Shoddy AdviceA decade ago, when the savings and loans were...


June 23, 1993

Shoddy Advice

A decade ago, when the savings and loans were laying the groundwork for the disasters that later overtook them, one of the most powerful influences in the shocking transfer of money from sound institutions to shoddy ones was unquestionably the ill-considered -- if indeed it was considered at all -- advice of consumer advocates.

If there were two savings institutions side by side, one paying the highest rate compatible with prudent investment of its funds and the other paying a higher rate that could only be derived from bad loans and variations of Ponzi schemes, consumer advocates unfailingly advised the saver to put his or her money in the shaky, high-paying institution.

I can recall no warning from these people about the inadequacy of the resources of the Maryland Savings Share Insurance Corporation; if my memory is at fault, I shall be glad to hear it.

Later, when the shaky institutions inevitably became insolvent, the consequent disaster and drain upon the taxpayer could be very conveniently blamed on the Reagan-Bush administrations and the me-first attitudes of the Eighties, when it could more properly have been blamed on the consumerists who had acted as missionaries and shills for the corrupt institutions.

Not content with having wrecked the savings and loan industry, the advocates are now turning their guns on the banks, urging that all bank accounts should be made identical, so that savers could exercise the same delightful privilege with the banks as earlier with the savings and loans and move funds out of the bank that prudently charges enough to cover its cost into another that relies on sharp practices to keep its rates artificially low.

Who, I wonder, will consumer advocates blame this time in order to deflect responsibility from themselves when one of the shady banks into which they have irresponsibly steered money goes broke? Considering the disastrous consequences of their last foray into investment advising, their behavior is inexcusable.

We are all attracted by low prices, of course; but people with adult minds know that those apparently low prices are a delusion, like the high rates at Old Court S&L. To switch funds into a cheaper institution without any clear understanding of whether that cheapness is achieved by indefensible lending and investment policies endangers one's own money and the money of other taxpayers.

Robert L. Taylor


In Real World, BWI Privatization Won't Work

I am responding to Maryland Del. Jim Rosapepe's article on privatization (The Sun, June 2). Mr. Rosapepe focuses in on Baltimore-Washington International Airport, but his comments provide a less than clear and total picture.

He begins by stating Maryland taxpayers have invested more than $170 million in BWI since 1972. He overlooks how that investment in BWI is returned to the citizens of Maryland. It generates over $2.5 billion in economic benefit to the state and directly accounts for about 10,000 jobs. Another 38,000 jobs are generated statewide. That is a good return on investment.

Next, Mr. Rosapepe states privatization would improve air service for Marylanders by taking BWI out from under "federal red tape" so it could charge competitive rates for runway use (landing fees), and so forth.

He suggests that under private management/lease/ownership, BWI would not utilize federal grants to assist in building runways, ramps and for noise abatement.

This being the case, the private firm could set landing fees at different rates for peak and non-peak periods without federal intervention and still be competitive with federally assisted airports.

This assumes the pricing scheme would also pass legal muster. The theory is that by doing so, peak traffic would be spread out and fewer facilities would be needed. There are several significant fallacies to this theory.

Without the 75 percent federal share for these projects, the airlines, which pay the state back for the other 25 percent of the project costs through landing fees, would have to cover the 75 percent federal share.

The result: higher landing fees and potentially less air service.

Nor does Mr. Rosapepe take into consideration the long-term agreements under which many of the airlines operate at BWI, which ensure full recovery of the airport's runway and associated expenses.

The agreements establish the rates and fee structure. He seems to think the airlines would be willing to scrap these for the privilege of paying higher fees -- in an industry that has lost $10 billion in the last three years.

Then there is the question of peak versus off-peak landing fees.

The assumption is lower fees for off-peak periods, or conversely, higher fees during peaks, would induce some airlines to move to off-peak times, thereby resulting in lower ticket prices -- thus encouraging people to fly off-peak.

Again, theory overlooks the real world.

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