The Crash of 1987 -- What a Difference 20 Years Doesn't Make

[wtmusic]

"On Black Monday of October 1987 a stock collapse of unprecedented size lopped 22.6 percent off the Dow Jones Industrial Average. The collapse, larger than that of 1929, was handled well by the economy and the stock market began to quickly recover. However the lumbering savings and loans were beginning to collapse, putting the savings of millions of Americans in jeopardy.

The panic that followed led to a sharp recession that hit hardest those countries most closely linked to the United States, including Canada, Australia, and the United Kingdom. The economies of Europe and Japan were hurt, but not as badly. The US economy continued to grow as a whole, although certain sectors of the market such as energy and real estate slumped.

The first burst of the recession was short-lived, as fervent pre-election activity by the governments of the United States and Canada created what many economists at the time saw as an economic miracle: a growing consumer confidence and increased consumer spending almost single-handedly lifted the North American economy out of recession."

http://en.wikipedia.org/wiki/Late_1980s_recession

A few points:
• The recession was widely attributed to a crisis in confidence due to savings and loan failures from investments in high-risk junk bonds.
http://en.wikipedia.org/wiki/Michael_Milken
Bear Stearns failure is attributed to investments in high-risk subprime mortgages.
• To match the Black Monday selloff of October 19th, 1987 the Dow would have to lose 2,530 points tomorrow.
• Within two years the Dow had set an all-time high.
• The stocks you bought the day before the 1987 crash, and wisely held onto, are worth 4x what you paid for them now, for an annualized return of 20%.

FYI.

[spag68]

1. they have already lost1700 of that figure,wheee only 800 to go

[FlyingSquirrel]

2. "putting the savings of millions of Americans in jeopardy"

What savings?

[wtmusic]

3. Customers of Lincoln Savings, for one

"In 1972, Keating began to work for American Financial Corp., a company involved in insurance and banking. Four years later he moved to Phoenix, Arizona to run the real estate firm American Continental Corporation, a spin-off of American Financial Corp. In 1984, American Continental Corporation bought Lincoln Savings. Such savings and loan associations had been deregulated in the early 1980s, allowing them to make highly risky investments with their depositors' money, a change of which Keating took advantage.

Some regulators noted the danger and pushed for more oversight, but Congress refused. Some of this may be due to the Keating Five, five Senators (Dennis DeConcini, Alan Cranston, John Glenn, Don Riegle and John McCain) who had received some $300,000 from Keating in the 1980s as political contributions. They later met twice with regulators who were investigating American Continental Corp., in an attempt to end the investigation. (In 1990, they would be rebuked to various degrees by the Senate Ethics Committee.)

In 1985, Keating hired Alan Greenspan as an economic consultant, in an effort to convince an oversight agency to exempt Lincoln Savings from certain regulations. Greenspan delivered a favorable report, writing that Lincoln Savings was "a financially strong institution that presents no foreseeable risk to depositors or the government." (Greenspan produced similar favorable reports on numerous other banks that also failed soon after.) The agency ultimately declined the request.

American Continental Corporation, the parent of Lincoln Savings, went bankrupt in 1989. More than 21,000 mostly elderly investors lost their life savings, in total about $285 million. This occurred largely because they held securities backed by the parent company rather than deposits in the federally-insured institution, a distinction apparently lost on many if not most depositors until it was too late."

http://en.wikipedia.org/wiki/Charles_Keating

Have we figured out that Greenspan is a criminal yet?

[Indiana_Dem]

4. so what if I have some CDs at a local credit union that is

privately insured? Should I find out who insures this money?

[wtmusic]

7. Most CDs are insured by the FDIC up to $100,000

if they're insured privately it would be a good idea to check out who's doing the insuring and what their assets are.

[Tektonik]

5. This time we don't have a collapsing Soviet Union to look at to make ourselves feel better

We're the ones about to break.

[BOHICA06]

6. We can only hope that its as mild as '87 n/t