The Southwestern Historical Quarterly, Volume 95, July 1991 - April, 1992 Page: 117
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first New Deal, represented a sure-fire recipe for four-star financial disaster,
should the proper ingredients be found.
More specifically, as a result of the Glass-Steagall Act of 1933 and the crea-
tion in 1934 of* the Federal Savings and Loan Corporation (FSLIC) as a subsidi-
ary of the Federal Home Loan Bank Board (FHLBB), the U.S. thrift industry
was limited by law to rather mundane lending activities-residential mortgage
loans-the funds for which would come from interest-capped savings accounts
backed by government deposit guarantees. To be sure, the thrifts fared well
and served the nation fairly well under this regulatory structure for over a gen-
eration; one cannot deny their role, for example, in helping to increase home
ownership in the U.S. in the decades after World War II. But, to Pilzer, the
structure thus created was both too rigid and too weak to endure; rigid in that
thrifts were narrowly circumscribed in their financial roles, and weak because
governmental oversight of the dreary and monotone loan portfolios of S&Ls,
not surprisingly, atrophied over time.
Such structural problems were minor as long as prices remained relatively
stable. Between roughly 1965 and 1980, however, an ingredient was added to
the U.S. economic stew-rapid inflation-that at once revealed the inherent
weaknesses of the thrift industry and unleased the forces that ultimately would
bring it down.
In attempting to stanch the inflation-induced process of disintermediation-
the hemorrhaging of funds from interest-capped accounts in banks and thrifts
to other investment outlets-the U.S. government, of course, gradually de-
regulated these industries in the 197os and 980s. While this was in many ways
a reasonable, even desirable response, deregulation-the Garn-St. Germain
Act of 1982 in particular-was to wreak havoc on the thrift industry, as this
formerly dowdy and dusty component of the financial sector was increasingly
overrun by a rogues' gallery of fast-buck artists, conniving cowboys, and de-
vious developers. Betting that the FSLIC or, alternatively, the American tax-
payer would bail them out, this crew embezzled, gambled, and/or frittered
away billions from befuddled savers and stockholders. This was, in fact, one bet
they won, and we all will be paying for their debauchery for years to come.
Those that want to know the details of this sordid tale will find Other People's
Money well worth their while.
University of North Carolina at Chapel Hill PETER A. COCLANIS
When the Raznbow Touches Down. By Tryntje Van Ness Seymour. (Seattle: Uni-
versity of Washington Press, 1989. Pp. xv+377. Foreword, preface, intro-
duction, photographs, color plates, appendices, endnotes, sources and se-
lected bibliography, index. $50, paper.)
Nineteen years ago Professor J. J. Brody of the University of New Mexico
created a considerable stir in the art world by publishing a book titled Indian
Painters and White Patrons in which he pointed out that the twentieth-century
easel paintings executed by American Indian artists prior to the 1960s were not
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Texas State Historical Association. The Southwestern Historical Quarterly, Volume 95, July 1991 - April, 1992, periodical, 1992; Austin, Texas. (texashistory.unt.edu/ark:/67531/metapth117153/m1/145/: accessed May 27, 2017), University of North Texas Libraries, The Portal to Texas History, texashistory.unt.edu; crediting Texas State Historical Association.