Banks in the News
Zip Dobyns
Recent weeks have seen a rash of insolvent banks and saving and loan institutions being taken over, merged with “healthy” banks, or closed by the U.S. government. The Federal Home Loan Bank Board has disposed of 48 Savings and Loans institutions (also called “Thrifts”) in just the last three weeks, mid-August through the first week in September, 1988, pledging over $12 billion in the process. Many of the S & Ls have been “ailing” for years and the government has hesitated to spend the billions needed to take over the non-performing loans. But a new law passed by Congress will require any “bailouts” after October 1, 1988 which are “paid for” by government “IOUs” to be added to the U.S. deficit. Since the current budget deficit is very close to the Gramm-Rudman-Hollings limit, the bank boards are trying to deal with as many insolvent banks as possible before the new law takes effect. If the permitted annual deficit is exceeded, automatic cuts will go into effect, slashing the funding of both defense and many social programs. The U.S. is walking a tightrope, and Capricorn is coming. The next President will have to bite the bullet, possibly as early as the fall of 1989 though I expect a continuing slide into deeper trouble rather than a big crash.
Even the English weekly The Economist, which usually supports Reaganomics, is getting uneasy about the U.S. handling of problem banks. Their current (September 10-16, 1988) issue quotes Danny Wall, FSLIC head, as estimating that their IOUs may reach $16 billion by the end of September. An additional $50 billion or more of problem S & L assets remains for future “rescues.” Yet the annual FSLIC income from insurance premiums paid by “solvent” Thrifts is only about $1.8 billion while their interest costs on already incurred debts are running over $2 billion a year. Congress has authorized the FSLIC to sell bonds to the public to raise the needed cash to cover the deposits in the failing Thrifts. The Economist calls for a comprehensive audit of the thrift industry: “the sooner, the better.” p. 97
As the government continues to go deeper into debt, our interest rates have to rise to persuade people to buy our debt instruments (T Bonds, T Bills, etc.). Currently, our business people pay a prime rate of 10% or more, German business people pay about 6% and Japanese companies pay less than 4%. With most businesses dependent on debt to stay in business from year to year, the interest rates certainly raise the odds against the U.S. Of course interest rates are also pushed up by the Federal Reserve when they think inflation is a threat, since higher interest slows down the economy. Hence the spectacle of the stock market plunging when the big investors think business is growing “too fast” and stock prices rising with moderate declines in goods produced and sold and moderate increases in unemployment. (Large changes would threaten a recession or depression and would send the stock market down.)
We have not had so many banks in trouble since the early 1930s when we were in the so-called Great Depression. On Sunday, March 5, 1933, the day after he was inaugurated, President Franklin Delano Roosevelt (FDR) proclaimed a national Bank Holiday. On March 6, Congress, which had been called into a special session, passed the Emergency Banking Act. (Another historical source says that Congress rather than the President declared the Bank Holiday on March 5). A third historical source lists March 9 for the passage of the emergency act. The banks started reopening on March 13, and by the end of the month at least 75% were again functioning. On June 16, the Banking Act of 1933 was passed by Congress, establishing the Federal Bank Deposit Insurance Corporation which continues to assure the public that their money is safe in the banks. More than 9,000 banks had failed between 1930 and Roosevelt’s inauguration, resulting in enormous losses for their depositors. I remember that my father had five banks close in succession. Finally, his sixth choice remained in business. On one occasion, he was stranded away from home on a business trip without any funds except for a checkbook on a bank which had just died. My mother had saved some cash and was able to wire him the money to get home.
A horoscope drawn for March 9, 1933 at 8:36 P.M. has been in my files for years and is labeled the Roosevelt Bank Bill. Unfortunately, I have no idea of the source of the chart. Since one historical reference lists March 6 as the date of Congressional action on the Emergency Act and another source lists March 9 for Roosevelt’s Emergency Banking Act, it is possible that the chart is for FDR’s signature. Another potentially useful chart comes from one of my historical sources. 22 states had declared bank holidays by March 3. Bank holidays were declared in six states on March 1 and bank panics are said to have reached their greatest intensity by March 4, which was the day that FDR took office. According to one reference, on March 4 at 4:30 A.M. Governor Herbert Lehman of New York declared a state bank holiday, and Governor Horner of Illinois immediately followed suit. New York was the state with the greatest population and wealth at that time, playing a leadership role in U.S. economic affairs, so the horoscope for its bank holiday might be worth continued observation as a key to our bank health in general. I have not yet tested the reliability of either of these two possible charts, so much more work is needed before we can put any trust in them. I am including the charts so that interested readers can investigate for themselves whether either horoscope offers a useful key to the current bank situation.
