalized

23:48the RTC

23:49received an

23:50offer from

23:50an investment

23:51group headed

23:51by Al Rabelais

23:52a Dallas

23:53real estate

23:53developer

23:54Did you know

23:56that there

23:56were any

23:56competitors?

23:57They were

23:57always saying

23:59that there

23:59were other

23:59people making

24:00offers and so

24:01on but that's

24:02pretty typical

24:03in real estate

24:04you don't know

24:04whether that's

24:05how real the

24:06other parties

24:07are or not

24:08I had two

24:08people wanting

24:09the property

24:10desperately

24:10wanting the

24:11property

24:12Janice Duffy

24:13handled the

24:14sale for the

24:15RTC

24:15And to know

24:16that I had

24:16fulfilled all

24:17of my duties

24:18and make sure

24:20that I had

24:20gotten the

24:21highest and

24:22best offer

24:22I sent

24:23one final

24:24letter saying

24:24please submit

24:25your highest

24:26best and

24:27final offer

24:27and gave

24:28them a

24:28deadline

24:28According to

24:30Ms. Duffy's

24:31RTC file on

24:32the case which

24:33Frontline has

24:33obtained

24:34the best and

24:35final offer

24:36from Rabelais

24:37came in at

24:37$5,205,000

24:40but Jackson's

24:42final offer

24:42was higher

24:43The bid that

24:45we make them

24:45at this point

24:46at this point

24:47is $5,400,000,000

24:48Jackson didn't

24:50know his bid

24:51was almost

24:51$200,000

24:53higher than

24:53the competition

24:54so to make

24:55sure he got

24:56the deal

24:56he offered

24:57to pay

24:57even more

24:58if necessary

24:59We knew

25:00if we got

25:00it from

25:00$5,700,000

25:01it was still

25:02an excellent

25:02deal

25:03So you made

25:04in a sense

25:04an offer

25:05to bid more

25:06and what

25:06did they say?

25:07They told us

25:08they wouldn't

25:08accept any

25:09more bids

25:09no more bids

25:10They didn't

25:11want to hear

25:11from you

25:11even if the

25:12price were

25:12higher?

25:13Even if the

25:13price was

25:13higher

25:13no more

25:14bids

25:15Although the

25:16bidding was

25:16closed for

25:17Jackson

25:17Duffy's own

25:19files show

25:19that she did

25:20go back

25:20to Rabelais

25:21and countered

25:21in the amount

25:22of $5,365,000

25:25after he'd

25:27made his

25:27best and

25:28final offer

25:28I don't

25:29remember

25:29countering

25:30no I don't

25:31remember

25:31countering

25:32he made

25:34that one

25:35and that

25:35no I don't

25:36remember that

25:37no I don't

25:38I felt like

25:38we had the

25:40inside track

25:41into being

25:42able to

25:42acquire the

25:43property

25:43In the end

25:45Al Rabelais

25:46won the

25:46bid

25:47So the

25:47final price

25:48was

25:48$5,365,000

25:51But that

25:52was still

25:52less than

25:53the Dallas

25:54Housing

25:54Authority's

25:55$5.4

25:55million

25:56offer

25:56and far

25:57less than

25:58what Jackson

25:58says he

25:59was prepared

25:59to pay

26:00Did you

26:01ever find

26:01out who

26:02won

26:03the

26:04apartment

26:05building?

26:05No we

26:05did not

26:06find out

26:06by specific

26:07name

26:07but what

26:08they did

26:09tell us

26:09is that

26:10it was a

26:10non-for-profit

26:11outside of

26:12the state

26:12of Texas

26:13This

26:13corporation

26:14this partnership

26:15that you run

26:15is it a

26:15not-for-profit

26:16partnership?

26:17No no

26:18it's hopefully

26:18for-profit

26:19So you're a

26:20real for-profit

26:21business?

26:22Absolutely

26:22We looked up

26:24who won the

26:24contract

26:25It is a

26:25Texas

26:26limited

26:26partnership

26:27They are

26:28controlled by

26:28a man named

26:29Al Rabelais

26:30and another

26:31fellow named

26:31Richard Arrenzy

26:32Mr. Arrenzy

26:33purchased the

26:34yacht Sequoia

26:35for President

26:36Reagan

26:36As far as

26:38we can tell

26:38they were a

26:40for-profit

26:40company

26:41then I will

26:41sit here

26:42looking you

26:43straight in

26:43the eye

26:43and say

26:43RTC

26:44lied to

26:45the Dallas

26:45Housing

26:46Authority

26:46They told

26:47us that

26:47a non-for-profit

26:48had purchased

26:49the property

26:49when we asked

26:51them specifically

26:51Ms. Duffy

26:52says she does

26:53not recall

26:54that conversation

26:55And I firmly

26:56believe that was

26:57the highest and

26:58best offer

26:58and I firmly

26:59believe that was

27:00the best return

27:01for RTC

27:02and it was

27:02by far the best

27:03We have had

27:05a tremendous

27:05charade

27:06pulled on

27:08all public

27:09entities

27:09in this country

27:11and non-for-profit

27:11because not only

27:13is this happening

27:13in Dallas

27:14I have talked

27:15to other people

27:15in Louisiana

27:16and New Mexico

27:17and Arizona

27:19where the same

27:20thing has happened

27:21to them

27:21While we were

27:24in Texas

27:25we found one

27:26man who is

27:27thrilled to do

27:27business with

27:28the RTC

27:29When I heard

27:30about the

27:30Resolution Trust

27:31Company

27:31knowing that

27:33it was going

27:33to be a

27:34government

27:34operation

27:35I see nothing

27:36but dollar

27:37signs and

27:38bargains

27:38We heard about

27:40the failed

27:41savings and

27:41loans

27:42Joe Smith

27:43is a small

27:43time real

27:44estate speculator

27:45from Sacramento

27:46California

27:46He says he's

27:47bought more

27:48than 300

27:49bailout properties

27:50This is the

27:51first building

27:51that we bought

27:52the first property

27:53We paid

27:55$1,750

27:55for it

27:57When you

27:58walked up

27:58this block

27:58and looked

27:59at this house

27:59and realized

28:00that you had

28:01bought the

28:01whole thing

28:02for $1,000

28:03$750

28:04What did you

28:05think?

28:05I don't know

28:06how to describe

28:07it

28:07It was just

28:07so unbelievable

28:08I mean

28:09this house

28:09is

28:10I would pay

28:11probably

28:11$80,000

28:13for this house

28:13in Sacramento

28:14in that same

28:15kind of shape

28:16After their

28:19first successful

28:20deal

28:20Joe and his

28:21wife Millie

28:21started buying

28:22bailout properties

28:23by the dozen

28:24And we found

28:25approximately

28:2538 of them

28:26wrote offers

28:28on everything

28:28that we

28:29seen

28:30and

28:32didn't expect

28:35to get

28:35any of them

28:36accepted

28:36because

28:37we realized

28:38that

28:38the offer

28:39that we wrote

28:40for $1,750

28:41was too much

28:42because it got

28:42accepted too

28:43quick

28:43So we didn't

28:46write offers

28:46of anything

28:47on those

28:4832 properties

28:49over $1,200

28:50and we wrote

28:52some as low

28:52as $50

28:53In real estate

28:55generally

28:56you make

28:57a low-ball offer

28:58with the

28:59anticipation

29:00that it will

29:00be rejected

29:01and a counter-offer

29:02will be given

29:03to you

29:04so that you

29:05can have

29:05grounds for

29:06negotiating

29:07And when they

29:08just accepted

29:09them

29:09we were really

29:10amazed

29:10because we

29:11had written

29:11such low offers

29:12to begin with

29:13we thought

29:13they'd never

29:14accept

29:14maybe one

29:15or two

29:15of them

29:16but not

29:1632

29:17In Fort Worth

29:21Joe showed us

29:22his most

29:22expensive property

29:23This house

29:24is your house

29:25Right

29:25This is a brick

29:26duplex

29:27that we talked

29:27about earlier

29:28that we paid

29:29$8,100 for

29:31How much?

