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2 Stan. L. & Pol'y Rev. 138 (1990)
Warnings Ignored: The Politics of the Crisis

handle is hein.journals/stanlp2 and id is 140 raw text is: EDWIN J. GRAY Warnings Ignored: The Politics of the Crisis by Edwin J. Gray The vowerful savings .1 d1 The savings and loan crisis is a story of unbridled power and and loan in influence corrupting the politi- always cot cal process, crooked manage- ment perpetrating massive fraud members of and insider abuse, and the gov- ernment failing to see, or even do what it u wanting to see, where it might was to d all end. Pure greed on the part of too many savings and loan operators, who were contemptuous of fun- damental standards of fiduciary responsibility as well as the regulatory process, which was established to protect the broad public interest, spawned and fed the crisis. These new players on the financial scene ap- parently rejected the proposition that their institu- tions were vested with public charters to invest safely their publicly-backed deposits, thereby fulfilling their public trust. Most thrift managements ran their Mr. Gray was chairman of the Federal Home Loan Bank Board from 1983 to 1987. He is currently president of Chase Federal Bank in Miami, Florida. '- o institutions profitably and re- U -ustny could sponsibly. Too many, however, nt on most did not. Meanwhile, Congress and Congress to the Reagan administration sim- ply refused to meet their own anted, which public responsibilities to protect nonO g. the public treasury from loss. Instead, they maintained at a grossly inadequate level the fis- cal and human resources of the federal thrift deposit insurance and regulatory apparatus, which had been set up to protect the public interest-particularly the taxpay- ers' interest-from loss and abuse. Political money (i.e., political contributions mo- tivated by a desire for influence) and a misguided obsession with the notion of thrift deregulation para- lyzed Congress and blinded the administration during my tenure as chairman of the Federal Home Loan Bank Board (FHLBB). As a result, an abundance of alarms, red flags, and clear warnings were simply ig- nored as regulatory hyperbole. With political contributions from the organized STANFORD LAW & POLICY REVIEW

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