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# US Stock Market 1989: Savings and Loan Crisis, Buffett copied Wells Fargo Bank Regarding the junk bond bubble, Buffett concluded: "A large number of junk bond

2026-07-24·x-repost-20260724-164505
US Stock Market 1989: Savings and Loan Crisis, Buffett copied Wells Fargo Bank Regarding the junk bond bubble, Buffett concluded: "A large number of junk bonds are sold by people who don't care to people who never think about it - and (the market) is never short of both." The indifferent people are people like Drexel Securities and Milken.

Who are the people who never think? Savings and Loans (S&Ls) ## Savings and Loans that Never Think (S&L) S&L savings and loans originated in the 19th century and were originally called building societies.

Its core social mission is to absorb community savings and provide long-term, fixed-rate housing mortgage loans to working families based on the communities in which they are located to promote "home ownership." The traditional business model is to accept short-term deposits and issue fixed-rate mortgages with a term of up to 30 years.

Its profits mainly come from the interest rate difference between deposits and loans, but this model is obviously "borrow short and lend long".

From 1980 to 1982, the Reagan administration loosened financial controls and canceled the upper limit on deposit interest rates (Regulation Q), allowing S&L savings and loan institutions to acquire deposits at high interest rates in the face of competition from interstate banks.

This led to a sharp rise in deposit costs, but the income from existing low-interest mortgages could not increase simultaneously, resulting in inverted interest rate spreads and expanding losses.

Secondly, in order to relax the scope of financial business and give S&L savings and loan institutions more business profit points, S&L savings and loan institutions are allowed to invest up to 40% The assets are invested in non-housing areas, such as commercial real estate and consumer loans, and up to 11% of the assets can be invested in junk bonds, etc.

## The “Savings and Loan Crisis” of 1989 that Buffett often mentions The collapse of junk bonds also directly led to the "Savings and Loan Crisis" in the United States in 1989. S&L Savings and Loans not only invested heavily in junk bonds, but also invested heavily in commercial real estate.

The interest rate hike reached its peak in 1988 and the real estate boom that spanned the entire 1980s ended. , from 1984 to 1990, the average annual new commercial real estate in 56 major cities in the United States was 94.8 million square feet, while the demand was only 51.6 million square feet.

Commercial real estate in 51 major cities across the United States fell by nearly 30%, and rents fell by nearly 20%. Real estate loan defaults soared. By 1990, the proportion of bad debts in the banking industry related to real estate was as high as 43.41%, and the number of bank failures reached a record high after the Great Depression - 279.

In 1987, the U.S. S&L savings and loan institution industry lost nearly $6 billion. In 1988, the figure reached $13.4 billion. In 1989, losses reached their peak at $19.2 billion. Before the crisis, there were nearly 3,000 S&L savings and loan institutions in the United States. By the end of 1989, 400 had been taken over by the U.S. government.

If the crisis from the 1980s to 1995 came to an end, More than 1,000 S&L savings and loans institutions have gone bankrupt or been in receivership.

These bankrupt S&L savings and loan institutions involved total assets of approximately $620 billion, accounting for approximately two-thirds of the total assets of financial institutions that failed during the crisis.

## Remember, financial controls cannot be relaxed Here is a prequel: When the Reagan administration was deregulating financial regulations, in order to take care of the business of S&L savings and loan institutions, it required the U.S.

Deposit Insurance Agency to increase the federal deposit insurance limit for each account from $40,000 to $100,000 to enhance public confidence in these small financial institutions.

Now that S&L Savings and Loan Institution's depositors' money has been lost by S&L Savings and Loan Institution, FSLIC Federal Savings and Loan Insurance Company must compensate. By the end of 1988, the insurance fund gap had reached $75 billion, and it was essentially bankrupt.

In 1989 the government established a new Restructuring Trust Company (RTC) The S&L Savings and Loan Institutions, which were specifically responsible for resolving insolvent debts, successfully reorganized (mainly liquidated) 747 problem S&L Savings and Loan Institutions until 1995, handling assets with a book value of approximately US$456 billion, and ultimately recovered approximately US$395 billion, with a recovery rate of approximately 87%.