29:32That's right

29:33$8,100

29:34For a brick house

29:36Right

29:37And that's a

29:38total price

29:39I mean that's

29:40not a down payment

29:41like everybody

29:42seems to think

29:43They're both

29:43two-bedroom

29:44apartments

29:44They've got

29:45dishwashers

29:45and garbage

29:46disposals

29:47I'm real

29:48sure that this

29:49will be an

29:50$80,000

29:50property in two

29:51years

29:52When you found

29:53out that you

29:53could get

29:54all of this

29:54for $8,100

29:56Again

29:58thinking as a

29:59taxpayer now

30:00what did you

30:01think?

30:01As a taxpayer

30:02I thought

30:02oh my god

30:03how I'm getting

30:04ripped off

30:05I mean as an

30:06investor

30:07terrific buy

30:08but as a

30:09taxpayer

30:09what a rip

30:10off

30:10The problem

30:12is that for

30:12every bargain

30:13that Joe

30:14Smith gets

30:14the taxpayer

30:15has to make

30:16up the

30:16difference

30:16The federal

30:18government

30:18is not in

30:19the business

30:20of selling

30:20homes

30:21They don't

30:23know how

30:23to sell

30:23homes

30:24They don't

30:25know how

30:25to manage

30:26homes

30:26And they

30:29were forced

30:29in this

30:30business

30:30And whenever

30:31you're forced

30:32into something

30:32that you don't

30:33know nothing

30:34about

30:34you're bound

30:35to make

30:35a boo-boo

30:36Whether it's

30:36Joe and Millie

30:37buying at the

30:38bottom

30:38or John and

30:39Betsy trying

30:39to buy at

30:40the top

30:40The common

30:41complaint we

30:42heard in Texas

30:43was that the

30:43RTC simply

30:45doesn't know

30:45how to sell

30:46real estate

30:47And the

30:47agency is

30:48plagued

30:49with bureaucratic

30:49delays

30:50and a lack

30:50of accountability

30:51But in Austin

30:53where the RTC

30:54recently opened

30:55an office

30:55people say

30:56that things

30:57are getting

30:57a little better

30:58Six months

31:00ago

31:00this office

31:01did not exist

31:02Juan Patlin

31:04is manager

31:04here

31:05He admits

31:05the RTC

31:06had a bad

31:07reputation

31:07when he first

31:08opened the office

31:09The biggest

31:10challenge

31:10that we had

31:11here

31:11was to

31:12to turn

31:14the people

31:14around

31:15in terms

31:15of their

31:16view

31:16of RTC

31:17They had

31:18experienced

31:19not having

31:20an office

31:20here

31:21calling

31:22an office

31:23and they

31:23were referred

31:24to somebody

31:24else

31:25and they

31:26were referred

31:26to somebody

31:26else

31:27and they

31:27were referred

31:27to somebody

31:28else

31:28and they

31:28were referred

31:29to somebody

31:29else

31:29Patlin says

31:31his number

31:32one job

31:32was to make

31:33sure people

31:33didn't get

31:34the run

31:34around anymore

31:35His team

31:36he says

31:36is making

31:37progress

31:37But when

31:38you look

31:39around the

31:39office

31:39it's clear

31:40the RTC

31:41still has

31:42big problems

31:43RTC owns

31:43approximately

31:4464,000

31:45properties

31:46Robin Davis

31:47gave us

31:47a demonstration

31:48of the

31:48RTC's

31:49computer system

31:50which is

31:50supposed to

31:50keep track

31:51of their

31:51properties

31:52We asked

31:53her to

31:53pull up

31:53the building

31:54we were in

31:55which was

31:55on the

31:56RTC's

31:56sales list

31:57We'd look

31:57it up

31:57by the

31:58address

31:59and since

32:00we know

32:01the address

32:01is 4303

32:03Victory Drive

32:04and then

32:06this is

32:06going to

32:06sort

32:07for like

32:07five minutes

32:09or so

32:09If it's

32:10in our

32:10zone

32:10it'll

32:11take

32:11about

32:11five

32:11minutes

32:12The

32:12National

32:12will

32:13take

32:13approximately

32:1330

32:14Several

32:15minutes

32:15later

32:15the

32:16computer

32:16was

32:16unable

32:17to

32:17find

32:17our

32:17building

32:18What happened

32:19here

32:19is that

32:20the

32:20institution

32:20was not

32:21in our

32:21particular

32:22zone

32:22that

32:23owned

32:23this

32:24building

32:24So

32:25he said

32:25alright

32:25let's

32:26find

32:26a

32:26property

32:26from

32:26the

32:27local

32:27list

32:27Let me

32:28look up

32:29something

32:29Provided

32:30that

32:30the

32:30address

32:31is

32:31the

32:32same

32:32as

32:33we

32:34show

32:34it

32:34to be

32:34in

32:35this

32:35generated

32:36list

32:36then

32:37it's

32:37going

32:37to

32:37be

32:38in

32:38here

32:38A

32:39few

32:39minutes

32:39later

32:40we

32:40were

32:40disappointed

32:41again

32:42Okay

32:43it's

32:43not

32:43going

32:43to

32:43bring

32:44it

32:44up

32:44Well

32:45we've

32:45been

32:45critical

32:45of

32:46their

32:46information

32:46system

32:47Charles

32:47Bouger

32:47is

32:47head

32:48of

32:48the

32:48general

32:48accounting

32:49office

32:49the

32:49nation's

32:50watchdog

32:50agency

32:51which

32:51audits

32:51the

32:52RTC

32:52Those

32:53systems

32:53aren't

32:54in

32:56good

32:56shape

32:57yet

32:57In

32:57other

32:57words

32:58when

32:58you

32:58test

32:59them

32:59why

33:00what

33:00you're

33:01finding

33:01is

33:02exactly

33:02what

33:02our

33:02auditors

33:07Despite

33:07the

33:08RTC's

33:08computer

33:09problems

33:09Chairman

33:10Seidman

33:10defends

33:11his

33:11agency's

33:11record

33:12selling

33:12properties

33:13The

33:13bottom

33:13line

33:14is

33:14we

33:15have

33:15to

33:15sell

33:15the

33:16inventory

33:16we

33:17have

33:17to

33:17put

33:18these

33:18assets

33:18back

33:19into

33:19the

33:19private

33:19sector

33:20and

33:20you

33:20know

33:20we're

33:21not

33:21doing

33:21long

33:21we

33:22had

33:22162

33:23golf

33:23courses

33:23and

33:24we

33:24sold

33:25120

33:25of

33:26them

33:26now

33:26that's

33:26pretty

33:26good

