If anyone needs some extra summer reading, below is a little bit of the introduction to Inside Job: The Looting of America's Savings & Loans, written by Stephen Pizzo, Mary Fricker, and Paul Muolo. Their research into the now extinct Centennial Savings & Loan is a fantastic look at the dangerous mix of brokered deposits and the riskier loan portfolios they necessitate.
Coauthors Steve Pizzo and Mary Fricker were jarred to attention by thrift deregulation's fallout when tiny, conservative Centennial Savings and Loan in their rural Northern California hometown of Guerneville began acting strangely in December 1982 (two months after the signing of the Garn-St Germain Act) and announced it was going to pay $ 1 3 million cash for a construction company. Pizzo was editor of the Guerneville weekly, the Russian River News, and Fricker was news editor. Pizzo wrote a news analysis highly critical of Centennial's plan to spend seven times its net worth' on a construction company, and he began aggressive coverage of a succession of strange happenings at Centennial Savings and Loan. Centennial officers suddenly were awash with money. Their names popped up in complex real estate transactions documented at the county recorder's office. Out-of-town visitors from places like Holland, Las Vegas, and Boston mysteri- ously came and went, taking money with them. Still the thrift's financial state- ments recorded phenomenal growth. And the small-town rumor mill geared up to churn out dozens of explanations for this bizarre behavior. In the Russian River News, Pizzo began asking some fairly obvious questions of the Centennial officers: "Where is all this money coming from? " "Who are you lending it to, and why?" "How can you justify these extravagant salaries, benefits, perks, planes, luxury cars, boats, and trips?" Was this, Pizzo asked, the proper role for a savings and loan, heretofore the most conservative, predictable, and reliable of all American financial institutions?