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S&L bailout brings benefits to Arkansas.

S & L Bailout Brings Benefits To Arkansas

The latest wrinkle in the $300 billion S & L bailout is the news that Arkansas will be a big winner in the greatest government subsidy program of all time.

Stripped of all excess verbiage, the bailout is nothing more than a colossal taxpayer-driven transfer payment as the government bites the bullet and pays off insured deposits at failed S&Ls. Those states with the most failed S&Ls are the big winners.

Edward W. Hill, an economist at Cleveland State University, has put a pencil to the proposed numbers of the bailout bill and calculated that an extra $4,106 per capita in taxpayer's funds will be transferred to the Natural State's thrifts. Only Texas which has considerably more failed thrifts, but also more people, ranks higher by garnering an additional $4,775 per capita.

Is this all academic mumbo-jumbo? Look at it this way.

Arkansas received an artificial investment boom in the early and mid 1980s when the statewide thrift lending explosion took off and many less-than-wise projects were funded. When the Texas oil boom went bust and the 1986 Tax Reform Act gutted real estate tax shelters, even many sound investments headed for troubled waters. Now as the government comes in to clean up the insolvent S&Ls, Arkansas depositors sleep soundly at night assured their deposits are intact.

As the bailout bill progresses, Arkansans will pay higher taxes to fund the program, just like the rest of the nation. But the benefits we've already gotten in the form of projects built, salaries paid, etc., will still be here. Most importantly, the cash in the thrifts is still around.

Imagine if the government's insurance plan was not in place. Then depositors would have lost millions as S&Ls failed and their money would have disappeared. Instead, what is occurring is taxpayers from around the country - including Arkansas - will send their dollars to the Wonder State as the bailout progresses, as if the thrifts never dove head first under financial waters.

Using Hill's calculations, Arkansans come out way ahead when all the bills are paid.
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Title Annotation:savings and loans
Publication:Arkansas Business
Article Type:editorial
Date:Jul 16, 1990
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