33:27golf

33:27course

33:27selling

33:28you

33:28don't

33:28get

33:28too

33:28many

33:29of

33:29those

33:29we

33:29sold

33:30$140

33:31billion

33:31worth

33:32of

33:32assets

33:33in

33:33our

33:33first

33:3418

33:34months

33:34no

33:35startup

33:36in

33:36history

33:36has

33:37ever

33:37done

33:37that

33:37and

33:37lost

33:38$50

33:38billion

33:38at

33:38the

33:39same

33:39time

33:39they

33:40are

33:40making

33:40progress

33:41they

33:41are

33:41also

33:42of

33:42course

33:42you

33:42have

33:42to

33:42recognize

33:43selling

33:43the

33:44property

33:44and

33:45the

33:45financial

33:45assets

33:46that

33:46are

33:46most

33:47easily

33:47sold

33:47so

33:48you

33:48have

33:48to

33:49be

33:49a

33:49little

33:49careful

33:50as

33:50you

33:50look

33:50at

33:50the

33:50statistics

33:51and

33:51I've

33:51warned

33:51the

33:51Congress

33:52on

33:52this

33:52that

33:53the

33:54progress

33:55even

33:55probably

33:56if

33:57it's

33:57too

33:57slow

33:57now

33:58you're

33:58probably

33:58seeing

33:58the

33:59assets

33:59that

33:59are

33:59most

34:00easily

34:00sold

34:00in

34:01the

34:02favorable

34:02reports

34:04that

34:04are

34:04being

34:04sent

34:04in

34:05so

34:05the

34:05toughest

34:05part

34:06is

34:06yet

34:06to

34:06come

34:06so

34:07what

34:07is

34:08the

34:08savings

34:08and

34:08loan

34:08problem

34:09going to

34:09cost

34:10taxpayers

34:10when

34:10the

34:10job

34:11is

34:11finally

34:11done

34:12three

34:13years

34:13ago

34:13the

34:13Reagan

34:14administration

34:14said

34:14they

34:15could

34:15handle

34:15the

34:15problem

34:16without

34:16charging

34:17the

34:17taxpayers

34:17a

34:18dime

34:18in

34:191989

34:19the

34:20incoming

34:25and

34:25that

34:25official

34:26figure

34:26would

34:26later

34:26rise

34:27to

34:27160

34:28billion

34:29200

34:30billion

34:30dollars

34:31plus

34:31interest

34:32was

34:32chairman

34:32Seidman's

34:33estimate

34:33of

34:33S&L

34:34losses

34:34when we

34:34first

34:35spoke

34:35back

34:35in

34:35the

34:35spring

34:36four

34:37months

34:37later

34:37I

34:38asked

34:38him

34:38for

34:38an

34:38update

34:39I'm

34:40wondering

34:40what

34:41is

34:41your

34:41present

34:42estimate

34:42overall

34:43we're

34:43fairly

34:44close

34:44to

34:44the

34:45same

34:45number

34:45we'd

34:46say

34:46225

34:47to

34:47250

34:48now

34:48based

34:49on

34:49current

34:49dollars

34:50in

34:50the

34:51blink

34:51of

34:51an

34:51eye

34:52we

34:52were

34:52told

34:52the

34:52number

34:53is

34:53now

34:5325

34:54to

34:5450

34:55billion

34:55dollars

34:56higher

34:56yet

34:57250

34:58billion

34:59dollars

35:00that

35:00amount

35:00would

35:01pay

35:01for

35:01what

35:01the

35:01federal

35:02government

35:02spent

35:02last

35:03year

35:03on

35:03NASA

35:04the

35:05FBI

35:05the

35:06Environmental

35:06Protection

35:07Agency

35:07the

35:08Veterans

35:08Administration

35:09the

35:10War

35:10on

35:10Drugs

35:11the

35:11Head Start

35:12Program

35:13prenatal

35:14health

35:14care

35:14AIDS

35:15research

35:16and

35:16the

35:16entire

35:1761

35:17billion

35:18cost

35:19of

35:19the

35:19war

35:19against

35:19Iraq

35:20and

35:21even

35:21all

35:21those

35:21together

35:22are

35:22barely

35:23half

35:23of

35:24250

35:24billion

35:25now

35:26add

35:26on

35:26interest

35:26which

35:27is

35:27how

35:27this

35:27bill

35:27would

35:27be

35:28paid

35:28for

35:28the

35:28next

35:2830

35:29or

35:2940

35:29years

35:30the

35:30number

35:30skyrockets

35:32to

35:32over

35:32700

35:33billion

35:34dollars

35:34there

35:36are

35:36a lot

35:36of

35:36reasons

35:37for

35:37the

35:37astronomical

35:38costs

35:39of

35:39this

35:39disaster

35:39from

35:40deregulation

35:41to

35:41mismanagement

35:42but

35:42perhaps

35:43the

35:43most

35:43critical

35:43factor

35:44was

35:44delay

35:45the

35:45failure

35:46of

35:46our

35:46leaders

35:46to

35:47confront

35:47this

35:47problem

35:48in

35:48the

35:48crucial

35:48year

35:49of

35:491988

35:50now

35:511988

35:52of course

35:52was an

35:52election

35:53year

35:53and there

35:54are many

35:54people

35:54who still

35:55believe

35:55that

35:56politics

35:56was at

35:57the heart

35:57of this

35:58problem

35:58it

35:59it was

35:59very

35:59hard

35:59to

36:00believe

36:00that

36:00the

36:01assessments

36:01didn't

36:01have

36:02something

36:02to do

36:02with

36:02the

36:02election

36:02we're

36:04now

36:04one

36:05year

36:05away

36:05from

36:05another

36:06election

36:06this

36:07summer

36:07when

36:08treasury

36:08secretary

36:08brady

36:09came to

36:09the

36:09senate

36:10to

36:10ask

36:10for

36:10more

36:10money

36:11for

36:11the

36:11RTC

36:11senator

36:12john

36:13carrey

36:13charged

36:14that

36:14the

36:14administration

36:15covered

36:16up

36:16the

36:16size

36:16of

36:17the

36:17S&L

36:17crisis

36:18until

36:18after

36:19the

36:191988

36:19elections

36:20i

36:21resent

36:21senator

36:24carrey

36:24your

36:25insinuation

36:26we have

36:28played

36:28politics

36:28with

36:29this

36:29problem

36:29i've

36:31never

36:31questioned

36:32your

36:32motives

36:32or

36:33anybody

36:33else

36:33on

36:33this

36:34committee

36:34and

36:35i

36:35resent

36:35your

36:36statements

36:36both

36:37for

36:37myself

36:37and

36:38every

36:38other

36:38member

36:39of

36:39this

36:39board

36:39i

36:40said

36:40i

36:40hope

36:41there

36:41isn't

36:42but

36:42let

36:42me

36:42tell

36:42you

36:43that

36:43there

36:43was

36:43a

36:44very

36:44legitimate

36:44question

36:45in

36:451988

36:46and

36:46i

36:47felt

36:47betrayed

36:47by

36:47that

