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323154561
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Issues - Miscellaneous Issues [Animal Rights, S&L's, Clean Air] 1990 [OA 8749]
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323154561
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Issues - Miscellaneous Issues [Animal Rights, S&L's, Clean Air] 1990 [OA 8749]
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13872-007
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Records of the White House Office of Speechwriting (George H. W. Bush Administration)
Mark Davis Subject Files
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Originally Processed With FOIA(s):
FOIA Number:
S
FOIA
MARKER
This is not a textual record. This is used as an
administrative marker by the George Bush Presidential
Library Staff.
Record Group/Collection:
George H.W. Bush Presidential Records
Collection/Office of Origin:
Speechwriting, White House Office of
Series:
Davis, Mark, Files
Subseries:
Subject File, 1989-1991
OA/ID Number:
13872
Folder ID Number:
13872-007
Folder Title:
Issues-Miscellaneous Issues [Animal Rights, S&L's, Clean Air], 1990
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Section:
Shelf:
Position:
G
19
2
6
5
SATURDAY, AUGUST 11, 1990 A21
Photo Copy Preservation
Colman McCarthy
Courage
Prescott, a vegetarian whose diet in-
cludes no dairy products, went on an
unofficial hunger strike the first few days
Of Her
in jail. She wouldn't eat the meat or
animal-related food. When vegetables
were served, she would trade her meat
with others. After a week, she success-
E OREGONIAN
Convictions
fully challenged the jail's dietary rules,
which sanction vegetarian meals for only
religious or health reasons, She broad-
ened it to a third category-ethics.
A hundred years ago, judges were
In the five years between college and
locking up cattle rustlers. Now leaf rus-
the Fund for Animals, Prescott served
tlers are criminals.
society as a wildlife rehabilitator. It was
Heidi Prescott, national outreach di-
volunteer work, rescuing animals hit by
rector for the Fund for Animals, served a
cars or wounded by hunters, nursing and
maximum 15-day sentence in a Maryland
then freeing them back into the wild. "I
jail (with two days off for good behavior)
suppose I saved about 100 animals a
for rustling leaves with her feet in a
year," Prescott estimated. "Most were
public wildlife management area. She
squirrels. I learned a lot about the innate
was in the woodland on Nov. 25, 1989,
struggle for life that each animal has. I'd
the opening of the deer-slaughtering sea-
come on a near-starving animal or one
son, when some of Maryland's toughest
half-dead after being hit on the road, and
hombres were displaying their bravery
I witnessed the intense fight to stay alive.
by pumping bullets into the brains and
You learn from those kinds of exper-
hearts of does and bucks.
iences how all life should be cherished."
Prescott, an idealist who believes in the
When not bottle-feeding infant squir-
sacredness of all life-four-footed as well
rels every two hours everyday for as
as two-footed-was arrested with a group
long as nine weeks-Prescott earned a
of others for breaking a state law that
small living from artwork. One of her
forbids harassing hunters. For the harass-
largest paintings-30 feet by 4 feet-
G
ment of rustling leaves, as well as talking
was sold to the Brookings Institution in
to the gunners as they hied into the
Washington for $6,000.
woods to risk life and limb-the deer's-
In the tradition of pure civil disobe-
Prescott was fined $500. She refused to
dience, Prescott accepted her jailing but
pay. The judge, aiming his judicial gun at
not the reasons for it. She told the court,
this menacing target, sent her off in
"I remain convinced that my behavior
handcuffs for contempt of court.
was appropriate. I did not physically
Having never met a criminal leaf rus-
strike, obstruct, yell at or insult any of
tler, I went to the county jail-a maxi-
the hunters with whom I communicated.
mum-security operation-to talk with
I simply exercised my First Amendment
Prescott. She is 28, a graduate of Penn-
right to voice my objections to the cruel-
sylvania's Edinboro State College and
ties of sport hunting and my right to walk
the daughter of a Methodist minister
on public lands."
who is now a counselor. She smiled
U.S. jails are packed with people guilty
broadly when mentioning that after sev-
of violent crimes. Prescott may be one of
en months with the Fund for Animals,
the first people in U.S. history jailed for
and a fair number of 80-hour weeks, she
trying to prevent violence. She sees her
won a raise from $12,000 to $14,000.
imprisonment as a positive, not a negative,
She believes that the simple life is the
experience. "They look on my being here
good life is the humane life, and if we
as a punishment. I don't. I see it as a
can't end the war against animals
chance to grow, a time in which my beliefs
chances are slim that we can stop the
are being tested and strengthened."
wars against each other.