The 2000 report of the U.S. Federal Deposit Insurance Corporation (FDIC) showed that the direct losses caused by the crisis were approximately US$153 billion. According to estimates by the U.S. General Accounting Office (GAO), The total cost of the entire crisis is approximately $160.1 billion, of which $123.8 billion is borne by the public sector (i.e.

taxpayers). These bailout costs were equivalent to approximately 24.7% of the total assets of the failed S&L savings and loan institutions ($620 billion).

## Buffett’s bargain hunting and Munger distance themselves After the savings and loan crisis, Buffett took another dip: from 1989 to 1990, he spent about US$289 million to buy 10% of Wells Fargo's shares at a price-to-earnings ratio of about 5 times and a price-to-book ratio of 1 times, and bucked the trend to increase his position when the stock price continued to fall.

Wesco Financial under Munger's leadership actually owned a mutual savings institution (actually an S&L savings and loan institution) at this time. In May 1989, Munger announced his withdrawal from the American Alliance of Savings Institutions.

, to protest the alliance's lobbying of the government to maintain the loose and dangerous behavior of the alliance's S&L savings and loan institutions. This letter of protest is actually a cut off from the savings and loan crisis.

and In fact, Munger's mutual savings companies have sharply cut high-risk loans and exited from frothy commercial real estate, redirecting their funds to higher-quality, stable assets such as Freddie Mac. In 1992, Mutual Savings gave up its savings and loan operating license.

In 1993, Wesco Financial sold most of the assets and liabilities of Mutual Savings to CenFed Bank and transformed itself into a financial holding company that is not subject to savings and loan regulations, focusing on insurance and other businesses.

Do not covet the last bubble, dare to abandon the temptation of high-risk profits, and be able to retain cash. Choose to believe in the future economy after a thunderstorm (this is more difficult). We still see too many great gods.

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# US Stock Market 1989: Savings and Loan Crisis, Buffett copied Wells Fargo Bank Regarding the junk bond bubble, Buffett concluded: "A large number of junk bond

# US Stock Market 1989: Savings and Loan Crisis, Buffett copied Wells Fargo Bank Regarding the junk bond bubble, Buffett concluded: "A large number of junk bonds are sold by people who don't care to people who never think about it - and (the market) is never s