36:48mr

36:48secretary

36:48let

36:49me

36:49tell

36:49you

36:49i

36:49did

36:49well

36:50you're

36:50entitled

36:50to

36:50your

36:50statement

36:51i'm

36:51entitled

36:51to

36:52mine

36:52i

36:52resent

36:52your

36:53comments

36:53well

36:54i

36:54appreciate

36:54that

36:54i

36:55think

36:55the

36:55american

36:55people

36:55resent

36:56the

36:56sense

36:56of

36:56incompetence

36:57that

36:57they're

36:57seeing

36:58as

36:58this

36:58gets

36:58bigger

36:59and

36:59bigger

36:59and

37:00bigger

37:00and

37:00bigger

37:01the

37:01question

37:01is

37:02where

37:02is

37:02it

37:02going

37:02to

37:03end

37:03did

37:06election

37:07year

37:07politics

37:07interfere

37:08with

37:08the

37:08government's

37:09handling

37:09of

37:09the

37:09SNL

37:10crisis

37:10what's

37:11certain

37:11is

37:12the

37:12SNL

37:12scandal

37:13never

37:13became

37:14a

37:14major

37:14campaign

37:15issue

37:15in

37:151988

37:16the

37:17question

37:17is

37:18why

37:18many

37:21democrats

37:21had

37:22supported

37:22deregulation

37:23and

37:24with

37:24some

37:24of

37:24their

37:24top

37:24leaders

37:25tainted

37:25by

37:25the

37:26SNL

37:26scandal

37:26they

37:27weren't

37:27exactly

37:27anxious

37:28to

37:28make

37:28it

37:28a

37:28big

37:29issue

37:29the

37:30republican

37:31administration

37:31had been

37:32responsible

37:32for

37:33policing

37:33the

37:33SNLs

37:34in

37:34the

37:341980s

37:35and

37:35vice

37:36president

37:36bush

37:36of

37:36course

37:37had

37:37a

37:37son

37:37who

37:37was

37:37a

37:38director

37:38of

37:38a

37:38failing

37:39SNL

37:39in

37:39Colorado

37:40at

37:42the

37:42beginning

37:42of

37:421988

37:43Danny

37:44Wall

37:44the

37:44nation's

37:44top

37:45SNL

37:45regulator

37:46was

37:46estimating

37:47the

37:47size

37:47of

37:47the

37:48SNL

37:48losses

37:48to

37:48be

37:4915

37:49billion

37:50dollars

37:51by

37:51the

37:51summer

37:52that

37:52number

37:52would

37:53grow

37:53to

37:5330

37:54billion

37:54in

37:55retrospect

37:55that

37:55seems

37:55extraordinarily

37:56low

37:57it

37:58does

37:59exactly

37:59but

38:00at

38:00that

38:01point

38:01in

38:01the

38:01process

38:02that

38:02was

38:02what

38:02our

38:03system

38:03our

38:04mechanisms

38:04were

38:04telling

38:05us

38:05was

38:05the

38:05size

38:06of

38:06the

38:06problem

38:06but

38:07all

38:08during

38:081988

38:08behind

38:09closed

38:09doors

38:10in

38:10Washington

38:10there

38:11was

38:11a

38:11growing

38:12controversy

38:12about

38:13the

38:13true

38:13size

38:14of

38:14the

38:14SNL

38:14losses

38:15Danny

38:16Wall

38:16and

38:17the

38:17administration

38:18people

38:18were

38:18not

38:19acknowledging

38:19this

38:20problem

38:20as

38:20chief

38:21of

38:21the

38:21general

38:21accounting

38:21office

38:22it

38:22was

38:22Charles

38:23Bouger's

38:23responsibility

38:24to audit

38:25the

38:25SNL

38:25insurance

38:26fund's

38:26books

38:27Mr.

38:27Wall

38:27came in

38:28and I

38:29went over

38:29and met

38:30with him

38:30right there

38:30at the

38:31beginning

38:31of his

38:31tenure

38:32and I

38:33told him

38:33that he

38:33had a

38:34big

38:34problem

38:34a

38:34big

38:35financial

38:35problem

38:35that

38:36was

38:36developing

38:36and

38:37that

38:38I

38:38thought

38:39that

38:39it

38:39was

38:39something

38:39that

38:39he

38:40ought

38:40to

38:40get

38:40on

38:40top

38:40of

38:41and

38:41try

38:41to

38:41determine

38:42what

38:42the

38:43size

38:43of

38:43it

38:43was

38:43to

38:44my

38:44recollection

38:44I was

38:45never asked

38:45as chief

38:46economist

38:46to give

38:47a true

38:47economic

38:48estimate

38:49of the

38:50size

38:50of

38:51cleaning

38:51up

38:51the

38:51savings

38:52loan

38:52mess

38:52Jim

38:53Barth

38:53was

38:53working

38:54for

38:54Danny

38:54Wall

38:54as

38:55the

38:55chief

38:55economist

38:56at

38:56the

38:56bank

38:57board

38:57there

38:58were

38:58hundreds

38:58of

38:58institutions

38:59with

38:59hundreds

38:59of

39:00billions

39:00of

39:00hours

39:00that

39:01were

39:01reporting

39:01their

39:01insolvency

39:02I

39:03knew

39:03that

39:03everybody

39:04else

39:04knew

39:05it

39:05or

39:05should

39:05have

39:06known

39:06it

39:06Presumably

39:08he

39:09did

39:09he

39:09could

39:09see

39:09the

39:10numbers

39:10that

39:10I

39:10was

39:10releasing

39:11to

39:11him

39:11but

39:12he

39:12was

39:13free

39:13obviously

39:13to

39:14draw

39:14his

39:14own

39:14conclusions

39:15about

39:15what

39:16those

39:16numbers

39:16meant

39:16By

39:18February

39:19of

39:191988

39:20the

39:20presidential

39:21campaign

39:21was

39:21well

39:22underway

39:22Michael

39:23Dukakis

39:24had

39:24emerged

39:24as

39:24a

39:25serious

39:25candidate

39:25and

39:26Vice

39:26President

39:27Bush

39:27got

39:27a

39:27lift

39:28by

39:28winning

39:28in

39:28New

39:28Hampshire

39:29that

39:30same

39:31month

39:3120

39:31senior

39:32government

39:32regulators

39:33held a

39:33retreat

39:34at

39:34Early

39:34House

39:35in

39:35Virginia

39:36at

39:37that

39:37meeting

39:37Darryl

39:38Doko

39:38one of

39:39Danny

39:39Wall's

39:39top

39:40officials

39:40at

39:40the

39:40bank

39:40board

39:41addressed

39:42his

39:42staff

39:42about

39:43the

39:43S&L

39:43losses

39:44he

39:44wanted

39:45to

39:45get

39:45the

39:45feeling

39:46of

39:46the

39:46senior

39:47staff

39:47as

39:48to

39:48what

39:48the

39:48size

39:49of

39:49the

39:49deficit

39:49was

39:50the

39:50size

39:50of

39:50the

39:50hole

39:51and

39:52started

39:52off

39:53at

39:53$15

39:53billion

39:57at

39:58that

39:58time

39:58by

40:00Mr.