Prescott, along with growing numbers
Although terrified the first night in jail
of citizens who think public wildlife lands
Prescott was calmed by the warmtl
are for animals, not their slaughterers,
shown her by fellow prisoners. She was E
see this arrest and jailing as the begin-
curiosity-a jailbird who chose deliber
ning of a nonviolent protest movement,
ately to fly into the coop. "This is an odo
BY OUPHANT
not its squashing. Prescott is a crime-
place to have my faith in human nature
AY.
fighter, with one message for woodland
restored," she said, "but that's what has
gunmen: Take a hike, boys.
happened. Not one person has criticized
me for what I did on behalf of the animals
that day. No one has said, why don't you
fight for a more important cause, which is
what I hear all the time on the outside."
of
THE TREASURY THE
THE DEPUTY SECRETARY OF THE TREASURY
WASHINGTON
1789
July 28, 1990
The Honorable John Ashcroft
Governor of Missouri
State Capitol
Jefferson City, MO 65101
Dear Governor Ashcroft:
This is in response to your request for information
regarding the origin of the savings and loan crisis.
This is a question which the Administration,
academicians, economists, and the Congress have been exploring
for some time. The Treasury Department is pleased to share our
information with you because we believe it is important that as
many people as possible have a thorough understanding of the
events which began long ago and led to the current crisis.
The savings and loan industry was created in the early
1930's through charters which restricted their activities to
fixed-rate, long-term mortgage loans and the acceptance of
short-term deposits. Without a diversified portfolio, thrifts
were, from their very inception, particularly vulnerable to the
"ups and downs" of the real estate market and any substantial
increases in interest rates. Because the interest rates these
savings and loan institutions charged were primarily locked into
long-term residential mortgage loans, significant increases in
market rates meant thrift institutions would likely be paying out
more in interest to depositors than they were receiving in
interest payments from loans.
In 1966, Congress attempted to address the industry's
particular vulnerability to increasing interest rates by creating
"Regulation Q." This regulation imposed ceilings on the amount
of interest that S&Ls could pay on deposits. But as market
interest rates increased, depositors who had their money in low-
rate S&L accounts began to take their money out of S&Ls and put
their savings in other financial instruments, which were paying
market interest rates (higher than S&L rates). S&Ls were then
faced with massive deposit outflows, while their assets were
primarily tied up in long-term, fixed-rate, low-interest mortgage
loans.
In the late 1970's, inflation and interest rates
soared, and eventually the prime interest rate skyrocketed as
high as 21 percent. The combination of high inflation and high
interest rates, along with Regulation Q, put extreme financial
pressure on the thrift industry. During the period 1978-80,
thrifts suffered significant declines in deposits, and their
capital positions deteriorated to the point where a substantial
part of the industry was bankrupt on a mark-to-market basis.
In 1979, President Carter formed a special Task Force
to study the problem. The Task Force recommended deregulation.
In 1980, President Carter proposed, and the Congress passed, the
Depository Institutions Deregulation and Monetary Control Act
(DIDMCA). The principal features of that Act included:
-- Providing for the phased elimination of Regulation Q,
allowing thrifts to attract more deposits with higher
interest rates.
-- Increasing deposit insurance from $40,000 to $100,000
per account.
-- Expanding the ability of federally-chartered thrifts to
engage in commercial lending, including commercial real
estate loans.
-- Lowering capital requirements for thrift institutions.
The huge increase in deposit insurance coverage -- a
leap of 150 percent -- increased the U.S. Government's liability
should an institution fail.
In another significant decision in 1981, the Federal
Home Loan Bank Board (FHLBB), an independent regulatory agency,
loosened restrictions on the ability of S&Ls to use brokered
deposits. This provided S&Ls with new access to large pools of
money formed by aggregated deposits. In 1984, the FHLBB reversed
itself and proposed regulations limiting the use of brokered
deposits. When the courts overturned the FHLBB regulations,
Congress refused to provide the authority needed for FHLBB to
proceed with the regulations.
Higher interest rates caused more thrifts to become
unprofitable and seriously depleted their capital, but they were
allowed to stay in business. Thrifts with low capital had a
perverse incentive to make riskier investments in order to gain
higher returns. Any profits from the riskier investments could
be used to shore up their capital, while any losses from these
same investments would be covered by the higher insurance
coverage. Huge pools of money -- made. available through
brokered deposits and deposit insurance -- added to the
motivation for thrift operators to expand their risk of loss.
However, even with interest rate deregulation,
increased deposit insurance, and brokered deposits, thrifts
continued to struggle because the bulk of their assets were still
held in low-interest mortgage loans.
In response, Congress passed the Garn-St Germain bill
in 1982. The bill allowed federally-chartered thrifts to become
more like banks and further expanded authority granted in the
1980 act to make commercial loans. It also continued the 1980
practice of lessening capital requirements. Many believed these
actions were necessary in order for thrifts to make higher
returns on investments to offset lower returns on mortgage loans.
