Full Faith and Credit: The Great S & L Debacle and Other Washington Sagas

A colorful and insightful memoir on the creation and nurturing of the S& L debacle.

Categories: Banking & Finance | Bankruptcy & Restructuring

Of Interest:

Bailout: An Insider's Account of Bank Failures and Rescues

The Failure of the Franklin National Bank: Challenge to the International Banking System

The First Junk Bond: A Story of Corporate Boom and Bust

Thrifts Under Siege: Restoring Order to American Banking

The Rise and Decline of the Medici Bank: 1397-1494

The Story of Bank of America: Biography of a Bank

The Tumultuous History of the Bank of America

The author, a former FDIC/RTC chairman under Presidents Reagan and Bush, Sr., presents a colorful, irreverent, insightful Washington memoir. Chosen by Congress to lead the S & L cleanup, he describes how the debacle was created and nurtured, and the lawsuits against Charles Keating, Michael Milken, and Neil Bush that it spawned. Included are lively anecdotes of confrontations with heavy-weight White House chief of staff John Sununu, an interview with a wild-eyed Wyoming purchaser of FDIC property from a liquidated bank who arrived in Seidman’s office armed with a gun to register his displeasure with the purchase, and an ambush by Secret Service agents who converged on Seidman as he opened his window and leaned out to watch the President’s helicopter take off.

"My friends, there is good news and bad news. The good news is that the full faith and credit of the FDIC and the U.S. government stands behind your money at the bank. But the bad news is that you, my fellow taxpayers, stand behind the U.S, government." Take it from L, William Seidman, former chairman of the FDIC under Reagan and Bush, in his irreverent Washington memoir. Chosen by Congress to lead the S&L cleanup, the author describes how the debacle was created and nurtured, and the lawsuits against Charles Keating, Michael Milken, and Neil Hush that it spawned.

The story begins in the summer of 1973 when Seidman, then a Grand Rapids, Michigan, businessman and managing partner of one of the country's ten largest accounting firms, which bore his family's name, was tapped by Nixon to be undersecretary of HUD. Seidman had scarcely unpacked his bags when "the summer of 1973" took on new meaning in Washington and across the country. Confirmation of any of the precarious president's nominations looked dubious in the extreme, and Seidman prepared to pack up again. Then came a call from the office of newly appointed Vice President Ford, Spiro Agnew, hastily departing, had left the office in a shambles. (Not least to be disposed of were large cases of Scotch whiskey, presented to Agnew by supplicants.) Would Seidman lend his managerial expertise for a few weeks to help a fellow Grand Rapidan get organized?

One thing led to another in the usual Potomac way, and when Ford advanced to the presidency, Seidman was made his assistant for economic affairs. That job, too, was relatively short-lived, but a decade later he returned to Washington to head the FDIC under Reagan. What the author found was plenty disturbing. The over-optimism of the 1970s and 1980s - in particular, he believes, a speculative binge of real estate investing followed by recession, was resulting in numerous bank failures, more than 1,000 between 1986 and 1991. Worse, disaster loomed in the sister agency that insured savings and loan institutions; a majority of the nation's 4,000 S&Ls were on their way to bankruptcy. What caused the S&L crisis? Seidman, although a small-government advocate, blames a combination of deregulation and cutbacks in the oversight agencies. One of his many battles, for example, was with OMB, which sought to cut the FDIC's bank supervision staff just as it had tried to reduce the number of S&L examiners. But he finds a silver lining in the near catastrophe; proof of resilience. The diversity of the U.S, financial system is also its strength.

Seidman's memoir is as much about life inside the Beltway as it is about financial crises, making this book, first published in 1990, no less entertaining today. Included are lively anecdotes of confrontations with heavy-weight White House chief of staff John Sununu, an interview with a wild-eyed Wyoming purchaser of FDIC property from a liquidated bank who arrived In Seidman's office armed with a gun to register his displeasure with the purchase (a valid objection, the author discovered), and ambush by Secret Service agents who converged on Seidman as he opened his window and leaned out to watch the president's helicopter take off.

Gerald R. Ford

A fascinating inside story by a straight talker. The author dramatically tells how the federal agencies sought to confront the challenge of the banking and S&L Crisis.

A jauntily opinionated memoir of government service from the resilient septuagenarian who was chairman of the Federal Deposit Insurance Corp. and the Resolution Trust Corp. at the height of the crises that convulsed the domestic banking industry during the 1980's. An accountant by trade, Seidman first went to Washington toward the end of the Nixon Administration, staying on when Gerald Ford assumed the presidency. He returned as head of the FDIC near the start of Ronald Reagan's second term. Casino capitalism had gathered a full head of steam by then, and Seidman's hitherto sleepy fiefdom was soon in the eye of many fiscal storms. Commercial banks were among the first casualties of laissez-faire's excesses and, here, Seidman offers behind-the-scenes accounts of how the FDIC helped deal with major failures in New England as well as in the Southwest. Also covered are the varied battles that appointed agency chiefs must wage with bureaucrats, lawmakers, politicos, and the press if they are to maintain their clout. The author goes on to provide a savvy, often witty, rundown on the roots of the S&L disaster, which burst into full bloom on his watch, albeit only after George Bush had secured a four-year lease on the White House. Among other matters, Seidman evaluates the RTC's role in the $200-billion bailout, as well as its record in running history's largest fire sale (i.e., its liquidation of the assets of seized institutions) and in seeking to make recoveries from the white-collar crooks who ran hundreds of thrifts deep into the red. Notwithstanding a less-than-graceful departure at the end of his term, the author took fond memories with him when, late in 1991, he departed Washington, convinced that the system works in the public interest. An informative briefing on the big-money games played on the banks of the Potomac. -- Copyright ©1993, Kirkus Associates, LP. All rights reserved.

L. William Seidman, former head of the FDIC in the Reagan and Bush Administrations, has been a chief commentator on CNBC since November 1991, and is publisher of Bank Director magazine. He is also on the speaking circuit, and is a consultant to the Nippon Credit Bank, Morgan Stanley Dean Witter, Ernst & Young, and Freddie Mac, among others.