The 90s

Professor Paul Nadler from Rutgers University talks about money, racism with Tom Weinberg and Skip Blumberg at Bentley's restaurant at a Hilton hotel in Newark, New Jersey.

00:00Copy video clip URL B-roll, shooting out a train window at other trains, traveling through Newark, New Jersey. The videographer, Skip Blumberg, records Tom Weinberg who is shooting with a video camera. It is January 28, 1991.

01:03Copy video clip URL View of Newark from the train.

01:41Copy video clip URL Weinberg and Blumberg walk through a train station. A police officer approaches and notifies them there’s no videotaping allowed.

01:59Copy video clip URL Weinberg, Blumberg and Professor Paul Nadler enter Bentley’s restaurant at a Hilton hotel. They look at a menu and decide if they want to eat here.

03:00Copy video clip URL The three sit at a table and order lunch. Nadler wants them to plan the theme of the interview. Weinberg says he wants to interview Nadler, who was once his college professor, because he has the ability to explain complicated things very well, and he has a real bad attitude about life. Weinberg notes that for The 90’s they’ve covered a variety of topics including sex, drugs and rock-n-roll, world issues, world affairs, human rights, people, humanities, homelessness. Nadler interjects saying the two biggest issues in America right now are homelessness and all the unsold houses. “Do you want to talk about how the Savings & Loan mess came about?” he asks Weinberg.

04:36Copy video clip URL Nadler examines the Savings & Loan problem. He says Savings & Loan started as a family financial center. You come in, bring in your deposit, and they make mortgage loans. It used to be called the 3 ,6, and 3 business. They take your money at 3. they lend it back to you at 6, and they’d be on the golf course by 3. He adds, if you take in money at three percent and lend it at six percent you’re not going to need much talent to run a savings and loan business. But what happen is that they were making these loans long-term fixed rate. You’d have a twenty year mortgage at 6 percent. That’s fine if interest rates stay  the same, but if interest rates rise and you have a five-and-a-quarter percent interest rate you say “Thank God! The new guy’s paying 8 percent.” But if interest rates go down you realize the new guy is paying less than you. From the institution’s stand point it was “heads I lose, tails I get my money back.” People realized this wouldn’t work. It would have been wiser to offer adjustable rate mortgages. They go up and down as interest rates fluctuate. The Savings & Loan companies were like a student who would come to me and say “Professor, you’re giving an exam on Wednesday but I have a date on Tuesday so I’m not going to study. Can you pass a law that no body can study so that I can do as well as the class. That way I can go out on my date and not study. But instead what the Savings & Loan companies said was, if we can’t compete, if rates go up and we can’t pay more because we can’t earn more, don’t tell us  to change and make rates that go up and yield. Just don’t let the banks pay more. Don’t let them compete even though they could because they had assets that rolled over. They didn’t want the banks to have the right to compete. They want an interest rate ceiling. Before 1982 this is exactly what we had. Regulars put in a ceiling to protect Savings & Loan, stating that no one could pay more than a certain interest rate. The banks got around this restraint by creating the Euro dollar. They set up an office in London. Money was sent from New York to London and London funneled it back. The banks developed holding companies. Instead of being registered as a bank ,they were now registered as a corporation: Citi Corp, Chase Manhattan Corp. The banks basically told the regulators if you’re going to regulate banks we won’t be a bank. We’ll be a corporation. Finally, deregulation came, but loan companies were still losing money. So they went to the regulators and changed the law. They got the ceiling changed from $40,000 to $100,000 without one minute of Congressional deliberation. Then they created earnings out of thin air. They created good will. We’ll write up the mortgages over 8-years, write down the good will over 40. This way we make more money over the next 8-years. They set up a new kind of accounting to accommodate this. A bank has to pay off ninety-nine out of a hundred loans to break even because they only earn one percent on their assets. The Savings & Loan businesses were given unlimited ability to lend on anything they wanted. If you’re spending more than you’re taking in what do you do with the money you’re spending? You mark it as a deposit on the client’s records. You keep the money and simply call it a deposit. This is where the 160 billion dollars went.