Prior to the passage of Garn-St Germain, states began to greatly
broaden the powers of state-chartered, but federally-insured,
thrifts to make direct equity investments in speculative
ventures, from windmill farms to precarious real estate
developments.
As early as 1984, the FHLBB attempted to curb abuses by
state-chartered savings associations. The FHLBB was opposed by
many in Congress, and in particular by the House of
Representatives. For example, in 1985, a resolution calling on
the FHLBB to delay its tighter regulation of direct real estate
and equity investment by state-chartered institutions was co-
sponsored by over one-half of the House of Representatives. In
1987, amendments in the House Banking Committee to regulate these
aggressive real estate practices of state-chartered institutions
were defeated by overwhelming margins.
Now S&Ls could attract more deposits because they could
pay higher interest rates on those deposits, offer higher
insurance levels, and attract depositors from across the country.
And thrift institutions, particularly state-chartered thrifts,
could invest those deposits in highly risky ventures,
particularly commercial real estate ventures. And all the time,
the U.S. Government's promise to insure every depositor's savings
up to $100,000 kept looming as a larger and larger potential
liability.
In 1984, then-Vice President Bush led an Administration
task force on regulation of financial services. The task force
recommended comprehensive reform of the regulatory system:
-- Higher capital and accounting standards for S&Ls making
riskier loans and elimination of phony accounting
standards. (The task force report noted that low
capital levels encouraged insured institutions to
engage in high-risk speculative activities.)
-- More effective regulation through the elimination of
archaic and overlapping regulatory structures.
Strengthened ability for the FDIC to oversee deposit
insurance, and authorization for FDIC to institute
risk-based insurance premiums. (The task force report
noted that the current flat-rate premium system forced
prudently managed institutions to subsidize high risk
institutions.)
The task force recommendations were endorsed by the
Reagan Administration's Cabinet Council on Economic Policy in
1985 and forwarded to the Congress.
Meanwhile, sharp declines in oil prices and weakness in
the agricultural sector contributed to devastating economic
declines in certain regions, particularly the southwest. Real
estate values plunged. Large numbers of thrifts that had
invested in commercial real estate and other ventures became
insolvent, requiring deposit insurance protection from the
federal insurance (FSLIC) fund. When the FSLIC insurance fund
ran low, the Reagan Administration requested $15 billion to
recapitalize FSLIC in the spring of 1986.
The request encountered strong opposition on Capitol
Hill. Some Members of Congress feared that providing $15 billion
in deposit insurance funding would encourage S&L regulators to
close down more unsafe institutions. The savings and loan
industry forcefully lobbied the Congress in opposition to this
legislation, and it was killed at the end of 1986.
Finally, in 1987, Congress passed a bill which provided
$10.8 billion for recapitalization of the insolvent FSLIC
a
year and a half after the Administration requested $15 billion.
The final amount authorized was only two-thirds of the amount
requested by the Administration. In addition, Congress added
forbearance provisions making it harder for regulators to close
down high-flying S&Ls. Specifically, those provisions permitted
additional questionable accounting techniques which allowed
thrifts in trouble to make their levels of capital look better
than they were. They also allowed thrifts to count "goodwill"
toward meeting capital requirements.
The delay in funding the FSLIC prevented regulators
from closing insolvent institutions when the cost of protecting
depositors would have been much less. Instead, the problem
continued to grow, and so did the U.S. Government's liability to
make good on its promise of insurance coverage for deposits.
In February 1989, just 18 days after taking office,
President Bush proposed a comprehensive and permanent, solution to
the savings and loan industry crisis -- The Financial
Institutions Reform, Recovery, and Enforcement Act of 1989
(FIRREA). Four principles have guided the Administration in
developing and implementing the savings and loan cleanup effort:
-- Protecting the savings of Americans who made deposits
in thrift accounts, relying on the U.S. Government's
promise of deposit insurance.
-- Restoring safety and soundness to the thrift industry,
especially through tougher capital requirements.
-- Aggressively prosecuting the crooks who stole the
taxpayers' money through fraud and mismanagement.
-- Cleaning up the S&L mess as expeditiously and
responsibly as possible.
After seven months of debate, Congress passed FIRREA,
and President Bush signed the bill into law on August 9, 1989.
FIRREA provided not only the initial funds for
remedying the current crisis in the industry and protecting
depositors' savings, but the legislation also put into place the
mechanisms needed to prevent similar occurrences in the future.
With these protections in place, as well as additional
provisions proposed by the Administration to enhance the
Government's ability to prosecute those guilty of financial fraud
and mismanagement, we believe we have the basic framework
necessary to clean up the savings and loan crisis in an
expeditious and responsible manner.
