Securities Markets in the 1980s: The New Regime, 1979-1984

By Barrie A. Wigmore | Go to book overview

pants during 1982-1984 as savings and loans, money managers, investment bankers, and other mortgage market participants swarmed into the market. All aspects of the mortgage market were likely to be pushed to their limits when there was intense competition, most of the participants were new to the market, and borrowers and lenders were dealing with each other anonymously through unknown loan servicers. On the political level, federal politicians and regulators were anxious for any remedy that appeared likely to staunch thrift industry losses and rebuild equity through increased competitiveness. As Larry White, a former FHLBB director, has pointed out, "virtually everyone within the Washington policy community (and outside it as well) was mesmerized by the hemorrhaging of the thrifts and focused myopically on measures that would stop the bleeding." 19 This myopia was not merely among the politicians, but among some of the market participants as well. Charlie Knapp at American Savings & Loan was just the first big loser.


Summary

This brief description of the inception of the mortgage-backed securities market points out the crucial roles in its growth played by government efforts to offset the stresses of monetary policy on the savings and loan industry and Fannie Mae. Such rapid growth carried with it speculative excesses and poor institutional controls that became important in the second half of the decade. The mortgage securities market was not alone in being supercharged by government efforts to save the savings and loan industry, however. As we shall see in the next chapter, the savings and loan industry was also vital to the growth of the junk bond market, and there was a similar ignorance of the growing risks associated with it.

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Securities Markets in the 1980s: The New Regime, 1979-1984
Table of contents

Table of contents

  • Title Page iii
  • Preface vii
  • Contents ix
  • 1 - Introduction 3
  • 2 - The Change in Regimes 15
  • 3 - The New Regime Revives the Common Stock Market 79
  • Summary 107
  • 4 - The Underperforming Industries 118
  • Summary 174
  • 5 - The Overperforming Industries 178
  • Summary 210
  • 6 - U.S. Treasury Markets 211
  • Summary 240
  • 7 - The Mortgage Securities Market 242
  • Summary 252
  • 8 - The Corporate Bond Market 253
  • Summary 295
  • 9 - The Merger and Acquisition Market 301
  • Summary 361
  • 10 - Conclusions 366
  • Notes 380
  • Index 401
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