40:00Wall

40:01Robert

40:02Moore

40:02Doko's

40:03deputy

40:03director

40:03at

40:04the

40:04bank

40:04board

40:04was

40:04at

40:05the

40:05meeting

40:05he

40:06says

40:06Doko

40:07conducted

40:07a

40:07poll

40:08of

40:08everyone

40:09in

40:09the

40:09room

40:09he

40:10wanted

40:10to

40:11know

40:11how

40:11many

40:11thought

40:11the

40:11loss

40:12was

40:12$15

40:13billion

40:13there

40:14may

40:15have

40:15been

40:15one

40:16or

40:16two

40:16hands

40:16besides

40:16his

40:17that

40:17went

40:18up

40:18I

40:19don't

40:19know

40:19but

40:20not

40:20many

40:20and

40:21then

40:21he

40:22went

40:22to

40:22$20

40:22billion

40:22and

40:23then

40:23to

40:2325

40:23and

40:24as

40:24he

40:24got

40:25higher

40:25a

40:26progressively

40:27larger

40:28number

40:28of

40:28people

40:28raised

40:29their

40:29hands

40:29and

40:29then

40:29started

40:30to

40:30tail

40:31back

40:31down

40:32after

40:32people

40:32had

40:32given

40:33their

40:33opinion

40:34we

40:36got

40:36up

40:36to

40:36the

40:3645

40:37or

40:3750

40:37billion

40:38range

40:39what

40:39did

40:39he

40:40say

40:40to

40:40you

40:40guys

40:41who

40:41still

40:42had

40:42your

40:42hands

40:42up

40:42at

40:43$45

40:43or

40:44$50

40:44billion

40:44dollars

40:45the

40:45precise

40:45words

40:46racked

40:47my

40:47brain

40:47trying

40:47to

40:48recall

40:48exactly

40:49what

40:49he

40:49said

40:49but

40:50the

40:50message

40:53that

40:54anybody

40:54who

40:54believes

40:55it's

40:55more

40:55than

40:55$15

40:56billion

40:56really

40:57should

40:57not

40:57be

40:58part

40:58of

40:58this

40:58team

40:58I

41:00noticed

41:01people

41:01in

41:01the

41:01room

41:02looking

41:02at

41:02each

41:02other

41:03in

41:03astonishment

41:04because

41:06the

41:06message

41:07that

41:07we

41:07certainly

41:08got

41:08was

41:09that

41:09if

41:10you

41:10say

41:10it's

41:10more

41:11than

41:11$15

41:11billion

41:11you

41:12don't

41:13belong

41:13here

41:13you

41:13gotta

41:13find

41:14a

41:14job

41:14somewhere

41:14else

41:15the

41:15reason

41:16Wall's

41:16lower

41:17estimates

41:17were so

41:17critical

41:18was

41:18this

41:19if

41:20the

41:20true

41:20losses

41:20were

41:21nearing

41:21$50

41:21billion

41:22then

41:23the

41:23insurance

41:23fund

41:24might

41:24require

41:24a

41:25taxpayer

41:25bailout

41:26and

41:26the

41:27growing

41:27SNL

41:27crisis

41:28might

41:28well

41:28have

41:28emerged

41:29as

41:29an

41:29explosive

41:29campaign

41:30issue

41:31read

41:32my

41:32lips

41:33by the

41:38spring

41:38of

41:391988

41:39as the

41:40primary

41:40campaigns

41:41moved

41:41beyond

41:42Super

41:42Tuesday

41:42Danny

41:43Wall

41:43and

41:44the

41:44bank

41:44board

41:44were

41:44receiving

41:45internal

41:45reports

41:46that

41:46indicated

41:47that

41:47Wall's

41:47numbers

41:48were

41:48far

41:49too

41:49low

41:49for

41:50example

41:51a

41:51routine

41:51investigation

41:52by

41:52SNL

41:53regulators

41:53of the

41:54Texas

41:54region

41:55found

41:55the

41:56reported

41:56financial

41:57data

41:57severely

41:58misrepresents

41:59the true

41:59extent

42:00of the

42:00financial

42:01problems

42:01another

42:02internal

42:03report

42:03concluded

42:04that

42:04the

42:04bank

42:04board's

42:05procedures

42:05for

42:05estimating

42:06SNL

42:06losses

42:07were

42:07consistently

42:08biased

42:09toward

42:09under

42:10prediction

42:10the

42:12chairman

42:12just

42:12really

42:12never

42:13really

42:13wanted

42:13to

42:14face

42:14up

42:15you know

42:16to

42:16the

42:16problem

42:16I

42:17don't

42:17know

42:17why

42:17I

42:21just

42:21don't

42:21know

42:21why

42:22everybody

42:23knew

42:24the

42:24numbers

42:24Roger

42:25Martin

42:25was

42:25appointed

42:26by

42:26President

42:26Reagan

42:27to be

42:27one of

42:27three

42:28members

42:28of

42:28Wall's

42:29bank

42:29board

42:29Martin

42:30kept

42:30his

42:31own

42:31tally

42:31of

42:32losses

42:32and

42:32he

42:32says

42:33his

42:33numbers

42:33were

42:33two

42:34to

42:34three

42:34times

42:34higher

42:35than

42:35Wall's

42:36official

42:36estimates

42:37the

42:37whole

42:37was

42:38forty

42:38eight

42:38to

42:38sixty

42:39two

42:39billion

42:39dollars

42:40and

42:40growing

42:41one

42:41point

42:41two

42:42a

42:42month

42:42plus

42:43the

42:43fact

42:44is

42:44that

42:44you

42:44had

42:45the

42:45wild

42:45card

42:45out

42:46there

42:46of

42:46the

42:46real

42:47estate

42:47you

42:48know

42:48whether

42:48it

42:48was

42:48going

42:48to

42:48go

42:49up

42:49and

42:49down

42:49but

42:50Chairman

42:51Wall

42:51held

42:51on

42:52to

42:52his

42:52more

42:52optimistic

42:53projections

42:54you

42:54had

42:54FSLIC

42:56an

42:56insurance

42:56fund

42:57that

42:57was

42:57going

42:57down

42:58down

42:59and

42:59you

42:59probably

42:59could

42:59see

43:00the

43:00drain

43:00by

43:01the

43:01summer

43:01of

43:011988

43:02it

43:02was

43:02empty

43:02to

43:03near

43:03nothing

43:03and

43:04you're

43:04talking

43:04about

43:04no

43:05taxpayer

43:05bailouts

43:06we

43:06couldn't

43:06see

43:07the

43:07end

43:07of

43:07the

43:08fund

43:08by

43:08the

43:08summer

43:08of

43:091988

43:09we

43:09could

43:10see

43:10it

43:10by

43:10the

43:10winter

43:10of

43:101988

43:11but

43:11not

43:11by

43:12the

43:12summer

43:12and

43:13the

43:13fact

43:13that

43:13the

43:13summer

43:13was

43:13before

43:14the

43:14election

43:14and

43:14the

43:14winter

43:15was

43:15after

43:15the

43:15election

43:15has

43:15nothing

43:16to do

43:16with

43:16that

43:16no

43:16what

43:17really

43:17has

43:17to

43:17do

43:17with

43:18it

43:18is

43:18November

43:19and

43:19December

43:20of

43:201988

43:20when

43:21we

43:21brought

43:21to

43:21conclusion

43:22a

43:22number

43:22of

43:23transactions

43:23by

43:26the

43:26summer

43:26of

43:2788

43:27both

43:27parties

43:28were

43:28heading

43:28toward

43:28their

43:29nominating

43:29convention

43:30I

43:30accept

43:31your

43:31nomination

43:32for

43:32president

43:33I

43:35accept

43:36your

43:36nomination

43:37for

43:38the

43:38presidency

43:38of

43:38the

43:39United

43:39States

43:39All

43:41this

43:41time

43:42the

43:42SNL

43:42crisis

43:43had

43:43gone

43:43virtually

43:44unmentioned

43:45in

43:45the

43:45campaign

43:46in

43:47July

43:47the

43:48bank

43:48board

43:48released

43:49its

43:49annual

43:49report

43:50in

43:50which

43:50wall

43:50wrote

43:51now

43:52is

43:52not

43:52the

43:52time

43:53for

43:53a

43:53taxpayer

43:54bailout

43:55in

43:551988

43:56you

43:57said

43:58now

43:59is

43:59not

43:59the

43:59time

43:59for

44:00taxpayer

44:00bailouts

44:01do you

44:01remember

44:01saying

44:02that

44:03vaguely

44:04so

44:05that

44:05was

44:05an

44:05election

44:05year

44:06and

44:06I'm

44:06wondering