In the year since FIRREA was enacted, the government
has paid out $62.5 billion in deposit insurance obligations,
representing 5.8 million accounts -- about $10,000 per account.
The RTC has seized 463 insolvent thrifts -- more than one per
day; closed or sold 211 bankrupt thrifts -- one every 48 hours;
and sold or liquidated more than $65 billion of assets -- $178
million per day. By moving expeditiously and responsibly to
quarantine sick thrifts, the Administration has stemmed the
losses and given the healthy segment of the industry an
opportunity to succeed.
Since October 1988, the Justice Department has obtained
more than 200 convictions for savings and loan fraud.
Settlements and judgements from civil cases during the first half
of 1990 will produce recoveries in excess of $200 million.
is not to bail out financially unsound S&Ls or S&L executives
Let me reiterate that the purpose of the cleanup effort
responsible for the crisis. The sole purpose is to protect the
and loan institutions. The U.S. Government made a promise to
savings of those Americans who have insured deposits in savings
that promise.
insure those deposits, and the Government is now living up to
We hope this is useful in tracing the causes of
thrift crisis and describing the considerable progress made under the
FIRREA to address the problem and prevent its recurrence.
Sincerely,
John John E. E. Robson .. Rabson
Clean Air Revisited
Photo Copy (Preservation
The Clean Air Act, once thought.to use could cost $31,000 to $66,000 a
be a sure thing, may have a big prob-
ton
lem: the bottom line. As Members of
Other provisions of the Clean Air
Congress plow through its hundreds of
Act make just as little economic
pages, many are becoming worried
sense. Its crash program of installing
over its impact on the economy. When
limestone scrubbers on old power
as part of the budget negotiations, the
plants to reduce acid rain will have
idea for a 5%energy tax floated out of
the perverse effect of delaying the in
the budget summit, Rep. John Din-
stallation of clean coal technology.
gell, co-chairman of the conference
The bill will divert at least $50 billion
committee, quickly told negotiators
in capital to install a 20-year old tech-
the Clean Air Act already represented
nology and add to pollution by leaving
a hefty tax on energy.
behind tons of limestone sludge a
The Bush Administration also has
year
begun to recognize the costs that the
After studying what the congres-
Clean Air Act would impose on the
sional process did to the President's
economy. Last month, Michael Bos-
proposal to create a system of trada-
kin, chairman of President Bush's
ble emissions permits to reduce acid
Council of Economic Advisers, re
rain, analysts at Washington Univer
sponded to congressional questions
sity concluded that the Senate has
about claims from the Environmental
created a Rube Goldberg scheme for
Protection Agency that the act would
distributing emissions allowances.
have little adverse job impact. "The
Both House and Senate versions have
President's support for this proposal
eviscerated the intended savings from
was not premised on the view that its
a tradable permits system.
costs would be negligible. He is fully
aware they may result in temporary
The Clean Air Act's fast phase oui
of chlorofluorocarbons uses the most
unemployment, he wrote. 'Rather,
the President believes that our nation
tentative of scientific research on
is able and should be willing to pay a
ozone depletion to justify a ramatic
reasonable price to clean its air. But
increase. in air-conditioning and re
the President is not prepared to see
frigeration/costs. The likely substitute
American firms, workers and con-
for the most popular banned refriger
sumers overcharged or to see eco-
ant costs 30 times as much and will it
nomic growth needlessly slowed
self be banned by the year 2015. The
It is now clear that is precisely
economy will have to shoulder at least
what the Clean Air Act will do. A sin-
$10 billion to $15 billion a year in
gle provision requiring the use of gas-
added refrigeration costs by the year
oline and alcohol blends in 25% of the
2000.
country will add 15 cents to 25 cents a
Members of Congress tell us pri-
gallon to the price of gasoline. A study
vately that the Clean Air Act was
by Tom Austin, a former executive of-
rushed to passage because no one
ficer of the California Air Resources
wanted to publicly oppose any bill
Board, concludes that the reformu-
with the words "clean air" in it. The
lated fuel will be 15% less fuel-effi-
Bush Administration was then rolled
cient and could actually increase ni-
in private negotiations with environ-
trogen-oxide emissions. "Motorists
mental extremists, and then backed
would end up paying more for dirtier
off from its threats to veto an outra-
air," he says. A study by Resources
geous bill. These are hardly excuses
for the Future, a leading environmen-
for enacting a public policy that
tal group, also questions the use of al-
drapes significant financial weights on
ternative fuels. It estimates that re-
an economy trying to compete glob-
ducing emissions through methanol
ally.
Photo Copy Preservation