History repeats itself…

It is said that those who forget history (or do not learn from it) are condemned to relive it. Think back to the late 1980s and ear1y 1990s, when several hundreds of Savings & Loan associations (S&Ls) in the US went belly up. The US government of the time had to pump in more than $150B to absorb the impact and keep the thrifts afloat.  Sound familiar? Dig into why many of these S&Ls failed, and you will find imprudent real estate lending and asset-liability mismatch as the primary causes. Of course, insider trading and inadequate regulation simply accelerated their demise and catalyzed the spread of the crisis.

Bush Sr was VP when the mess began to unravel. He became President in 1989. The US was at war with Iraq in 1990-91. His son Neil Bush was alleged to have given himself a loan (when he was with Denver based Silverado Savings & Loan, which went under). Neil’s brother is today President of the US. The US is fighting both in Afghanistan and Iraq. More than $800B has already been earmarked to bail out many ailing banks and financial institutions- including Fannie Mae and Freddie Mac (that, ironically, were part of the solution to the S&L crisis twenty years ago). In the early 1990s, the US economy went into a tailspin and was in recession through 1992/93. I do not know what will unfold in 2009 and beyond but perhaps someone with a crystal ball can help us see the writing on the wall.

And perhaps in 2035, someone may find this blog and read it- again.