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Chapter 6

ORGS 2010 Chapter Notes - Chapter 6: Savings And Loan Association

Organization Studies
Course Code
ORGS 2010
Frank Miller

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The Fat Men and Their Marvelous Money Machine [1981-1986]
-Savings and loan presidents from across American were desperate to sell their loans
-One trillion dollars’ worth of debt, seemed to be for sale
-There were many sellers but only one buyer, Ranieri and his traders
oMoney just kept swarming in from the phone lines
oSeptember 1981, tax break passed to allow thrifts to sell all mortgage loans and put cash to work for higher return
oAmounted massive subsidy to Wall Street from Congress
-Ranieri and his traders did not know about the legislation until after its initiation; could not take earlier advantage of this
-Ranieri and Co was now a thriving monopoly
-Bond-traders exploit weakness of their customers without worrying about the long term effects on
oThrifts presidents were desperate; bond traders could get away with whatever they want since sellers were in a weak
oThey were like ducks, trained to fly repeatedly over the same field of hungers until shot dead
-1981, Larry Fink was head of small mortgage department at First Boston; soon expanded and became Ranieri’s major competitor
-Ranieri had a sense of mercy; stepped in to redress balance of power between thrift presidents and his traders
oRanieri got mad at his traders and openly told them about mistakes/illegal activities that they had conduction
oLewie told Stone to call his customer back to inform them that Stone had ripped them off
-Hyper-growth in the thrift market meant that that next crisis would be larger; thrift managers not thinking that far in
oThrifts continued to buy new mortgages as they sold their loans
-Tax break seemed to be tailor-made for Ranieri’s mortgage department
oLewie promoted buy now, worry later attitude amidst this upheaval in the thrift industry
oSalomon traders now trading home loans
oSalomon Brothers had severed ties with the thrifts
-To deal with whole loans, it was essential to get the approval of the Federal Housing Administration
-Took the whole loans to the USA government for stamping to sell as bonds to institutional investors
-Ranieri persistently lobbied with the government; Freddie Mac and Fannie Mae facilities had sprung in the federal
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