Both horoscopes have an exact square of Pluto in Cancer to Uranus in Aries, fitting the emotional tension of the period. Both also highlight the issue of faith. The NY bank holiday has the Pisces Sun square the Moon and opposite the midpoint of Jupiter/Neptune, co-rulers of Pisces. The south node of the Moon, Neptune and Mars are conjunct each other in Virgo and opposite the north node and Ceres in Pisces. The Antivertex and Venus at the beginning of Pisces are square Vesta, a key to Virgo. Capricorn rising and Saturn in the first house in Aquarius suggest questions about personal power vs. the limits of personal power. The FDR Bank Bill has Pluto on the MC and Uranus in the seventh house in a close T square with the Ascendant. The massive oppositions across Virgo-Pisces are placed in the fifth and eleventh houses while the Leo Moon forms a wide grand cross in fixed signs and partly fixed houses to the Antivertex, Pallas, and Chiron. The fixed areas of life bring in the issues of money, possessions, pleasures and power with Uranus and Pluto part of the emphasis since they are rulers of fixed signs. Virgo and Pisces point to the high focus on work and faith.
Much more work is needed to determine whether the charts are relevant to current banking problems. Secondary progressions give us some future dates which can be watched to see whether they mark times of challenge and change. A recent addition to our CCRS computer program lists the day that each progressed aspect enters a one degree orb, the day the aspect is exact, and the day that the faster moving planet leaves the one degree orb. Normally, I only have it print the day that Moon aspects are exact since there are so many of them.
My first surprise in working with the new computer routine on the FDR bank bill chart was that even though the natal MC was listed as exactly one degree from natal Uranus, P Pluto will reach the exact square to natal Uranus nine months before it reaches the one-degree-orb conjunction to the MC. Pluto moves so slowly, that when the seconds of longitude for Uranus and the MC are calculated, the square to Uranus will be exact on June 29, 1990 and the conjunction to the MC starts on April 1, 1991. Since the chart remains questionable, such precise accuracy may be nonsense but we will see what the next two years bring. If the chart time is accurate, the P MC will reach an opposition to the natal Sun on September 23, 1989, an aspect that will last for two years. P MC starts the conjunction to natal Jupiter very soon after the election this coming November. It was conjunct P Jupiter in 1985 when we had the Ohio and Maryland bank panics.
Panic is a loss of faith. Many past bank failures were simply due to panic when depositors all tried simultaneously to take their money out of the bank. Of course the bank would have loaned out much of the money so would not be able to meet the unusual demands on it. Jupiter symbolizes the principle of faith but when it is aspected, it may mean that faith is present or is lacking or is misplaced or any of several other variations. The MC is the same principle as Saturn, the power of the universe in its external form. (In its internal form, it symbolizes an individual’s power in the world and the internalized conscience). Many people react to Saturn or to the MC with fear of the world’s power to hurt them, so a Jupiter-MC or Jupiter-Saturn conjunction can mark faith in one’s power to handle the world, lack of that faith, unrealistic faith, unrealistic fears, etc. Saturn (MC) is always potentially a lesson in realism.
P Mercury has recently started a conjunction with Uranus and a square to Pluto, and its rulership of both the ninth and twelfth houses connects these aspects also to faith issues. Many authorities are expressing increased anxiety over the banking world. Fully one third of the nation’s Savings and Loan Associations are said to be in deep trouble or past any chance of recovery. As P Mercury goes through this part of Aries, it also forms octiles and trioctiles to the Virgo-Pisces oppositions, again reminding us of the importance of faith and jobs. P East Point which is currently squaring the Sun from Sagittarius repeats the message. It will trine Uranus and be quincunx Pluto through most of 1990-1991, but the value of the trine is dubious since natally the East Point opposed Uranus and squared Pluto. P Ascendant in early Sagittarius hammers at the same theme with a current opposition to Vesta, the Virgo asteroid, and a square to P Pallas in Pisces. On February 17, 1989, P Ascendant will begin a square to P Mars to be followed by squares to the rest of the Virgo-Pisces stellia. If the chart is a valid key to our banking situation, the years ahead will need wisdom. As a final note on this chart, P Mars will remain on the lunar south node for years and P MC will start the quincunx to Uranus on March 17, 1992, holding the aspect for two years to natal Uranus, then for a year to the midpoint of natal and P Uranus and for another two years to P Uranus. These could be years of major changes; hopefully toward more democracy and equalitarian principles. With Uranus, we can move voluntarily toward equality and freedom or we can have revolution.
It is the weakness of Saturn in this theoretical FDR bank chart which throws the most doubt on its validity. The emergency bill gave considerable power to the President. The MC (carrying the same meaning as Saturn) was involved in an immense network of close aspects, but Saturn itself lacked any traditional aspects to traditional planets. If we include minor, rarely used aspects, Saturn did have seven aspects within one degree orbs. It was triseptile Mars, Neptune, and the south node of the Moon, quatranovile Pluto and the MC, biquintile Jupiter, and biseptile Chiron. The aspects seem appropriate, including contacts with the three keys to faith, Jupiter, Neptune and Chiron, a contact with Mars, key to faith in personal power, a contact with the MC, similar to its own nature, and with the south node which also carries the message of a lesson to be learned. But I would have more faith in the chart if Saturn had at least one or two traditional aspects.
