Welcome readers to todays offering from The Philatelist. So slip on your smoking jacket, fill your pipe, take your Tums and sit back in your most comfortable chair. We will pass on the adult beverage because the situation here would have benefited from more sobriety.
This stamp just did not age well. The old fashioned piggy bank did not fit the savings and loans of the go go eighties. In fact the times were the undoing of the savings and loan industry. Their undoing caused the nation to loose much wealth and perhaps cost the first President Bush his second term.
The stamp today is issue A1298, an 18 cent stamp issued by the USA on May 8th, 1981. It was a single stamp issue honoring the sesquicentennial of the Savings and Loan form of bank. According to the Scott Catalog, the stamp is worth 25 cents used.
Savings and Loans are in theory a useful form of bank. In their most basic form, they borrow money from depositors at 3 %, make home mortgages at 6% and keep overhead under 2%. This works for everybody. A profit of 1% works out to 10% on a banks equity, so owners win. A decent return on deposits allows area older people to have a more comfortable and secure retirement without risk. Available mortgages allows responsible younger people to own homes to raise families and build wealth. Not many young people could have houses if they had to pay for them in full. 20 percent down can be done with a little saving and perhaps help from parents.
The inflation of the 1970s destroyed this model and eventually the saving and loans themselves. Inflation pushed up home prices and this pressured mortgage rates to compensate for the higher prices. Then the government raised interest rates dramatically to slow inflation and the economy. This forced the Savings and Loans to raise rates on deposits. This increased the wealth of some quite a bit. Their home value was much higher but their mortgage balance was still low and at a low rate agreed to long ago.
You perhaps can see the problem for savings and loans They are paying more for deposits but receiving the same old rate on the long term house mortgages. To counteract this, the savings and loans start making loans at higher rates to more risky real estate development. Developers than get the idea to start savings and loans themselves to fund their development projects. This was not going to end well.
End well it did not. The recession of the early nineties reduced real estate values and caused enough defaults on the risky loans to bankrupt the savings and loans. There was a government guarantee on the deposits at savings and loans and the government paid depositors in full in the middle of the recession, when government revenues are already depressed. This contributed to a large deficit at the time and added to the belief that the first President Bush mismanaged the economy. After the bailout of depositors, the government got a little bit of a windfall as the foreclosed properties were sold off. Ironically, this made President Clintons recovery stronger. A similar thing happened in the later Obama years. Old bailouts from 2008-2009 were paid back making the deficit look better. This is over now so current President Trump should be worried about the direction of the deficit.
After the nineties savings and loan crisis, the small surviving banks repackaged themselves as community banks but were never able to recapture the old financial model and many failed 2007-2012. Now again the survivors are repackaging themselves as credit unions without the profit motive. We will see how that turns out.
Well now I need a drink so I will turn over the conversation. For many years I was in this industry and a great believer in it but today find myself disillusioned and believing the lack of old fashioned banking will spell the death of many small towns as the next generation has no opportunity to stay. Come again tomorrow for another story that can be learned from stamp collecting.