44:07of

44:08course

44:08it

44:08isn't

44:08the

44:08time

44:09for

44:09taxpayer

44:09bailouts

44:10in

44:10election

44:11year

44:11you

44:11would

44:11have

44:11probably

44:11been

44:12fired

44:12if

44:12you'd

44:13spoken

44:13about

44:14taxpayer

44:14bailouts

44:15my

44:15guess

44:15is

44:16there

44:16political

44:17pressure

44:17to

44:17avoid

44:18phrases

44:18like

44:19that

44:19no

44:20I

44:21can't

44:22identify

44:22or

44:23think

44:23or

44:23point

44:24to

44:24anything

44:24that

44:25was

44:25political

44:25pressure

44:26from the

44:26standpoint

44:26of an

44:27administration

44:27talking

44:29with

44:29us

44:29no one

44:29ever

44:30told

44:30you

44:30don't

44:31say

44:31something

44:31don't

44:31mention

44:32taxpayer

44:32bailouts

44:32absolutely

44:33not

44:33but

44:34frontline

44:34has

44:34learned

44:35there

44:35may

44:35have

44:35been

44:36more

44:36direct

44:36political

44:37pressure

44:37from

44:37the

44:37administration

44:38than

44:39wall

44:39admits

44:39in

44:40the

44:41late

44:41summer

44:41of

44:411988

44:42bank

44:43board

44:43member

44:43roger

44:44martin

44:44had

44:44a

44:44lunch

44:45meeting

44:45in

44:45the

44:45private

44:46office

44:46of

44:46william

44:47seedman

44:47then

44:48head

44:48of

44:48the

44:48federal

44:48deposit

44:49insurance

44:49corporation

44:50on

44:51most

44:51occasions

44:52when

44:52I

44:52would

44:53meet

44:53with

44:54seedman

44:54I

44:54would

44:55discuss

44:56how deep

44:58this hole

44:59was

44:59and how

44:59expensive

45:00these

45:00costs

45:00of

45:01these

45:01resolutions

45:02really

45:03were

45:03roger

45:04frequently

45:05met

45:05with

45:05bill

45:06seedman

45:06sometimes

45:07for

45:07lunch

45:08sometimes

45:08just

45:09privately

45:10in

45:10seedman's

45:10office

45:11I

45:12always

45:13went

45:13with

45:13him

45:13and

45:14Elise

45:15Palin

45:15roger

45:16martin's

45:16executive

45:17assistant

45:17was also

45:18at the

45:18meeting

45:19we were

45:20talking about

45:20the size

45:21of the

45:21hole

45:21and why

45:21danny

45:22wasn't

45:22acknowledging

45:23the

45:23proper

45:23size

45:24it

45:24was

45:25a

45:25comment

45:26that

45:26mr

45:27seedman

45:27made

45:28that

45:28day

45:28that

45:29certainly

45:31led

45:31me

45:31to

45:32believe

45:32that

45:33he

45:33was

45:33approached

45:34not

45:35to

45:35mention

45:36the

45:36figure

45:37nor

45:39as

45:40well

45:40as

45:40chairman

45:41wall

45:41during

45:42the

45:42meeting

45:42with

45:43bill

45:43seedman

45:43they

45:45were

45:45discussing

45:45the

45:45size

45:46of

45:46the

45:46hole

45:46and

45:47roger

45:47had

45:48this

45:49is

45:49at

45:50sort

45:50of

45:50the

45:50height

45:50of

45:50his

45:50frustration

45:51he

45:51was

45:51saying

45:51he

45:52didn't

45:52understand

45:52why

45:53chairman

45:53wall

45:53was

45:54not

45:54forthcoming

45:55about

45:55the

45:55true

45:56size

45:56of

45:56the

45:56problem

45:57and

45:57roger

45:57felt

45:58sure

45:58that

45:58chairman

45:58wall

45:59knew

45:59about

45:59this

45:59and

46:00was

46:00just

46:01ignoring

46:01it

46:01and

46:02chairman

46:03seedman

46:03said

46:04well

46:04I

46:04know

46:04why

46:05he's

46:06not

46:06doing

46:06that

46:06and

46:07roger

46:08said

46:08why

46:09and

46:09seedman

46:10said

46:10well

46:11it's

46:11because

46:11george

46:12gould

46:12told

46:13him

46:13to

46:15lie

46:15about

46:15the

46:15numbers

46:16now

46:16to

46:17be

46:17honest

46:17i

46:17don't

46:17know

46:17if

46:18lie

46:18is

46:18the

46:18exact

46:18word

46:19he

46:19used

46:19but

46:19lie

46:20misstate

46:21you know

46:22something

46:23along

46:23that

46:23line

46:23and

46:25roger

46:27was

46:27quite

46:28stunned

46:28by

46:28that

46:28george

46:30gould

46:30was

46:31deputy

46:31under

46:31secretary

46:32for

46:32finance

46:33working

46:34under

46:34treasury

46:34secretary

46:35jim

46:35baker

46:36who

46:36had

46:36just

46:37become

46:37bush's

46:38campaign

46:38chairman

46:39gould

46:40was

46:40the

46:40administration's

46:41political

46:41point man

46:42on the

46:42s&l

46:42crisis

46:43no

46:44wonder

46:44roger

46:44martin

46:45would

46:45be

46:45stunned

46:46to hear

46:46that

46:47gould

46:47may

46:47have

46:47told

46:48the

46:48nation's

46:48top

46:49s&l

46:49regulator

46:49to

46:50lie

46:50about

46:51the

46:51numbers

46:52and

46:52when

46:53roger

46:53said

46:53oh

46:53is

46:54that

46:54true

46:54what

46:55makes

46:55you

46:55say

46:55that

46:56chairman

46:57seidman

46:57said

46:57because

46:58he

46:59told

46:59me

46:59to

46:59do

46:59the

47:00same

47:00thing

47:00we

47:02asked

47:02martin

47:02if

47:03miss

47:03palin's

47:03account

47:04of

47:04seidman's

47:04comments

47:05was

47:05accurate

47:06that's

47:07exactly

47:07what

47:07he

47:07said

47:07i

47:09was

47:09concerned

47:09that

47:10george

47:11gould

47:11was

47:12delivering

47:12this

47:13message

47:13on

47:13behalf

47:14of

47:14the

47:14administration

47:15because

47:15the

47:16fdic

47:17and

47:17the

47:17fslic

47:18are

47:18independent

47:19agencies

47:20and

47:21really

47:22george

47:22gould's

47:22purpose

47:23was to

47:24either

47:25maintain

47:26the whole

47:27consumer

47:27confidence

47:28that we

47:29talked about

47:29a few

47:29minutes

47:30ago

47:30or

47:31to just

47:32make sure

47:33that things

47:33were stable

47:34before the

47:34election

47:35i just

47:36couldn't

47:36believe

47:36anybody

47:36would do

47:37it

47:37why

47:37they

47:38would

47:38want

47:38to

47:38do

47:38it

47:38and

47:39more

47:39importantly

47:39why

47:39seaman

47:40told

47:40me

47:40we

47:41asked

47:42william

47:42seaman

47:43about

47:43that

47:43conversation

47:44and

47:44we

47:44were

47:45wondering

47:45why

47:46danny

47:46wall

47:46estimates

47:47were

47:47so

47:47consistently

47:48lower

47:48than

47:48everybody

47:48else's

47:49and we

47:49did

47:49talk

47:50to

47:50an

47:50official

47:50at

47:50the

47:51home

47:51loan

47:51bank

47:51board

47:52who

47:52says

47:52that

47:52you

47:52had

47:53an

47:53explanation

47:54at

47:54that

47:54time

47:54for

47:55his

47:55behavior

47:55and

47:56you

47:56said

47:56i

47:57know

47:57why

47:57danny's

47:57doing

47:58it

47:58george

47:58gould

47:59told

47:59him

47:59to

47:59keep

47:59the

47:59numbers

48:00low

48:00i

48:00know

48:00because

48:01they

48:01told

48:01me

48:10certainly

48:11do not

48:11remember

48:12george

48:12gould

48:13telling

48:13me

48:14to

48:14keep

48:14the

48:14numbers

48:14low

48:15george

48:15gould

48:16declined

48:16an

48:16on-camera

48:17interview

48:17but

48:17denied

48:18he

48:18ever

48:18applied

48:19any

48:19political

48:20pressure

48:20to

48:20seaman

48:21or

48:21danny

48:21wall

48:22the

48:22same

48:23denial

48:23he