The chart for the New York bank holiday may be more reliable since at least it is from a known source. It also has a very strongly placed Saturn, ruling the Ascendant and rising in the first house. It has several long-term progressed aspects which last well into the next century including Saturn octile Mercury to 2055, Pluto square Uranus to 2035, Jupiter opposite the Sun to 2027, Jupiter trioctile Ascendant to 2025, and Jupiter square the Moon to 2021. P Neptune stays on the south node for over 150 years. Faith is certainly a central issue, and of course the principles of Jupiter (along with Neptune and Chiron) include the idea of ethics and morals which are based on our religious faith. I don’t really expect humanity to suddenly realize oneness and abandon greed. But we can at least move in that direction. We can also remember that as long as we are human, power is likely to corrupt. It is vital that we avoid too much accumulation of power in one small group. Totalitarianism is deadly whether it takes the form of communism, fascism, a military clique, a guru, or an oligarchy of wealthy land-owners or industrial managers.
The current movement in the world is clearly toward increasing bureaucratic control and size of international businesses and institutions. I have written in earlier issues of Asteroid-World or The Mutable Dilemma about the approach of a universal currency which is tentatively to be called the Phoenix. A world central bank is also close to legal reality. The Bank of International Settlements (BIS) in Basel, Switzerland is being developed to play the role. It was founded in 1930 with the central banks of the U.S., countries in west Europe, and Japan as shareholders. Central banks own 85% of its stock, with shares currently trading for about $5,750 each. Its assets are said to include about $2.7 billion, mostly in gold bullion. It functions as an agent for the central banks in international financial settlements, extends credit to central banks, and produces data to aid economic planning. The countries of Western Europe are moving toward monetary integration by 1992, and by that date, every bank in the world must adhere to recently set capital standards. BIS will presumably be the “lender of last resort.” Banking privacy is disappearing. Reagan has called for an international currency transaction report to be filled out by anyone who withdraws the equivalence of $3000 and to be sent to all cooperating governments. The ostensible goal is to catch drug or other crime and black market money. Capricorn is coming. Are you watching, George Orwell?
And speaking of big, the ten biggest banks in the world are all Japanese. In fact, 17 of the top 25 banks are Japanese. One U.S. bank made it into the top 25 last year; Citibank was number 17. But this year, Citi was bumped. In addition to Japan’s 17, France has 4 and West Germany and Britain have two each in the top 25.
Although they are not bankers, perhaps it is worth noting that some Wall Street operators are still doing well in spite of the October 1987 crash. Financial World reports that the highest-paid individual on the street in 1987 was Paul Tudor Jones II, the 33-year-old head of Tudor Investment. His annual take was between $80 and $100 million. He earns more in a lunch hour—about $50,000—than 94% of this country’s wage earners make in a year. The second-place winner was George Soros of Soros Fund Management who made $75 million in 1987. Henry Kravis and George Roberts of Kohlberg Kravis Roberts & Co. were paid $70 million each and Michael Milken of Drexel Burnham Lambert earned $60 million. Meanwhile, Mr. Bush is firmly opposed to raising the minimum wage over the current $3.35 an hour. It would upset the economy if the peons were paid more. It would make our goods less competitive against goods made in Korea, Taiwan, etc. He was also against notifying workers that their jobs were about to disappear, but he is in favor of reducing the capital gains tax which only benefits stock owners who are mostly the already rich.
For a final word on banking, we might turn to economic historian and newsletter writer, John L. King. Mr. King is convinced that we are headed into a major depression which will include a collapse of credit, wages, and prices, including real estate, accompanied by a “monumental money panic.” I think his scenario is exaggerated, but he has some basic facts on money and banks which are not understood by many people, including quite a few who write financial newsletters. Many of these self-proclaimed experts warn of coming hyper-inflation due to the U.S. printing paper money which will rapidly become almost worthless as has been happening in other countries such as Mexico. It is true that most of these “experts” are selling precious metals (gold, silver, platinum). Metals do hold their value against depreciating paper currency, so the warning about inflation can be considered a sales pitch. As Dr. King points out, and as I wrote in my Economic Overview a year ago, the Fed (U.S. Federal Reserve which is our Central Banker) has already demonstrated that they will put us into recession in preference to letting inflation get out of hand. Volcker did it in 1979 by raising interest rates which he had to do to keep people buying our T Bills and T Bonds to fund our government.