# US Stock Market 1989: Savings and Loan Crisis, Buffett copied Wells Fargo Bank Regarding the junk bond bubble, Buffett concluded: "A large number of junk bonds are sold by people who don't care to people who never think about it - and (the market) is never short of both." The indifferent people are people like Drexel Securities and Milken. Who are the people who never think? Savings and Loans (S&Ls) ## Savings and Loans that Never Think (S&L) S&L savings and loans originated in the 19th century and were originally called building societies. Its core social mission is to absorb community savings and provide long-term, fixed-rate housing mortgage loans to working families based on the communities in which they are located to promote "home ownership." The traditional business model is to accept short-term deposits and issue fixed-rate mortgages with a term of up to 30 years. Its profits mainly come from the interest rate difference between deposits and loans, but this model is obviously "borrow short and lend long". From 1980 to 1982, the Reagan administration loosened financial controls and canceled the upper limit on deposit interest rates (Regulation Q), allowing S&L savings and loan institutions to acquire deposits at high interest rates in the face of competition from interstate banks. This led to a sharp rise in deposit costs, but the income from existing low-interest mortgages could not increase simultaneously, resulting in inverted interest rate spreads and expanding losses. Secondly, in order to relax the scope of financial business and give S&L savings and loan institutions more business profit points, S&L savings and loan institutions are allowed to invest up to 40% The assets are invested in non-housing areas, such as commercial real estate and consumer loans, and up to 11% of the assets can be invested in junk bonds, etc. ## The “Savings and Loan Crisis” of 1989 that Buffett often mentions The collapse of junk bonds also directly led to the "Savings and Loan Crisis" in the United States in 1989. S&L Savings and Loans not only invested heavily in junk bonds, but also invested heavily in commercial real estate. The interest rate hike reached its peak in 1988 and the real estate boom that spanned the entire 1980s ended. , from 1984 to 1990, the average annual new commercial real estate in 56 major cities in the United States was 94.8 million square feet, while the demand was only 51.6 million square feet. Commercial real estate in 51 major cities across the United States fell by nearly 30%, and rents fell by nearly 20%. Real estate loan defaults soared. By 1990, the proportion of bad debts in the banking industry related to real estate was as high as 43.41%, and the number of bank failures reached a record high after the Great Depression - 279. In 1987, the U.S. S&L savings and loan institution industry lost nearly $6 billion. In 1988, the figure reached $13.4 billion. In 1989, losses reached their peak at $19.2 billion. Before the crisis, there were nearly 3,000 S&L savings and loan institutions in the United States. By the end of 1989, 400 had been taken over by the U.S. government. If the crisis from the 1980s to 1995 came to an end, More than 1,000 S&L savings and loans institutions have gone bankrupt or been in receivership. These bankrupt S&L savings and loan institutions involved total assets of approximately $620 billion, accounting for approximately two-thirds of the total assets of financial institutions that failed during the crisis. ## Remember, financial controls cannot be relaxed Here is a prequel: When the Reagan administration was deregulating financial regulations, in order to take care of the business of S&L savings and loan institutions, it required the U.S. Deposit Insurance Agency to increase the federal deposit insurance limit for each account from $40,000 to $100,000 to enhance public confidence in these small financial institutions. Now that S&L Savings and Loan Institution's depositors' money has been lost by S&L Savings and Loan Institution, FSLIC Federal Savings and Loan Insurance Company must compensate. By the end of 1988, the insurance fund gap had reached $75 billion, and it was essentially bankrupt. In 1989 the government established a new Restructuring Trust Company (RTC) The S&L Savings and Loan Institutions, which were specifically responsible for resolving insolvent debts, successfully reorganized (mainly liquidated) 747 problem S&L Savings and Loan Institutions until 1995, handling assets with a book value of approximately US$456 billion, and ultimately recovered approximately US$395 billion, with a recovery rate of approximately 87%. The 2000 report of the U.S. Federal Deposit Insurance Corporation (FDIC) showed that the direct losses caused by the crisis were approximately US$153 billion. According to estimates by the U.S. General Accounting Office (GAO), The total cost of the entire crisis is approximately $160.1 billion, of which $123.8 billion is borne by the public sector (i.e. taxpayers). These bailout costs were equivalent to approximately 24.7% of the total assets of the failed S&L savings and loan institutions ($620 billion). ## Buffett’s bargain hunting and Munger distance themselves After the savings and loan crisis, Buffett took another dip: from 1989 to 1990, he spent about US$289 million to buy 10% of Wells Fargo's shares at a price-to-earnings ratio of about 5 times and a price-to-book ratio of 1 times, and bucked the trend to increase his position when the stock price continued to fall. Wesco Financial under Munger's leadership actually owned a mutual savings institution (actually an S&L savings and loan institution) at this time. In May 1989, Munger announced his withdrawal from the American Alliance of Savings Institutions. , to protest the alliance's lobbying of the government to maintain the loose and dangerous behavior of the alliance's S&L savings and loan institutions. This letter of protest is actually a cut off from the savings and loan crisis. and In fact, Munger's mutual savings companies have sharply cut high-risk loans and exited from frothy commercial real estate, redirecting their funds to higher-quality, stable assets such as Freddie Mac. In 1992, Mutual Savings gave up its savings and loan operating license. In 1993, Wesco Financial sold most of the assets and liabilities of Mutual Savings to CenFed Bank and transformed itself into a financial holding company that is not subject to savings and loan regulations, focusing on insurance and other businesses. Do not covet the last bubble, dare to abandon the temptation of high-risk profits, and be able to retain cash. Choose to believe in the future economy after a thunderstorm (this is more difficult). We still see too many great gods.

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