48:23made

48:23in

48:23this

48:24interview

48:24for

48:24a

48:24previous

48:25front line

48:25we've

48:27been

48:27told

48:28that

48:29there

48:29was

48:29direction

48:31from

48:31the

48:31white

48:31house

48:31to

48:32keep

48:32the

48:32lid

48:32on

48:33the

48:33magnitude

48:33of

48:33the

48:33SNL

48:34problem

48:34till

48:35after

48:35the

48:3588

48:36election

48:40things

48:41at

48:41that

48:41point

48:41my

48:42only

48:43response

48:43has

48:43been

48:44no

48:45one

48:45ever

48:45told

48:45me

48:46and

48:47I

48:48think

48:48if

48:48you

48:48wanted

48:48to

48:49keep

48:49the

48:49lid

48:49on

48:49it

48:50you

48:51would

48:51have

48:51communicated

48:51with

48:52my

48:53office

48:53after

48:54the

48:54meeting

48:54with

48:54chairman

48:55Seidman

48:55we

48:55were

48:55in

48:56the

48:56private

48:57elevator

48:57coming

48:57down

48:58from

48:58the

48:58chairman's

48:58office

48:58to

48:59the

48:59ground

48:59floor

49:00in

49:00the

49:00FDIC

49:00building

49:01and

49:02I

49:03think

49:04I

49:05personally

49:05had

49:05mixed

49:05emotions

49:06I

49:06don't

49:07know

49:07how

49:08Roger

49:10slightly

49:11giddy

49:11in

49:12the

49:12sense

49:12that

49:12you

49:13don't

49:13really

49:13expect

49:13people

49:14to

49:14tell

49:14you

49:14these

49:14incredible

49:15truths

49:15to

49:16your

49:16face

49:16you

49:17know

49:17it's

49:17something

49:17you

49:17can

49:17discover

49:18but

49:18it's

49:18difficult

49:19to

49:19have

49:19someone

49:19just

49:20look

49:20you

49:20in

49:20the

49:20face

49:20and

49:20tell

49:21you

49:21something

49:21like

49:21that

49:21I

49:23also

49:23wasn't

49:24sure

49:24if

49:24I

49:40smirking

49:41at

49:41each

49:41other

49:41because

49:42that

49:42was

49:42something

49:42we

49:43believed

49:43we

49:43believed

49:44that

49:44there

49:44was

49:44a

49:44conscious

49:45effort

49:45by

49:45chairman

49:46wall

49:46to

49:47distort

49:47the

49:47numbers

49:48and

49:48there

49:49we

49:49had

49:49been

49:49told

49:50that

49:50we

49:50were

49:50right

49:51on

49:54November

49:548th

49:541988

49:55George

49:56Bush

49:56was

49:56elected

49:5741st

49:58president

49:58of

49:58the

49:58United

49:59States

49:59had

50:01the

50:01problem

50:02been

50:02addressed

50:02honestly

50:03and

50:04frankly

50:04before

50:04the

50:05election

50:05of

50:051988

50:06had

50:07all

50:08the

50:08six

50:08savings

50:09and

50:09loans

50:09been

50:09shut

50:10down

50:10and

50:10had

50:11the

50:11issue

50:11been

50:11tidied

50:12up

50:12then

50:12of

50:13the

50:13200

50:14billion

50:14dollar

50:15bill

50:15not

50:15including

50:16interest

50:16how much

50:17of that

50:17200

50:18billion

50:18dollar

50:18bill

50:19would

50:19not

50:20have

50:20accumulated

50:21I'd

50:21say

50:21we

50:21probably

50:22could

50:22have

50:22saved

50:22half

50:23of

50:24what

50:24we're

50:24now

50:25going

50:25to

50:25have

50:25to

50:25pay

50:26you

50:26could

50:27have

50:27saved

50:27100

50:27billion

50:28dollars

50:28plus

50:29interest

50:29yes

50:30100

50:30billion

50:30dollars

50:31plus

50:31interest

50:32or

50:32250

50:32billion

50:33dollars

50:33although

50:34William

50:34Seidman

50:34denies

50:35receiving

50:35any

50:36direct

50:36political

50:36pressure

50:37he

50:37acknowledged

50:38that

50:38there

50:39was

50:39a

50:39political

50:40failure

50:40at the

50:41heart

50:41of the

50:41SNL

50:42disaster

50:42what is

50:43the

50:43lesson

50:44that

50:44one

50:44learns

50:44from

50:44this

50:45I think

50:46there's

50:46some

50:47clear

50:47lessons

50:48that

50:48one

50:48can

50:48learn

50:48from

50:49it

50:49in

50:49the

50:49first

50:49place

50:50when

50:51we

50:51discovered

50:51we

50:52had

50:52a

50:52problem

50:52we

50:53decided

50:54that

50:54we

50:55tried

50:56to

50:56cover

50:57it

50:57over

50:57in

50:58other

50:58words

50:58we

50:59decided

50:59we

50:59wouldn't

50:59face

51:00up

51:00to

51:00it

51:01particularly

51:02we

51:03ran

51:03up

51:03the

51:04flag

51:04which

51:05flies

51:05over

51:05all

51:06of

51:06our

51:06capital

51:06here

51:07not

51:07on

51:07my

51:07watch

51:08let's

51:08get

51:08it

51:08into

51:09the

51:09next

51:09thing

51:10secondly

51:11we

51:11changed

51:12all

51:12the

51:12rules

51:13of

51:13accounting

51:13and so

51:14forth

51:14to

51:14disguise

51:15the

51:15problem

51:16and

51:17as the

51:18problem

51:18got

51:19worse

51:19there was

51:20more and

51:21more reason

51:21not to

51:21face up

51:22to it

51:22and so

51:24the bottom

51:24line is

51:25that when

51:25you have

51:26a problem

51:26you need

51:27to face

51:27up to

51:27it

51:28you need

51:28to get

51:29the real

51:29facts

51:29and not

51:30try to

51:30disguise

51:31them

51:31and

51:32having

51:33analyzed

51:34it

51:34the sooner

51:35the better

51:35when

51:36William

51:37Seidman

51:37completed

51:38his term

51:38last week

51:39he left

51:39the RTC

51:40still facing

51:41its greatest

51:41challenges

51:42Seidman

51:43also stepped

51:44down as

51:44chairman

51:44of the

51:45FDIC

51:45Bank

51:46Insurance

51:46Fund

51:46which is

51:47now on

51:47the brink

51:48of

51:48insolvency

51:49earlier

51:50this year

51:51as the

51:51real estate

51:52market

51:52crash

51:52spread

51:53to the

51:53northeast

51:53the

51:54Bank

51:54of

51:55New

51:55England

51:55failed

51:56hitting

51:56the

51:56Federal

51:57Deposit

51:57Insurance

51:57Corporation

51:58for a

51:59loss

51:59of

51:592.3

52:00billion

52:01dollars

52:01with

52:02hundreds

52:03more

52:03banks

52:04expected

52:04to

52:04fail

52:05in

52:05the

52:05next

52:05two

52:05years

52:06people

52:06are

52:07looking

52:07very

52:07closely

52:08at

52:08the

52:08FDIC

52:09and wonder

52:10whether

52:10history

52:11may be

52:11repeating

52:11itself

52:12how

52:12serious

52:13is it

52:13if the

52:14thing

52:14isn't

52:14resolved

52:15by your

52:15own

52:15description

52:16there's

52:16no

52:16money

52:17to cover

52:17our

52:17bank

52:18serious

52:19the

52:19government

52:19guarantee

52:20will

52:20be

52:20no

52:20good

52:21so

52:21something

52:21is

52:21going

52:22to

52:22happen

52:22this

52:23is

52:23all

52:23the

52:23dance

52:24you

52:24know

52:24before

52:25the

52:25wedding

52:25when

52:26does

52:27the

52:27dance

52:27end

52:28when

52:28does

52:28the

52:28wedding

52:28well

52:29when

52:30we

52:31say

52:31if

52:31you

52:31don't

52:32act

52:32by

52:32so

52:32and

52:32so

52:33the

52:33government

52:33guarantees

52:34will

52:34be

52:34no

52:35good

52:35say

52:36it

52:36to

52:36me

52:36now

52:36when

52:37will

52:37they

52:37be

52:37no

52:37good

52:37well

52:38we've

52:38told

52:39the

52:39Congress

52:39sometime

52:40between

52:40the

52:41end

52:41of the

52:48somewhere

52:49in

52:49there

52:49yeah

52:49we

52:50run