Dr. King points out that paper money makes up only about 5% of all our money. 95% of what we call money is bank credit. Banks create it by making loans. The borrower is credited with a deposit which he can then spend and pay back later with interest. Note that the credit from the bank is a debt for the borrower. The role of the Fed in creating credit has been diminishing over the years. According to Dr. King, the Fed is currently the source of about 21% of new credit while the private sector (individual banks) is the source of the remaining 79%. The Fed can raise the interest it charges the banks for (usually) temporary loans, and the banks normally immediately raise the interest they charge for their loans. But when the rate of spending declines, the supply of money tends to contract with it, thus intensifying the move into depression. Dr. King describes the reduced commodity prices, many of them falling as much as 15% in “real terms” since 1974, as one example of reduced spending and contracting credit. Falling “real” wages is a second example, that is, wages that are not keeping pace with the rising costs of manufactured goods and professional services. Increasing real estate and other loan defaults and failing banks are another form of shrinking spending and credit. Dr. King expects these trends to continue and to increase into deep depression. He discounts any talk of inflation, claiming that a large part of the rising costs of goods is due to the increased cost of interest payments. Of course, rising interest costs contribute to the deflationary pressures as they take money away from more productive uses and contribute to the disparity of wealth in the world.
The balance of this statement is mine, to spell out in a little more detail the points made by Dr. King. If business is functioning normally, credit (money-debt) increases as more goods are produced and sold and more services provided for the public. Inflation can occur when there is more money than goods or services so buyers compete for the goods and are willing to pay more. Or the people with the money can choose to save rather than spend their excess as has been done in Japan. Cartels (such as OPEC with oil in the 1970s) can also inflate prices if they can get control of needed goods or services. In such areas of short supply, which includes the services of many educated professionals and near-monopoly institutions such as utilities, insurance, etc., the prices can keep rising as the providers keep pace with each other. When housing costs, medical costs, utilities, insurance, etc. have more than doubled, but wages have stayed the same or declined as has happened for many people in the U.S., it is obvious that these people will have less to spend on less essential goods and services. When the producers of the goods and providers of the services are unable to sell their offerings, they cut back on their employees, which further contracts the economy. When people lose jobs or have hours or wages cut or just fear such losses, they cut back on spending, further contracting the economy. Credit expands when people have the confidence to borrow and the confidence to loan. When fear becomes stronger, borrowing, lending, producing and spending all contract.
At some point in the contracting, downward spiral, the process reaches the point of positive feedback and escalates as it reinforces itself. Negative feedback is like a thermostat: at a set temperature, the heater or the cooler goes on to keep the temperature in a viable range. With positive feedback, increased heat produces more heat (or cold produces more cold) until life is destroyed. We are assured by the government that the economy is healthy and expanding. Statistics can be valuable or misleading. The gross national product (GNP) may actually be increasing but if a major part of the increase is made up of higher prices on real estate, professional fees, stock prices, spending on national defense, etc., and if the increasing number of jobs include many that are part time, for lower wages, lacking medical benefits and pension plans, the expanding economy may be rotten at its core. Lester Thurow of Harvard estimates that the top third of our population has been doing very well during the Reagan regime while the lower two/thirds have been losing ground. So we see the cost of houses rising astronomically in desirable areas as the beneficiaries of the higher prices bid them up at the same time that more families live in over-crowded, rat infested fire traps or on the streets, and millions in other countries starve because they cannot pay for food. The top third has been bidding up stock prices throughout the world and using their excess money in financial speculations with options, futures, currencies, etc. But manipulating paper (or more accurately today, figures on a computer screen), does not build desperately needed low priced apartments or give prenatal care to poor mothers or food to the hungry.
As modern technology increases our capacity to produce, we could provide for everyone’s basic needs if we could learn to share. According to Science News, computer expert systems are currently saving Digital Equipment Corp. $70 million to $100 million a year using the “first wave” of artificial intelligence technology of the 1970s. Far more impressive gains are expected as mainframe computers with large data bases of knowledge become operational. A few individuals with some complex equipment can produce abundant goods. We are expanding in knowledge and technology at an exponential rate while ethics and morals seem not much evolved beyond the dark ages. Ravi Batra had a lot of historical nonsense in his book but he did put his finger on the root cause of depression: the disparity of wealth which is partly due to expanding debt. But the concentration of power which accompanies the concentration of wealth, including the ability to control the media, may prove even more challenging in the years immediately ahead. I have another excellent tape recording if anyone is interested; a talk by Joan Vocare on the politics of the far right, describing how the wealthy elite are manipulating various special interest groups, often with appeals to religious beliefs. Let me know if you want a copy. I would appreciate a dollar to cover costs. Also, watch “The Politics of Food” on public TV if you have a chance. It is an excellent documentary showing how the elite keep the poor in their place. In the meantime, set the best example you can, it speaks louder than words, and be sure to vote.