PSU Magazine Summer 1990

insuring S&L deposits prompted the S&L managers to take bigger ri sks than they otherwise would have. The same was true of banks and the FDIC , he said . The govern– ment allowed the S&Ls to do anything they could to get cash, while it removed any ri sk to depositor funds. Or, as Day writes , "They (the S&Ls) had nothing to lose but other people's money. " William Greider, author of "The Trouble With Money, " explains thi s guaranteed freedom as "a bizarre version of laissez-fai re - a half-pregnant system that liberates banking and finance for new adventures in risk-taking, yet assures the players that if something goes terribly wrong , and they sustain great losses, the U.S . government will step in and pick up the tab . This has produced recurring disorder and crisis. " Although stories abound of S&Ls misap- PSU 8 propriating millions of dollars of depositor's funds before their institutions collapsed underneath them, in many cases the problem was simply ineptitude or inexperience. While Congress allowed the S&Ls to be more like banks, Anderson said, "By and large the S&Ls didn't have the expertise." "The closing ofBen}. Fran/din was in a sense a regulator's window dressing-they wanted to show they were on the ball." -Les Anderson B ut ineptitude can't be blamed for some S&L takeovers. Anderson points to Benj. Franklin , the Port– land-based S&L that was taken over by the feds in February as a case in point. Managed by Dale Weight , who Anderson called "one of the finest bankers in the country," Benj . Franklin's demise was a result of the govern– ment's rigid interpretation of the law that was passed in 1990 to put troubled S&Ls back on track. The law, titled the Financial Institutions Reform , Recovery and Enforcement Act (FJRREA), sets strict controls on the amount of hard assets an institution must have, compared with the amount of money they lend out. A solid asset base means a solid institution. Fall below the proper level and you're a candidate for federal takeover. Roberta McEniry ('76 BS), who was Benj . Franklin's senior vice president of investor and corporate communications before the feds ousted her, Weight and Benj . Franklin's other top management, are bitter about the government's handling of the crisis . Government auditors examined the books in single-minded fashion with "little cook– book audit guides," and failed to look any deeper into Benj . Franklin's true health than what the surface numbers told them , McEn– iry said . FIRREA allows institutions a five-year window of time to put together the capital to come within federal guidelines. McEniry said she and the rest of Benj. Franklin's management put together a tough, detailed business plan that outlined cost-cutting measures and tightly defined Benj. Franklin's market. " It was very doable," she said.