52:50out

52:50of

52:50money

52:50to

52:51cover

52:51the

52:51deposits

52:52in

52:52the

52:52banks

52:52of

52:52the

52:53United

52:53States

52:53we

52:53may

52:54run

52:54out

52:54of

52:54money

52:54it'll

52:55be

52:55so

52:55low

52:56that

52:56we

52:56shouldn't

52:56take

52:57a

52:57chance

52:57on

52:57getting

52:58to

52:59be

52:59that

52:59close

52:59to

53:00the

53:00edge

53:01does

53:02this

53:02banking

53:03problem

53:04smell

53:05too

53:05much

53:05like

53:06the

53:06savings

53:06and

53:06loan

53:06problem

53:07to

53:07you

53:07well

53:08it

53:08has

53:08some

53:08of

53:08the

53:09same

53:09ingredients

53:09in

53:10other

53:10words

53:10the

53:11banks

53:12have

53:12more

53:12capital

53:12I

53:13think

53:13they

53:13are

53:13in

53:14better

53:14shape

53:14than

53:14the

53:14SNLs

53:15but

53:16I

53:16think

53:17when

53:17you

53:17see

53:17the

53:18same

53:18problems

53:19like

53:19the

53:19real

53:19estate

53:20problem

53:20you

53:21see

53:21a

53:21deterioration

53:23of

53:23the

53:23fund

53:24happening

53:24to

53:24where

53:25now

53:25all of a

53:25sudden

53:25the

53:25fund

53:26is

53:26gone

53:26and

53:27you're

53:27having

53:27to

53:27borrow

53:28from

53:28the

53:28treasury

53:28taxpayer

53:29money

53:29I

53:30think

53:30you

53:30see

53:31some

53:31of

53:31the

53:31same

53:31ingredients

53:33that

53:33you

53:33saw

53:33in

53:33the

53:33SNL

53:34and

53:35so

53:35for

53:35people

53:36to

53:36say

53:36well

53:36it's

53:37totally

53:37different

53:37I

53:38don't

53:38understand

53:38that

53:39in

53:39the

53:39banking

53:39sector

53:40you're

53:40seeing

53:41this

53:41escalating

53:41loss

53:42picture

53:42that

53:43we

53:43saw

53:43in

53:43the

53:43thrift

53:44industry

53:44in

53:4488

53:4489

53:45here

53:45we

53:46are

53:46in

53:4691

53:47you're

53:47seeing

53:47the

53:47same

53:48situation

53:48repeated

53:49in

53:49banking

53:49where

53:50every

53:50time

53:50Chairman

53:51Seidman

53:51has

53:51to

53:51go

53:52to

53:52the

53:52hill

53:52the

53:52number

53:52is

53:53larger

53:53the

53:53problem

53:54is

53:54bigger

53:54earlier

53:55this

53:56year

53:56Chairman

53:56Seidman

53:57asked

53:57Congress

53:58for

53:58authority

53:58to

53:58borrow

53:5970

53:59billion

54:00dollars

54:00to

54:00cover

54:01all

54:01projected

54:02bank

54:02failures

54:02how

54:03can

54:04we

54:04be

54:04certain

54:04that

54:05we're

54:05going

54:05to

54:05be

54:06able

54:06to

54:06see

54:06these

54:07borrowings

54:08repaid

54:08given

54:09the

54:10levels

54:10of

54:10lending

54:10that

54:11we

54:11talk

54:11about

54:12we

54:12believe

54:12that

54:13the

54:14banks

54:14will

54:14be

54:14able

54:15to

54:15repay

54:15this

54:16over

54:16a

54:16period

54:16of

54:17time

54:17as

54:17Danny

54:18Wall

54:18had

54:18done

54:18in

54:181988

54:19Chairman

54:20Seidman

54:20told

54:20Congress

54:21that

54:21a

54:22taxpayer

54:22bailout

54:23of

54:23the

54:27this

54:27problem

54:28by

54:28themselves

54:28without

54:29a

54:29taxpayer

54:30bailout

54:30until

54:31well

54:31after

54:32the

54:321992

54:33elections

54:34I

54:34think

54:35that

54:35we

54:35shouldn't

54:36kid

54:36ourselves

54:36the

54:37taxpayer

54:37might

54:38have

54:38to

54:38pay

54:39part

54:39of

54:39this

54:39solution

54:41for

54:42the

54:42banks

54:42as

54:43well

54:43as

54:43the

54:43SNLs

54:44all

54:44these

54:44things

54:45sound

54:45like

54:46we

54:46may

54:46be

54:46heading

54:47sometime

54:47in

54:481992

54:48to

54:49another

54:50taxpayer

54:52bailout

54:52and so

54:53this

54:53is

54:53another

54:54round

54:55do

54:55you

54:55feel

54:55sometimes

54:56that

54:56you

54:56are

54:56living

54:57Danny

54:57Wall's

54:57experience

54:57over

54:58again

54:58well

54:59I

54:59my

54:59sympathy

55:00for

55:00Danny

55:00Wall

55:01increases

55:01on a

55:02daily

55:02basis

55:02and I

55:03was

55:03sympathetic

55:04with him

55:04then

55:04I

55:05mean

55:05this

55:05is

55:05a

55:06very

55:06tough

55:07and

55:07thankless

55:07job

55:08and

55:09anybody

55:10can go

55:11out

55:11and predict

55:11huge

55:12losses

55:12and get

55:13on the

55:13safe

55:13side

55:14like

55:14the

55:14GAO

55:15does

55:15you

55:15know

55:16I

55:17think

55:18that's

55:18your

55:18responsibility

55:19you

55:19have

55:19to

55:19make

55:19the

55:19best

55:20prediction

55:20you

55:20can

55:20but

55:21is

55:21it

55:21responsible

55:22to

55:23allow

55:23many

55:24banks

55:24to

55:24stay

55:25open

55:25and

55:25many

55:26thrifts

55:26to

55:26stay

55:26open

55:27when

55:27you

55:27still

55:27are

55:27losing

55:27money

55:28and

55:28is

55:28responsible

55:29to

55:29borrow

55:30money

55:30when

55:30you

55:30might

55:30just

55:31go

55:31to

55:31Congress

55:31and

55:31say

55:31look

55:31just

55:31let's

55:32pay

55:32for

55:32this

55:32and

55:32get

55:32it

55:33behind

55:33us

55:33aren't

55:33we

55:33at

55:34the

55:34point

55:34where

55:35you

55:35may

55:35be

55:35making

55:35the

55:35same

55:36error

55:36that

55:36they

55:36made

55:36four

55:36years

55:37ago

55:37that

55:37you're

55:37letting

55:37a

55:38problem

55:38drift

55:39along

55:39when

55:39if

55:40it's

55:40no

55:40this

55:40is

55:40a

55:41different

55:41situation

55:41an

55:42entirely

55:42different

55:43situation

55:43than

55:43the

55:43SNL

55:44situation

55:45that

55:45doesn't

55:45mean

55:46that

55:46the

55:46government

55:46may

55:47not

55:47have

55:47to

55:48step

55:48in

55:48the

55:49good

55:49news

55:49is

55:50that

55:50the

55:50government

55:50stands

55:51behind

55:52every

55:53deposit

55:54and

55:54the

55:54bad

55:54news

55:55is

55:55the

55:56taxpayers

55:56stand

55:57behind

55:57the

55:57government

56:10the

56:11people

56:12have

56:13a

56:15lot

56:16of

56:17the

56:19people

56:19can

56:20do

56:21to

56:22them

56:23and

56:24they

56:25can

56:26do

56:28and

56:29they

56:30can

56:31do

56:32and

56:35the

56:36them

56:37and

56:38the

56:39Funding for Frontline is provided by the financial support of viewers like you

56:55and by the Corporation for Public Broadcasting.

57:02Frontline is produced for the Documentary Consortium by WGBH Boston,

57:06which is solely responsible for its content.

57:13Additional funding provided by these and other funders.

57:22For video cassette information about this program, please call this toll-free number.

57:32This is PBS.

57:33Next time on Frontline...

57:37Our argument was not with the people of Iraq.

57:40It was a war against Saddam Hussein, but it was his people who paid the price.

57:45175,000 children could die due to the public health conditions.

57:50The war we left behind on Frontline.

57:52For a printed transcript of this or any Frontline program, please write to this address.

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