13:59Copy video clip URL Their lunch arrives. Static.

14:22Copy video clip URL B-roll as the three eat lunch. B-roll of sports news on a TV hanging in the restaurant.

15:56Copy video clip URL The interview continues. Weinberg asks where is this 160 billion dollars going? How did the public get screwed? Nadler says the point is we have an industry that’s losing money. Savings & Loans are spending more on loans then they are earning on their mortgages. They keep building up their deposits without paying any cash. Eventually the whole thing breaks down. The government comes in. Now it’s going to cost tax payers 160 billion dollars to pay the Savings & Loans’ debt — if we pay it off right now. It will cost more if we have to pay it off over time. Where did the money go? A small amount was pocketed for personal profit. The majority of it was funneled back into loans.

18:06Copy video clip URL Nadler expands his answer to Who got the money? “The depositors got the money, You got the money. The public.” Weinberg disbelieves that. Nadler notes that when the Government stepped in to stop the Savings & Loan fiasco, the loan companies, because of their political clout, told Congress their debt was only five billion dollars, not 160 billion. This way, the industry has to pay it back. But if the loan companies wait until the debt is giant, then the public has to pay it back through raised taxes.

20:21Copy video clip URL Weinberg shows Nadler a newspaper article on Edward Kane. Nadler notes that there was so much gluttony in the 80s that we’re paying for it now in the 1990s. “We over built America.” How do we recover from this?  “Slowly. The houses we built will be torn down. This is the problem. You boom and then you collapse. It’s far worse then just keeping a steady and slow, moderate pace.”

24:53Copy video clip URL The videographer stops recording.

25:05Copy video clip URL Weinberg tells Nadler, “When I went to school and studied from you, you explained standards. There are no standards anymore.” Nadler responds by looking at the US dollar. “Why don’t we have a gold standard? Why isn’t the dollar worth a damn?” “We cut taxes and thought that there will be so much more income everything will be wonderful. We spent and spent and let quality go down until we had a balance of payments that was unbelievable. The gold standard says that everything is tied to gold. Our economy was going down and we were threatened to lose our gold. And we didn’t want to do that. So just let the dollar go where it will. The trouble with politics is that we’re promised everything. I used to joke that once President Truman went gave a campaign speech on an Indian Reservation and said ‘if I’m re-elected we’ll have an Indian in my cabinet. And the Indians responded, ‘umpaugh!’  And if I’m re-elected there will be a subsidy for every Indian. And the Indians responded, ‘umpaugh!’ Afterwards an Indian is walking with Truman through a cow pasture and says, ‘Careful, Mr. President, don’t step in the umpaugh.’ We have lived in a world of umpaugh and we’re paying for it now.”

30:23Copy video clip URL B-roll of the newscast on television. Weinberg asks who pays for the country’s largest debt?  Nadler notes that the conservatives say one of the greatest achievements Reagan had was that he cut taxes. But taxes on whom? Only on the wealthy. For ninety percent of Americans, social security tax is higher than the income tax.

34:11Copy video clip URL The people who get rewarded are the people .. the people who have been doing well until recently are the ones who are in debt. We’ve been told to save money. Now it’s the opposite. Housing is going down, people are walking away from their mortgages. They can’t afford them anymore. Now we say it pays to be out of debt. Interest rates are high enough now that the borrower pays through the nose and the saver is the one to get benefits. The best advise I can give is: whenever possible, get out of debt!

35:37Copy video clip URL When the prime rate was 21.5 percent, the inflation rate was 18.5 percent. Today there’s a 5.5 percent real cost to money. The borrowers are paying more for loans.We’re in a new era of reality. We are in a world where everything has to happen instantly. But we need to stop and take perspective. “What have we done to this country?” “We have two major problems in this country: all the unused houses that no one wants, and number two, all  the homeless. How do we reconcile that? Why is it that so many people opposed to abortion are also opposed to daycare centers? Or they’re the one’s in favor of capital punishment? We have been a selfish generation.” Nadler notes business is bad, we’re having lunch in Newark, New Jersey, at the Hilton hotel. “You gentlemen came in on  the train to Penn Station. Did you notice that you do not have to touch the streets of Newark to get to the Gateway Center from the station? There’s an alley way so people can be sanitized. We have segregated our society. The haves and have nots. These are the issues America should be addressing.”

