The savings and loan insurance mess

He is author of The Gathering Crisis in Federal Deposit Insurance;and The S&L Insurance Mess: How Did It Happen?     

Winners and losers under medical savings accounts

As legislators wait to see how the MSA approach to health care reform plays out in the laboratory of the states, authors Marilyn Moon, Len M. Nichols and Susan Wall have put the numbers to work. The researchers simulated the effects of introducing MSAs into the health insurance market. What they found is what critics of MSAs suspected: As the young and healthy shift to MSAs, the premiums for those left in the remaining insurance pool will escalate. However, the authors conclude that if you are male, young and healthy, you stand to gain a lot from the MSA experiment.     

Institutions and savings in developing and emerging economies

Domestic savings are an important prerequisite for capital formation and growth. In this paper we analyze a new channel through which institutions influence aggregate savings and economic development. Whereas research in the field of savings decisions concentrates largely on the level of the individual, the literature on institutions and growth as well as on aggregate savings formation focuses on the aggregate, national level. First, we develop a framework that brings together both lines of reasoning, arguing that institutions may influence the individual savings decision as well as national savings in aggregate. This potential for institutional quality to influence economic performance has been neglected so far. Second, we build upon the empirical literature on aggregate savings formation and provide results supporting our hypothesis that better economic institutions drive aggregate savings formation upwards. By contrast, we do not find such effects in the case of the political environment. Our findings are robust when checked against a number of changes in explanatory variables, estimation methods and the treatment of instruments.     

The effectiveness of savings and loan political action committees

In recent years, political action committees (PACs) have played an increasingly important role, both in contributing to candidates and in influencing voting patterns. Savings and loan PACs are numerous throughout the country and consist of PACs affiliated with individual institutions and trade associations. The question which is addressed in this research paper is the effectiveness which savings and loan related PACs have had on influencing voting patterns. Because of savings and loan allegiance to the real estate industry, voting patterns on a selected set of nine cogressional bills pertaining to various facets of real estate are used to test PAC effectiveness. These bills were voted on by the House of Representatives during the 1978–80 congressional term. A twenty-one simultaneous equation model which employs probit transformations, maximum likelihood estimation procedures, and two stage least squares, is built to test relationships among the endogenous variables of congressional votes, electoral margin, PAC contributions, and constituent and congressional ideology. In addition to testing the effectiveness of savings and loan PAC contributions, the results of the study shed light on savings and loan PAC performance relative to that of real estate PACs, labor PACs, home builder PACs, business PACs, and other PAC groupings. The model is also used to identify some determinants of PAC contribution patterns. As a related issue, the role of ideology as a predictor of voting patterns is re-examined. Findings indicate that savings and loan PACs have only been marginally successful in influencing real estate voting patterns when compared to the other PAC groups. Results also indicate that few variables could be identified as determinants of savings and loan contributions, whereas other more established PACs had determinants which were consistently significant. Overall, findings imply that PAC contribution procedures of the savings and loan industry could benefit by imitating or purchasing the expertise of more experienced PAC groups.     

Comparing beneficiaries of the Medicare savings programs with eligible nonparticipants

This note focuses on participation in two entitlement programs that help reduce out-of-pocket expenses for low-income Medicare beneficiaries: the Qualified Medicare Beneficiary (QMB) program and the Specified Low-Income Medicare Beneficiary (SLMB) program. As of 1999, about 2.75 million eligible, noninstitutionalized individuals were not enrolled in these Medicare savings programs. The eligible nonparticipants differed substantially from the QMB and SLMB participants in that they were less likely to be Supplemental Security Income beneficiaries and more likely to be elderly, nonblack, and in relatively good health. These findings, which could help target future outreach efforts, are based on Survey of Income and Program Participation data matched with administrative records from the Social Security Administration.     

Politics and the rescue of insolvent savings and loans before 1989

The results presented in this paper are consistent with those predicted by public choice economists who believe that regulatory agencies represent the interests of their controlling congressional committees. Membership on committees is not random; congressmen seek committee assignments where they can represent the interests of their constituency. Congressmen from states where financial institutions are significant will seek membership on their respective banking committees. Once on those committees, congressmen will seek to protect and promote their own constituency. In the case of the savings and loan industry, insolvent savings and loans received benefits from staying in operation. These savings and loans gained another chance to gamble for resurrection. Being shut-down or placed in a management consignment program did not give this option. The results presented in our paper indicate that participation in one of the rescue programs is not random. Savings and loans in states with political power (representation on the Senate banking committee) are less likely to be resolved.A previous version of this paper was presented at the Southern Economic Association Meetings, November 18–21 1990, New Orleans, Louisiana. The authors thank James R. Barth, Henry N. Butler, Gordon Tullock, Lawrence J. White, and an anonymous referee, for helpful comments. Financial support from the Summer Research Program of the College of Business, Boise State University, is gratefully acknowledged. We accept responsibility for any remaining errors.     

The interest cost savings from municipal bond insurance: The implications for privatization

Previous studies of privatization have considered the cost-effectiveness of privatizing more labor-intensive services. This study examines the effectiveness of public and private delivery of a more capital-intensive service: insuring municipal bonds against default. Credit enhancement for local government bonds is available from private insurance companies and from some state governments. Because of their reduced default risk, bonds backed by a third party should incur lower interest rates. This research considers two questions. Does a third party guarantee lower interest rates? Is private bond insurance more cost-effective than the credit enhancement programs of state governments in lowering interest rates?