40:11Copy video clip URL Weinberg asks, “how will we pay off the [Gulf] war?” “We pay it off by taxes or borrowing. There’s no third choice. You borrow from Federal Reserve which creates it, so you don’t really pay it off. You can continue doing this if you don’t mind the decline in your money.”

41:30Copy video clip URL  Nadler notes now lenders are getting scared. “We’re paying the price now for all we did in the 80s.”

44:30Copy video clip URL Where do we go from here? Nadler says he’s been writing a news column since 1959. “I’ve been teaching for 40- years. What type of world are we passing onto our children? I give a pitch in my speech called What’s Right in America Today? I start off by saying you know what wrong? You know whose fault it is? The newspapers. When was the last time a paper came out with a headline “Everything’s All Right.” I’ve been a columnist for 30-years. A newspaper has to find something to say every day and the worst the better. It sells. We in the US have a broad market and an open society, many  different colors. We’re optimistic. We have a tremendous education system, schools people come from al over the world to attend. We have many nobel prize winners. But we raised a generation that grew up and said Everyone’s entitled to everything. We’re finally realizing this doesn’t work. I’m not paid for making this speech, I’m paid for all the work I have to do prepare for it: reading 5 newspapers a day, magazines, books, traveling to the location. All of us have to do our homework. But we raised a generation in the 1980s that was taught no one has to do their homework. What the recession of 1991 teaches us is that they were wrong! You do have to do your homework. We’ll get back to the fundamentals.”

51:44Copy video clip URL Blumberg says growing up things seemed worse then they were. The threat of nuclear war in the 1950s, for example. “Are things worse now then they used to be?” “No. When kids today grow up and get married they’ll talk about Communism like we talk about the Crusades. It will be a thing of the past. We’ve over come racial segregation. But now we have other problems. You never get away from problems.”

53:10Copy video clip URL The racism we face now is an economic racism. “We get along beautifully with people who are of the same social and economic status regardless of color. It’s the guy who has nothing and says I want something that threatens us. There will always be new problems to work out. But work is good. We love to work, be active.” He tells a gag of a man who dies and confronts St. Peter and is given a choice. You can go to Heaven or to Hell. The man asks, Can I look at each first? Sure. He sees one place where everyone is working, toiling away. He sees the other place where everyone is hanging out, relaxing, drinking, smoking. The man says, I’ll take that one. So for the next year he is relaxing, drinking, smoking. One day he returns to St. Peter and says, I’m finished relaxing I’d like to go to work now. And St. Peter says you can’t. The man replies, If I can’t go back to work I’d rather be in Hell. And St. Peter replies, Where do you think you are?

58:31Copy video clip URL Blumberg stops shooting to change the camera battery.

58:41Copy video clip URL B-roll of the TV news feed.

59:07Copy video clip URL Nadler sums up America by saying “anger is not the word to describe America, the word is disillusionment. It’s the fact that we had a President who told us it would be easy, we wouldn’t have to pay for anything. So we went on being selfish, indulging in excess. What we need is security from want, but not security from change. We have to have compassion for people who haven’t had the opportunities we’ve had. I asked an Ivy League president once, ‘How can I be sure my kids get into Brown University?’ He said, Have them pick their grandparents carefully. We have to have compassion for people who don’t have that. Here’s the curse, the problem of America: people saying I want everything my way and I am not willing to pay the price of fighting in the market place. The Muffler Man summed it up when he said ‘Pay me now or pay me later.’ And we’re paying now!”

01:01:20Copy video clip URL Nadler quotes his father who said, “What you fear most never happens, something else does.” And “If you don’t have any troubles, don’t go looking for them.” The older you get, the more you realize these things make sense. And then there’s Ann Lander’s advice: be careful what you wish for, you just might get it.

01:03Copy video clip URL:15 END

 

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